By K R Sudhaman

Himalayan states that share borders with neighboring countries of China, Pakistan, Bangladesh, Nepal, Bhutan and parts of Myanmar have faced tardy development since independence. This is partly because of difficult terrain and ecological fragility. Backwardness too is a factor. The terrain is hilly but most of the states are important from security point of view particularly because of some hostile neighbours like China and Pakistan. China in particular is a huge country and economy and has expansionary tendencies right from the beginning.

During British era China’s Xinjiang and Tibet autonomous region used to form as a buffer and hence India did not share borders with China directly in spite of the fact that both India and China were two large ancient civilizations. Nevertheless, it changed with Tibet and Xinjiang becoming part of China .

Himalayan states comprise Jammu and Kashmir, Ladakh, Himachal Pradesh, Uttarakhand, and North Eastern states of Sikkim, Assam, Arunachal Pradesh, Nagaland, Mizoram, Meghalaya, Manipur and Tripura. These states have been backward, barring Himachal Pradesh and Sikkim which have done well in social, human and economic indices, which are comparable with some of the advanced states in the country. Jammu and Kashmir though has a lot of potential has been lagging behind due to cross boarder terrorism for decades and has been a trouble-torn right from independence in 1947 due to hostilities from neighboring Pakistan, , which has ruined itself both politically and economically as a result.

The economic developments of these Himalayan states have been not that good and progress was at a snail’s pace as the successive governments have had other more pressing priorities. It was Prime Minister Narandra Modi who laid special emphasis on economic development since he came to power in 2014. Every successive budget since then has stressed on the development of the region, both from security point of view and to bring these regions into the mainstream of the nation.

The 2024 general budget, presented by Finance Minister Nirmala Sitharaman on July 23 after Modi came to power for this third term, is no different and in fact has gone step further in pushing ahead this agenda.

Article 370 of the constitution was abrogated by the Modi government in August 2019, making constitutional rights and power there on par with the rest of the states in the country. Since then there has been special efforts by Modi to double-up development and wean away people from fissiparous tendencies. The Union Budget for 2024-25 has therefore allocated significant funds to Jammu and Kashmir, with a total transfer of ₹42,277.74 crore through the Ministry of Home Affairs as there is no elected government at the moment.

This allocation aims to bolster various sectors, from industrial development to education and infrastructure. More recently assembly elections have been announced in three phases in September/October and the results will be announced on October 4. This is the first elections in 10 years and it is happening for the first time after abrogation of Article 370 of constitution.

Though there is nothing direct for industry for the Northeast, industry, chambers feel that the region can take benefit from the allocations in different heads.

To promote industrialisation of Himachal Pradesh and Uttarakhand, the budget has announced Rs 567 crore to these two states with special emphasis on job creation apart from pushing economic growth of these two hill states. Over Rs 1300 crore GST is to be provided to the Himalayan and North-Eastern states, which will give that much relief and additional funds for development activities in these states. This will encourage mores businesses to be set up particularly micro, small and medium industries, which are not only drivers of growth in backward areas but also an employment generator.

Border roads development gets a substantial Rs 6500 crore, which are  to be spent mostly in these Himalayan states. The spin-off of this boarder roads development would lead to creating much needed infrastructure and providing logistics development in these backwards regions to spur economic activity. This infrastructure development also helps in securing our borders and road development by itself provide huge employment opportunity to locals in the region. It will help in connecting remote areas and act as growth engines in rural areas. Border area development programme has been allocated an additional Rs 2000 crore. This will benefit the Himalayan region in creating infrastructure facilities in remote areas, apart from rural development, education and health care. Livelihood issues too will get addressed.

These states are to benefit from the massive allocation of over Rs 70,000 crore in the budget for the national rural drinking water mission called Jal Jeevan Mission. This is aimed at providing access to clean drinking water for all and the mission was started a few years ago and every year the allocation is increased to cover more areas. The health mission gets over RS 38,000 crore and Pradhan Mantri Awas Yojana gets over Rs 80,000 crore.

The Himalayan states would get its share in these two national missions aimed at improving health care and providing roof over the head of every family in this country through this rural housing mission. Ayushman Bharat Yojana gets Rs 7,500 crore to provide health cover to the poor and Pradhan gram Sadak Yojana gets Rs 19,000 crore and Himalayan and North-Eastern states too would get its due share in these national projects.

During the last 10 years, it was ensured that all the northeastern states have both air and rail connectivity, which had been eluding for several states. The last state to get air connectivity was Arunachal Pradesh. Now all these state capitals have both rail and air connectivity apart from road connectivity. This is important to give a fillip to economic and social development. There are IITs and IIMs in the North eastern region as well besides AIIMS. All these have happened during the last 10 years.

Ranjit Barthakur, Chairman of FICCI North East Advisory Council (NEAC), says the Union Budget 2024-2025 is a positive step towards the holistic development of the northeastern states. Assam Chief Minister Himanta Biswa Sarma thanked Sitharaman for proposing special assistance to the state to meet the challenges posed by ongoing floods in Assam.

The significant allocations for infrastructure and connectivity, particularly the  Rs. 1.11 lakh crore for capital expenditure and specific assistance for flood management in Assam, will bridge the regional disparities and enhance the connectivity of the northeast with the rest of the country. This budget truly recognizes and addresses the unique needs of our region.

