Moneycontrol | Global Economy 2024: Positives in macro outlook outweighing uncertainties, India in a position to dream big

Macroeconomists were created to make weather forecasters gain credibility” goes one joke. “Economists have successfully predicted 9 out of the last 5 recessions” is another dig at the predictive ability of the macroeconomics discipline. Beyond the humour, it points to the obvious complexity of interaction between hundreds of related variables in a complicated geopolitical scenario. Despite the obvious risks involved in speculating about the future in the economic domain, many brave economists undertake foolhardy tasks of making year-end projections and this is one such attempt. Read the full article here.

We must avert an economic disaster due to Covid-19

Indian economy will suffer due to COVID-19, but govt can ease the pain for individuals and firms with decisive and meaningful action nowFor businesses, the union government should think of delaying GST payments, tax credits, and any other policy that could support employers to keep their staff on board.  As on March 24, the Finance Minister, Nirmala Sitharaman has announced a few measures to ease the compliance and regulatory burden for businesses: increasing the threshold of default that triggers the insolvency and bankruptcy proceedings from 1 lakh to 1 crore, easing some of the rules for corporate affairs, and extending extending the deadline to pay excise and customs duty and GST. Government should ensure that the flow of critical supplies and services are uninterrupted, including food, healthcare, security, groceries and other provisions, electricity, telecom, ATM and banking.Most importantly, we need to think about how to protect the unorganised and informal workforce. While the salaried class, small as it may be, can afford to work from home and be assured of payments at the end of the month, the daily wage earner does not have the same luxury. A limited form of targeted Basic Income (not universal) using the JAM (Jan Dhan-Aadhaar-Mobile) trinity could be used to ensure sustenance. The union government can use the unexpected bonanza from the lowering of oil prices to fund some of these programmes.It is important, however, that any policy made for these emergency purposes come with sunset clauses. If not, the extraordinary measures to combat the disease and its impact will linger on far after the disease has faded from human memory.Read more here

What India really needs: A mass uprising to ensure inclusive economic growth

The focus on the country’s middle class ignores the problems of the millions in the informal sector.

In 2001, Jim O’Neill, a British economist working with Goldman Sachs, first coined the acronym BRIC to identify the four rapidly growing economies at the heart of the shift in the global economic power – Brazil, Russia, India, and China. Pivotal to the growth of these economies was the growing middle-class population in these countries, a segment of people with upward economic mobility, increasing spending power, and growing aspirations.In India, the rise of the middle-class has caught the fancy of economists, educationists, developmental organisations, industrialists, and politicians alike. The most common narratives about the middle class continue to be that many of them are young (so provide a large talent pool and workforce), have growing incomes (and significant spending power), and the ability to influence the outcome of economic and political strategies.

The full article is published in and available on Scroll.in

US investors concerned over India’s economic slowdown, social unrest and Modi’s disinterest

Even if we ignore the fact that the Indian economy is in a severe slowdown, we should not forget even for a moment that India’s per capita GDP is around $2000, it needs to create around 2 crore jobs every year, and needs every little point of economic growth that it can get.So, in terms of the level of income, India is in the same league as Congo, East Timor, Nicaragua, and Nigeria. Two of India’s subcontinental neighbours, the Maldives and Sri Lanka, are far ahead of us. At around $10,000, the average income in China is 400 per cent higher than India’s. Given our tax/GDP ratios, the Indian government’s combined expenditure on everything — including health, education, defence, rural development, and social welfare — is a paltry $300 per year.Read more

Slow economic growth is both immoral and anti-national. Don’t ignore falling GDP rate

Having convinced ourselves that the Narendra Modi government’s policies cannot be at fault, we are now debating whether the economic slowdown that began in 2017 is cyclical or structural. More than three million people emerge out of poverty for every percentage rise in GDP. The Indian economy will have to grow at over 10 per cent per annum every year to become a five-trillion-dollar economy by 2024. The RBI now projects a growth rate of 6.9 per cent for the next year.Read more

India needs to urgently address its investment problem

Things are looking bleak for the Indian economy. GDP growth in the latest quarter was a subdued 5.8 per cent, unemployment levels are at record highs, the fiscal deficit numbers projected in the Budget are suspect and presumed to be larger, export growth hit a 41-month low in June this year, and growth in the eight core sectors of the economy remained sluggish at 0.2 per cent. On the demand side, passenger vehicle sales, tractor sales, two-wheeler sales, and domestic air traffic growth have all been declining for around six months. FMCG sales are slowing down as well. Further, the trade war and the prospect of a global growth slowdown should be giving our economic policy makers sleepless nights.

One of the core issues which lie at the heart of many of these problems has to do with India’s dwindling investment rate. In just under a decade, India’s Gross Capital Formation (investment rate) has fallen about 9 percentage points from a high of 40 per cent of GDP in 2010-11 to about 31 per cent in 2017-18. The situation has become worse in the preceding few months where announcements of new projects have drastically declined. According to the CMIE database, Indian companies announced new projects worth ₹43,400 crore in the June 2019 quarter for both the private sector and public sector combined. This translates to about 81 per cent lower than what was announced in the March quarter and a stunning 87 per cent lower than the same period a year ago.

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Reliability of GDP data

In terms of the reliability of official data, India is getting dangerously close to Chinese territory. The year that witnessed demonetisation, when 86% of the cash in circulation was declared as illegal tender overnight and which was perhaps one of the greatest assaults on private property in recent history, is now being touted as the year of highest GDP growth in the last eight years. This was the year when all other macroeconomic indicators took a nose-dive, but the GDP for that year has been inexplicably revised upwards to 8.2%, which has left everyone confounded.Good policy-making requires reliable data. Collecting and publishing data has always been a difficult affair in India, given the magnitude of the task, compounded by the presence of a large informal and unorganised sector. We do not need deliberate manipulation and withholding of data to make the task even harder.Read more