Barthakur emphasized the need for substantial investment in connectivity infrastructure in the Northeast, including river-ways, international road and rail connectivity, and airways. He expressed confidence that the significant allocation towards capital expenditure will help address these needs. The allocation of INR 1.52 lakh crore for agriculture and allied sectors, along with targeted support for shrimp production and the creation of large-scale vegetable clusters. This is poised to transform the agricultural landscape of the northeastern states.

The budget also underscores the government’s commitment to combating climate change and promoting environmental sustainability. It includes policies for renewable energy projects, sustainable energy solutions, and initiatives aimed at reducing carbon footprints. The focus on green growth, including the PM Surya Ghar Muft Bijli Yojana, highlights the importance of integrating environmental considerations into economic development. The northeastern states, with their rich biodiversity and unique ecosystems, will benefit greatly from these initiatives.

The next generation reforms outlined in the budget are crucial for the northeastern states. Collaboration with states for land-related reforms and urban planning will address our unique challenges and improve productivity and market efficiency. This will drive overall economic development in the region.

Ravi Patwa, Chairman of FICCI Assam State Council said  the operationalization of the Anusandhan National Research Fund and a venture capital fund for the space economy will support research and innovation initiatives relevant to the northeastern region.

The comprehensive development initiatives and investments in cultural heritage sites and natural landscapes will position the northeast as a key tourist destination.  The Budget 2024 is a testament to the government’s dedication to integrating the Northeast with the rest of the country’s growth trajectory.

The Tea Association of India says the Pradhan Mantri Cha Shramik Protsahan Yojana” (PMCSPY) devised for the welfare of Tea workers especially women and their children in Assam and West Bengal would be of great benefit. As proposed earlier in the Budget Speech of 2021-22, Rs. 1,000 crores will be provided for the same and is aimed at making need-based interventions in tea garden areas for interalia strengthening provisions of education and health services to the tea workers. The scheme will be implemented in the period of FY 2024-25 and 2025-26.

In sum, the budget 2024 has made an honest attempt to bring these backward Himalayan region into the national mainstream and create necessary ambience to kick-start these economies to compete with other states in the country. Some of these states are already fast catching up with the rest of the country. Also the recent announcement of Tata  group  to set up a huge semiconductor manufacturing facility in Assam will give a boost to the region. There are steps being taken to attract FDI in Jammu and Kashmir from the middle-east. All this augurs well for the economic development of the Himalayan region. (IPA Service)

The article Budget 2024-25 Proposals Give A Boost To Development In Himalayan States appeared first on Arabian Post.

Landmark collaboration will include an industry-wide survey in partnership with AMEC, exploring attitudes towards the value and effectiveness of PR practices across agency and in-house.

NEW YORK, US – Media OutReach Newswire – 11 March 2024 – In a landmark collaboration that aims to redefine the value and effectiveness of public relations, PRovoke Media and the PR Council (PRC) have announced a new partnership focused on the upcoming North American Summit on 1 May.

Titled “Proving and Improving the Value of Public Relations,” the Summit aims to enhance the understanding and appreciation of PR’s true value in today’s complex reputational landscape. A cornerstone of the partnership will be an industry-wide North American survey led by AMEC, the world’s largest media intelligence and insights professional organisation, which will examine attitudes towards the effectiveness of PR practices – aiming to bridge the divide between agency and in-house perceptions.

The survey topic will lay the groundwork for the Summit’s agenda, informing the content of individual sessions and driving editorial coverage. Specific areas of discussion will include such crucial topics as: C-suite value, the effectiveness of ESG initiatives, talent and skills development, the integration of technology and AI, the impact of earned-led creativity, ROI amid geopolitical volatility, employee advocacy metrics, the business impact of DEI and measuring what matters.

The PRC, which counts 150 of U.S. and Canada’s premier global, mid-size, regional and specialty PR firms as members, will serve as the title sponsor of PRovoke Media’s 2024 North American Summit, which takes place on 1 May at the Whitby Hotel in New York, ahead of the 2024 North American SABRE Awards at Cipriani 42^nd St.

“This collaboration is designed to spotlight the PR Council’s commitment to tackling the critical challenge of effectively demonstrating PR’s value,” said PR Council president Kim Sample. “We aim to challenge and inspire PR professionals to rethink strategies for demonstrating value in an increasingly complex and competitive landscape.”

“This partnership not only emphasizes the critical role of public relations in today’s business environment but also offers a crucial platform for discussing, showcasing, and advancing the PR industry’s capabilities and impact,” added PRovoke Media CEO and editor-in-chief Arun Sudhaman.

“I would urge all PR professionals to participate in the survey and Summit, to ensure we can all identify and address the most pressing challenges relating to investment, value and impact.”Hashtag: #PRovoke #PRCouncil

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The issuer is solely responsible for the content of this announcement.

PRovoke Media

PRovoke Media produces content across multiple platforms, delivering the most sophisticated reporting and analysis of public relations news, trends and issues, along with an extensive global footprint of events, including the SABRE Awards – the world’s biggest PR awards program. Founded in 2000 and previously known as the Holmes Report, the media company’s intelligence and insight challenges practitioners to consider the broader implications of their actions and elevates the status of the discipline by proving to senior executives that PR is a mission critical management function that can deliver extraordinary business value.

PR Council

The PR Council is the only North American association dedicated to supporting agencies with a core competency in earned media. Through a combination of convening and advising, the PR Council aims to help Members – the leaders of 150 premier global, mid-size, regional and specialty firms – work smarter to build more valuable agencies. The organization is focused on the most critical issues affecting PR agency leaders’ ability to attract and retain talent and grow client relationships and their firms.

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By K R Sudhaman

Aaya ram gaya ram politics began in India when Indira Gandhi was Prime Minister. She used to be accused of decimating the opposition parties by buying wholesale elected representatives. It all started with the former Haryana Chief Minister Bhajan Lal who bought wholesale opposition MLAs to form a Congress government in Haryana, though it was in a minority in the elections. Now Prime Minister Narendra Modi and Home Minister Amit Shah have perfected it and taken this menace in Indian politics to the next level.

As Sanjay Jha, political analyst and former Congress spokesman, once said the way defections are taking place now, the 2024 Lok Sabha elections are going to be a contest between Congress (Nehru) vs Congress (Modi). This meant that BJP’s grand design to make Indian politics Congress mukt Bharat would instead become BJP full of Congress members.

On a serious note this sort of rampant aaya ram gaya ram politics raises a fundamental question—what has happened to morality, especially in Indian politics. One does not see this happen often in mature western democracy. People are in a particular party because of their preference for a particular ideology through which they want to serve the people. Here in India the political ideology seems to be only to serve themselves. What is worse is the BJP, which claims to be an ideology-based party and that a party with a difference, has now started indulging in the worst form of aaya ram, gaya ram politics. It is not only frequent but wholesale. More importantly, the persons against whom serious corruption and criminal cases are pending and alleged by BJP itself are taken into their fold. Once taken, the cases either disappear or put on the backburner, giving great relief to the alleged criminals.

There is now no value for honesty and integrity. This amplifies the fact that our educational system is totally faulty despite all tall claims of substantial improvement in literacy ,skill and educational prowess in the country. The fact of the matter is that our education system does not teach the basic requirement in life, that is morality. Moral education does not mean religious education. See the way people drive in this country. There is no semblance of fear in violating rules. Even policemen turn the other side at traffic signals, knowing fully that a sizable number of people have violated rules by crossing the line at signals or jumping the signals.

In India rules are meant to be broken with impunity. Two-wheeler riders do not wear helmets, meant for their own safety and policemen do not take cognisance of this violation. Policemen themselves would have violated rules and indulged in corruption to get a particular posting. Basically there is no fear of law, which can be easily bent, especially by the rich and powerful at the cost of morality. Why blame school students when those who teach them do not have morality. They get jobs in schools, especially those run by the government by bribing the ruling local politicians.

There are organised touts for this purpose. In private schools, the teachers are paid less than the scales prescribed by regulatory body and the school authorities get an undertaking from them that they have been paid the official scales. This is the basic morality of our schools. Likewise there is corruption and nepotism in government jobs. There is corruption in reservation, a constitutional guarantee provided for the uplift of the backward people. Some sub-sects of every community other than Brahmin come under reservation category to enable the rich and powerful to abuse this reservation policy by getting false certificates to get admission in educational institutions and jobs. In all these cases meritorious and deserving cases do not get the benefit barring a few.

Take the case of DMK’s ex minister Senthil Balaji in Tamil Nadu. He has been arrested in connection with corruption charges with regard to jobs in state transport corporations, when he was a minister in the AIADMK government. Now he is in DMK. The DMK leader, M K Stalin, who himself raised the issue of corruption when Balaji was in AIADMK, appears to be shielding him now and retained him as minister without portfolio for several months after his arrest. He however resigned recently, perhaps with some motive in fighting his case.

BJP too is the main culprit.. If one takes the case of Suvendhu Adhikari in Bengal, Himanta Biswa Sarma in Assam, Ajit Pawar, Ashok Chavan in Maharashtra, so on and so forth. All these persons have serious corruption charges and were frequently flagged by the BJP including the Prime Minister Modi. Now they are part of BJP and there is no talk of their corruption issues. These are cases of individual politicians shifting sides. BJP, a minority party in states like Goa, some northeastern states, Karnataka, Maharashtra, Madhya Pradesh, have formed governments by getting the support of some legislators of opposition parties through money and muscle power to form governments. Lately they are attempting to topple duly elected majority Congress government in Himachal Pradesh.

Now BJP is in power and with Modi’s charisma, party’s muscle and money power backed by RSS’s nation-wide network, there is bound to be some short-term gains for the ruling party because of this immoral aaya ram, gaya ram politics. But what is regrettable is they have not learned lessons from Congress, which was the original practitioner of this politics from Indira Gandhi’s time. Of course, two wrongs do not make one right. But what is important to note is that the Congress popularity and vote-share has been steadily declining ever since the aaya ram, gaya ram politics.

The declining trend is because of the resentment of the cadre towards this kind of politics. The cadres work hard for the party at local levels, only to find somebody imported from another party with no ideological moorings, becoming their leader. The winnability factor may work in an election or two but the cadre gets upset and stops putting in their best foot forward in the party affairs. This resentment will not show up immediately, but in the long run it will affect, particularly a cadre based party like BJP.

Today it is fine for them but the time is not far off, when it will become another congress with only leaders and no cadre. More importantly, right thinking citizens will have to start pondering over how to improve our moral education and exercise our franchise to those politicians, who are genuine, moral, upright and think about the constituency and welfare of the people rather than welfare of himself. This will require a concerted effort to impart moral education to the vast majority of the people, particularly the oppressed. It is not going to be easy and requires a stupendous effort over generations. (IPA Service)

The post BJP Has Perfected The Aaya Ram Gaya Ram Politics Initiated By Congress first appeared on Latest India news, analysis and reports on IPA Newspack.

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By K R Sudhaman

The interim budget 2024-25 presented ahead of the General elections in April-May is slightly different from previous interim budgets in the sense it made no major tax announcements keeping in line with the convention. What is significant is that the budget speech was short, less than an hour, and that it avoided populism as usually is the practice in the foreseeable past to get some political mileage to the ruling dispensation in the ensuing elections. But this time Finance Minister Nirmala Sitharaman has done well to avoid such indulgence. It also perhaps reflects the confidence of the Modi government to come back to power for the third consecutive term. There was smacking of this arrogance when Sitharaman said that the government will announce its detailed development agenda when the full budget is presented in July after returning to power.

Be that as it may, there are some positives in the interim budget, which needed to be highlighted. The government’s commitment to bring down the fiscal deficit to 5.1 per cent of the GDP in 2024-25 as against the revised estimate of 5.8 per cent in 2023-24. There is also a steep reduction projected in revenue deficit targets as well. This is a step in the right direction in the wake of the International Monetary Fund flagging off the problem of increasing debt burden in India. According to estimates, India’s debt has risen to 80 per cent of GDP, which rings warning bells and the IMF had warned it could rise to as high as 100 per cent in the next few years if correctives were not taken. That apart, getting back to fiscal consolidation path after covid years is important for bringing about macro-economic stability.

Accordingly, gross borrowing is estimated at Rs 14.3 trillion in 2025, which is a significant reduction from 2023-24. However, it is to be seen if the government sticks to this target in the event of the ruling party coming back to power. Anyway it is a step in the right direction to get back to fiscal prudence. One important factor that needed to be noted is that fiscal deficit compression has been achieved this financial year more because of the revenue buoyancy rather than expenditure compression. This is one area where the government needed to work on. With growth projections for coming years though good but not to the desired level of 8-9 per cent, there is a need to curtail expenditure, particularly wasteful in order to bring about fiscal stability. This however does not mean there should be curtailing capital expenditure, which will put the country’s growth prospects in difficulty. As it is, the coming years are not going to be that easy considering the geo-political situation.

Capital expenditure at Rs 11,11,111 crore may look like a big number but it is important to note that the rate of increase in capital expenditure in the previous two years was much higher. Calling India’s capex and infra spending situation to be on a ‘sweet spot’, Prime Minister Narendra Modi underlined the creation of enumerable job opportunities for youngsters in the coming years. “This budget is a reflection of the young aspirations of a young India. Two important decisions were made within the Budget. For research and innovation, a fund of Rs 1 Lakh Crore has been announced,” said PM Modi.

This move needed to be appreciated as promoting research is the need of the hour for the country to move toward to be a tech super power.

Sitharaman’s announcement of a housing scheme for the middle class, to those living in rented houses, slums, and unauthorised colonies to buy or build their own house, if implemented in right earnest will do a lot of good to pump prime the economy

Usually, the budget in most developed economies as well as China is just an annual statement of accounts as there is hardly any tinkering with tax rates. The budget does not lay out the economic agenda or roadmap of the government as in India. To that extent, the interim budget is a welcome change, as it was short and crisp and devoid of all false promises and hyperbole.

In fact, it is time India brought about stability in tax rates and it is possible to move towards this end with GST coming into being and the economy coming of age. Frequent tinkering with rates brings with it uncertainty in taxation policy. This should be best avoided for more private investments. It is also time India moved away from giving doles to industries barring some exceptional circumstances. Instead, it should work towards removing bottlenecks to industrial development by providing better infrastructure, reducing transaction costs. Digitisation has helped in moving towards this end particularly in plugging leakages.

Overall, the interim budget has set the right tone and how it is followed up in the July budget would reflect the government’s intent to bring about macroeconomic stability. Budget should be an instrument to promote only economic development and fiscal management. It should not get embroiled in the hyping political agenda of the government. (IPA Service)

The post Pre-Election Interim Budget 2024-25 Smacks Of Confidence Of Modi Govt first appeared on Latest India news, analysis and reports on IPA Newspack.

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By K R Sudhaman

After the G20 flagged off the Global South at its New Delhi Summit earlier this year, hunger and poverty eradication will be back on the global centre-stage at the 2024 G20 Summit in Brazil. “Brazil’s presidency offers something new: social issues, the fight against poverty and the resolution of the hunger problem,” Angola Sherpa Domingos Custódio informed other G20 sherpas.

The New Delhi G20 Summit’s highlight was the historic decision to make the African Union permanent member of the G20, just like the European Union, which has been a permanent member since the G20’s inception. Albert Muchanga, Sherpa of the union of countries on the African continent, said the African experience in combating inequality, hunger and poverty will contribute to strengthening the Brazilian proposal for a Global Alliance against Hunger and Poverty.

This observation came during five days of intense discussions about the priorities of the Brazilian presidency for the group that brings together the world’s main economies marked the Sherpa and Finance Tracks’ first meetings at the G20. Between December 11 and 15, member country representatives and eight guest nations met in Brasília to begin discussing solutions towards reducing inequality; promoting sustainable development; and dealing with climate change.

With the African Union’s permanent  membership ensured at the New Delhi G20 Summit, after India stood firm in giving a new thrust to the Global South, addressing the problems of developing economies has become crucial for ushering in a new world economic order. Getting the African Union on board was a significant step forward for the forthcoming G20 summits in Brazil and South Africa, especially for taking forward Global South initiatives.

This followed Prime Minister Narendra Modi’s clarion call for “Vasudaiva Kutumbakam (all the world is one family)” at the New Delhi G20 summit. Modi had elaborated on collective thinking and empowering fellow human beings – making the planet more inclusive as well as sustainable. He gave the example of how technology was leveraged to bring about a positive difference to the lives of Indian citizens.

More significant was the visit of G20 leaders to the iconic Rajghat to pay homage to Mahatma Gandhi – the beacon of peace, service, compassion and non-violence. As the leaders of the diverse nations converged, Mahatma Gandhi’s timeless ideals guided G20’s collective vision for a harmonious, inclusive and prosperous global future.

On the theme “One Earth, One Family, One Future”, US President Joe Biden stressed on creating a future that represented greater opportunity, dignity and prosperity for everyone, adding that together, the United States, India, Brazil and South Africa will reaffirm their shared commitment to the G-20 in delivering solutions for the shared world.

The Sherpas meeting, with India represented by Sherpa Amitabh Kant, has straightaway got on the job to deal with humanitarian issues which have become more pronounced after the Covid pandemic. Frequent floods and droughts in the face of global warming and ecological imbalance, too, needed to be addressed on a war-footing. The New Delhi summit had rightly laid emphasis on the issue of climate change. A plan of action had been chalked out in the New Delhi declaration.

The Millennium Development Goals, which is now followed by Sustainable Development Goals, had made efforts in the last two decades to bring about a visible change in hunger and poverty eradication but the progress has not been rapid enough. The progress has been uneven in least developed economies, particularly those of sub-Saharan Africa. The need to deal with hunger and poverty had become more urgent after Covid destroyed tens of thousands of families by pushing them to below poverty line levels – jobless and hit by health issues.

Highlighting the contributions of Indian Presidency to this important G20 process, V Srinivas, secretary to the Government of India, said that in the land of Gandhi and Buddha, India’s civilisational ethos to focus on what unites us and not what divides us enabled the global resolve to work for the betterment of humanity. The inclusion of African Union in the G20 is a significant step towards a more inclusive global dialogue. India as a developing power, coupled with G20 presidency, helped make both the G20 and G7 processes more inclusive.

Srinivas is of the view that the Indian Presidency was a people’s movement and hence set the tone to enable G20 work together to shape a new paradigm – human centric globalisation. Rightly, the Brazilian Presidency has started well to bring hunger and poverty to the top of the agenda of this global forum. With the United Nations losing its hold in tackling global issues, G20 taking the necessary initiative has assumed significance.

Also the mantle of next G20 Presidency falls on South Africa, which will facilitate in taking this agenda forward. With Indian Presidency imparting greater momentum to galvanize support of the international community to further the agenda of growth and jobs, more vigorous efforts would be made to work for the common good. Brazilian efforts to bring hunger and poverty to the centre-stage augurs well. (IPA Service)

The post Fighting Hunger And Poverty Back In Focus As G20 Sherpas Meet Under Brazilian Presidency first appeared on Latest India news, analysis and reports on IPA Newspack.

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By K R Sudhaman

Government statistics released this week paint a rosy picture of the Indian economy with GDP growth clocking 7.6 per cent in the second quarter of this financial year 2023-24 on the back of strong manufacturing sector. This also strengthens India’s position as the fastest growing major economy, a position held by China for a couple of decades. The economy had grown 7.8 per cent in the first quarter of this financial year. But the next two quarters are expected to have slower growth as the full-year projections remain at 6.5 per cent for 2023-24.

It is not only GDP growth, the upswing was witnessed in core sector output, which jumped 12.1 per cent in October this year indicating strong revival of infrastructure development and economic activity as a whole. Coupled with this, there is sustained growth of tax mop-up, which has helped in keeping the fiscal deficit under check at 45 per cent of FY24 budget estimate during April-October. These are welcome developments in the economy. Along with this retail inflation for industrial workers eased to 4.8 per cent in October due to lower prices of certain food items. This meant more money available for consumption expenditure.

Crisil chief economist Dharmakirti Joshi said after a strong growth of 7.8 per cent in the first quarter, the second quarter too surprised on the upside with 7.6 per cent growth. This takes the first half GDP growth to a 7.7 per cent. However, “we still expect growth to slow in the second half due to deepening global slowdown, the lagged impact of domestic rate hikes manifesting fully through the second half of this fiscal, and erratic weather and an El Nino event creating some downside to agricultural growth prospects. The advance estimates from ministry of agriculture peg kharif production at 4.6 per cent lower than last year,” he said.

But there is a worrying factor in the economy, that is, indebtedness of states. This is expected to remain high at 31-32 per cent this fiscal. It is expected to be at an elevated level because of higher capital outlays and moderate growth of states. According to Crisil, the aggregate indebtedness of states, measured as debt to gross state domestic product, is expected remain high with overall borrowings, including guarantees, likely to rise by 9 per cent to over Rs 87 lakh crore.

States are borrowing more to expand capital outlays, besides meeting high committed revenue expenditure related to salaries, pension and interest costs. This along with modest single-digit revenue growth will keep debt of states high. During pre-pandemic years, the debt to GSDP ratio was at 28-29 per cent.

The aggregate gross fiscal deficit (GFD) as a ratio of GSDP is expected to remain at 2.5 per cent, which is within the Fiscal Responsibility and Budget Management Act norm of 3 per cent, according to a Crisil rating study for the top 18 states, which account for 90 per cent of aggregate GSDP. After a small revenue surplus in fiscal 2022, states slipped into deficit in fiscal 2023, as overall revenues grew at a modest 8 per cent, while revenue expenditure rose faster at 11 per cent on-year. While the overall revenue of states is expected to rise 6-8 per cent, the revenue expenditure is set to increase 8-10 per cent, driven by higher committed expenditure and social welfare expenses.

“The revenue deficit will inch up to 0.5 per cent of GSDP this fiscal from 0.3 per cent last fiscal. This, coupled with the 18-20 per cent on-year increase in capital outlays of states on key infrastructure segments, such as water supply and sanitation, urban development, roads and irrigation will necessitate higher borrowing this fiscal, too,” senior director, Crisil Ratings, Anuj Sethi, said.

Crisil Ratings director Aditya Jhaver, went on to add that “overall balance sheet borrowings such as guarantees to the power sector and irrigation entities, are likely to go up by Rs 7.5 lakh crore this fiscal and cross Rs 87 lakh crore keeping states’ indebtedness high at 31-32 per cent, similar to fiscal 2023. Already, borrowings through state development loans, comprising 65 per cent of the overall borrowings for states rose 28.5 per cent on-year between April and November 2023.”

All these are pointers to the fact that fiscal health of states is not all that good and that economic reforms have not percolated down to states fully. The union government needs to ponder over this issue and the 16th finance commission, could look into this aspect as well. The 16th finance commission is tasked to evolve devolution formula to states from the central pool of taxes for a five-year period, beginning 2026.

But the Indian economy as a whole is expected to continue its strong growth trajectory, with real GDP growth in FY24 projected to be higher than long term average, according to a report by Client Associates, Gurugram based wealth management firm. (IPA Service)

The post Growth Data For This Fiscal’s Second Quarter Has Many Encouraging Signs first appeared on Latest India news, analysis and reports on IPA Newspack.

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By K R Sudhaman

All is not well with India’s exports this financial year and the global uncertainties has made matters worse when one reads between the lines the data of exports of goods and services in the first half of this financial year 2023-24. This meant that India’s dream of achieving $ 1 trillion exports of goods and services in next year or two will get pushed further.

On the face of it India’s overall exports (goods & services) looked good in the difficult global situation as it grew by 14.76% to US $ 776.38 billion in 2022-23 (April – March) powered by the 27.82% services export growth along with the 6.89 % merchandise export growth. But when some number crunching is done, India’s Overall exports of $ 63.84 billion in September 2023 and $ 376.9 billion in the first half (April September) of 2023-24 are  officially estimated to register negative growths of (-)1.20 percent and (-)2.97 per cent respectively over the corresponding period of the previous.

According to trade expert and for senior economic advisor in the finance ministry, H A C Prasad, this is mainly due to the negative growth in merchandise exports of (-) 3.1 per cent in September 2023 and (-) 8.77 percent in April-September 2023. Services exports grew marginally by 0.51 per cent in September 2023 and by a moderate 5.65 percent in April-September 2023.

The fall in merchandise exports and moderate growth of services exports in April-September 2023 is partly due to the base effect, as there was a high growth in merchandise exports (16.89 percent) and a high growth in services exports (27.26 per cent) in April-September 2022, which in turn is due to the post-covid pick up in exports, Prasad said.

The decline came at a time when World economic growth is projected by IMF to slow down to 3 per cent in 2023 from 3.5 per cent in 2022 and decelerate further to 2.9 per cent in 2024. Also the deceleration is notably in advanced economies, which is not good as India’s exports to advanced economies is significant.

“But what is really worrying for us (India) is that World trade volume (goods and services) growth is projected to decelerate sharply from 5.1 per cent in 2022 to 0.9 per cent in 2023,” Prasad said adding in case of advanced economies , import growth is is projected to decelerate  from 6.7 per cent  in 2022 to 0.1 per cent in 2023 and exports slowdown from 5.3 per cent in 2022 to 1.8 per cent 2023.

There are other downside risks as well that growth in services growth, particularly tourism is expected to be slower coupled with likely surge in oil prices in the face of War in the middle-east.

Analysing the sector-wise data Prasad said merchandise exports recorded negative growth in important items in the first half of 2023-24. The sectors included Engineering goods (-2.82 percent), Petroleum products (-17.61 per cent), Gems &Jewellery (-24.31 per cent) and Organic and Inorganic chemicals (-15.16 per cent).

Some export items with good/moderate positive growth are Electronic goods (27.62 per cent) and Drugs & Pharmaceuticals (5.02 per cent). Cotton yarn/ fabrics, made-ups, handloom products, etc., category also had a small positive growth (1.83 per cent).

Prasad said sector-wise services exports data for April-September 2023-24 are not yet available.  But as per RBI’s balance of payment data, services exports in the first two quarters of this financial year was moderate at 5.89 per cent and 5.65 per cent respectively. High negative growth was registered in Transportation (-24.77 per cent), which is also a reflection of the fall in merchandise exports. Communication services clocked negative 13.54 per cent.

Like exports, growth of Overall Imports (Goods & Services) was negative in the first half of 2023-24 at (-)10.14 per cent. This was due to the fall in both merchandise and services imports by 12.23 per cent and 1.50 per cent respectively, Prasad said.

Summing up, Prasad said the silver lining in India’s exports is that there are some positive signs including recent removal of trade barriers in Indo-US bilateral trade but the dampener could be prolonged Gaza war and weakened European economy. (IPA Service)

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By K R Sudhaman

Contrary to the Dravida Model of sidelining Brahmins in Tamil Nadu as part of the caste politics under the garb of so-called social justice, the DMK government in Tamil Nadu led by Chief Minister M K Stalin has decided to honour father of India’s green revolution late M S Swaminathan by naming the Thanjavur-based The Agricultural College and Research Institute after the iconic agricultural scientist.

Announcing this, Stalin decided recently to institute an award in Swaminathan’s name to honour toppers in plant propagation and genetics in the Tamil Nadu Agricultural University.

This is a welcome development in the state, which has so far avoided naming any university, institute or college in the name of three noble laureate-scientists from the state, C V Raman, S Chandrasekhar and Venki Ramakrishnan. One of the reasons is believed to be that all three belonged to Brahmin community.

Stalin’s announcement in the assembly to honour Swaminathan, recipient of a number of national and international recognitions including Padma Vibushan and Magsaysay Award, came after Prime Minister Narendra Modi wrote a long bylined article in several newspapers in praise of the scientist for making India a food grain surplus country from acute shortage in the early period of independence, which was preceded by 1943 Bengal famine during the British rule leading to millions of starvation deaths in the country.

The fact that most of the noble laureates from India are from Bengal or Tamil Nadu speaks volumes of quality of education in these two states but it is also a fact that caste and communal politics perpetuated by Dravidian parties in Tamil Nadu have ensured these achievers do not act as role models to enable the students draw inspiration from them. That’s one of the reasons that the Tamil Nadu economy, which has done reasonably well since 1991 reforms is yet to grow to its potential as politics coming in the way of development. This is one of the reasons that Gujarat and Karnataka are able to attract more foreign direct investment as caste politics is less oppressive.

The anti-Brahmin politics is less pronounced in Tamil Nadu now even though it raises its ugly head intermittently. Of course, Stalin like his father do have Brahmin advisers as there is a love-hate relationship. Stalin’s five-member economic advisory council has three Tamil Brahmins as its members — former RBI governor Raghuram Rajan, former Chief economic advisor, Arvind Subramaniam and former finance secretary S Narayanan. The other two members are not from the state. This change of heart is welcome as it is in the interest of the state and its people.

The Dravidian politics is not devoid of hypocrisy. Stalin’s son Udayanidhi Stalin, who is a minister in Tamil Nadu cabinet attacked Sanatan Dharma, saying it needed to be eradicated like Corona, Dengue and Malaria. This sparked of a major controversy with Hindutva and non Hindutva politicians gunning for each other. Soon after this episode, Udhayanidhi’s mother Durga, wife of M K Stalin, visited the famous Guruvayoor Temple, where the main deity is Lord Krishna, and presented golden crown weighing 32 sovereign and estimated to cost Rs 14 lakh. While Stalin and Udayanidhi are critical of Sanatan Dharma, Durga is an ardent devotee and regularly visits various temples to perform puja.

Father of the nation Mahatma Gandhi earned the respect of the majority of the people because he practiced what he preached. Gandhi was a practicing Hindu and religious person yet he advocated secularism, tolerance and non-violence. Whereas Mohammed Ali Jinnah, an irreligious person, advocated two-nation theory and supported formation of theocratic state on the basis of Islam. Now there are fresh evidences to suggest that pork-eating anglicised Jinnah was not well versed in Islam, smacking of hypocrisy. Carving out an Islamic country out of India without a vision has cost the country Pakistan dearly and has pushed the economy to a virtual bankruptcy.

So any attempt to move away from divisive politics needed to be applauded and Stalin’s decision to name after Swaminathan the Agriculture college and research institute needed to be lauded. Hope this is a beginning and more such institutes of learning are named after luminaries like C V Raman, S Chandrasekhar, Venki Ramkrishnan, former President Abdul Kalam, former ISRO Chairman K Sivan, Mathematician Srinivasa Ramanujam and many more from the state.

It is time that political parties give up caste and communal politics and work for common good of all. . Meritorious people and achievers in various spheres and not just politicians, needed to be recognised. (IPA Service)

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By K R Sudhaman

Red tapes and White caps were common sight in ministries and government departments, a colonial hangover that persisted long after independence. The white caps worn by ministers and babus, particularly by peons in the corridors of power gradually disappeared from 1970s onwards. But Red taped files remained in government offices until recently, stacked mostly in corridors giving a musty smell in all over government buildings. The files started disappearing, though not fully, after digitisation gathered momentum in the last few years as part of the swachhata campaign launched by Prime Minister Narendra Modi. Tracing of government files itself used to be an art mastered by the peons, who alone could retrieve them and is usually done only by greasing their palms by interested private parties.

This trend has lately been changing for good with concerted effort by Modi and his team. V Srinivas, secretary of Administrative Reforms and Public Grievances has been working hard in this regard to clear up space and sprucing up the government buildings by getting rid of old files after their digitisation and disposing of junk material stacked in various courtyards and backyards. Back-side of the government buildings in Delhi, particularly Shastri Bhavan, Udyog Bhavan, Krishi Bhavan, buildings in Raisina hills always had junked furniture and other waste material cluttering up the entire space giving an ugly look to the buildings. Of course these buildings were maintained very badly, especially staircases where one could witness pan spits and stinking toilets. These are changing now with swachhata campaign gathering momentum. Hopefully with central vista project completed in the next few years, the ambience in government buildings at least in Delhi is expected to vastly improve.

It is not that all government buildings are badly maintained. The Rail Bhavan in Delhi used to be comparatively better maintained, so also Air Bhavan. At the Raisina Hills, South Block, which houses Prime Minister’s office, External Affairs and Defence ministries are better maintained with lot of foreign dignitaries visiting those buildings. But just across the road, North block, which houses Home ministry and Finance ministry is not that well maintained. When Jaswant Singh became Finance minister taking over from Yashwant Sinha in 2003, a vast improvement was brought about as he cleared entire finance ministry of all protruding extensions on corridors and every vacant space to accommodate more men, files, furniture and computers, in temporary and shabby looking rooms. His philosophy was both North and South Block along with Rashtrapati Bhavan are heritage buildings and their beauty should not be spoiled by such ugly wooden and asbestos rooms. So overnight he removed them and beautified the heritage building to restore its past glory. Since then both Home and finance ministries housed in North Block have been looking better but certainly not that well maintained as South Block.

Sam Pitroda launched digitisation of files during the UPA government led by Manmohan Singh. But digitisation and Swachhata campaign gathered momentum only after Modi pursued it vigorously in the last few years as part of the administrative reforms. There have been several expenditure and administrative reform commissions set up in the government from time to time. Unfortunately, none of the reports got implemented and they have been gathering dust in some corridor. Somehow all political parties are not that enthusiastic when it came to political, electoral, judicial and administrative reforms as chaos and loopholes in the system suit them better. Unfortunately no government has made serious attempt to take the bull by the horn as far as reforms go. Only in 1991 circumstances forced Prime Minister P V Narasimha Rao to embark upon economic reforms. All other reforms have remained in slow track even though every government promise to speed up reforms, which had to be done on a continuous basis.

Now Modi has made some attempt on these pending reforms, which is welcome but regretfully have not yet become a big-ticket. But as far as Swachhata is concerned, it has gathered pace in recent years and credit goes to Modi, Minister of state, Jitendra Singh, and Srinivas.

According to Srinivas, good governance practices in recent years are marked by secretariat reforms, special campaign, improving delivery, recognition of meritocracy and replication of good governance practices, besides repealing obsolete laws. The department is also working with state governments as well to improve governance.

Significantly, the special campaign launched by Modi has resulted tangible result is freeing up sizeable space in government buildings, besides getting some revenue. Srinivas listed the achievements from October 2021 to July 2023 under this special campaign. Cleanliness campaign was carried out cumulatively in 1,43,913 places resulting in space being freed in government building to 184.66 lakh sq ft. That apart 68.15 lakh files have been weeded out. All this have resulted in earning a revenue of Rs 600 crore from scrap disposal. The special campaign has been going on every year from 2021. As part of administrative reforms, 1991 government rules have been simplified during this period.

The focus during the special campaign 3.0 launched for a month in October this year is to step up digitisation, efficiency management and enhancement of office spaces besides adopting environment-friendly practices in ministries. The target set for carrying out cleanliness campaign is 1.5 lakh sites under special campaign 3.0.The space to be freed will be 100 lakh sq feet. The revenue to be earned from scrap disposal is Rs 400 crore.

A good beginning has been made in clearing red-taped files in the government buildings and broken furniture by the central government. Hopefully state governments, too, follow suite to make government buildings more presentable, clean, less stinking and provide better ambience. It would also help in restoring the heritage of those grandiose buildings. (IPA Service)

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By K R Sudhaman

Forbes has come out state-wise analysis of GDP in India, which makes an interesting analysis of how growth has been uneven in the country and there appears to be correlation between human development index and per capita income. Apparently merely high GDP does not indicate high economic prosperity in the country.

Forbes says India’s GDP reached $3.75 trillion in 2023. Indian states have shown vibrant growth. The analysis indicate that some states have high GDP but their per capita income is not all that high. Uttar Pradesh is one such example. Such examples can be found in smaller states as well. Like-wise FDI flow is too is uneven. Some states have higher FDI flows need not have higher GDP than other states. Karnataka and Gujarat are examples of this phenomenon. Forbes depends on Invest India figures for FDI flows.

GDP, or the gross domestic product, is a parameter to measure the value of all goods and services produced in a particular region. As for GDP per capita, it is a measure that represents the average economic output, or Gross Domestic Product (GDP), per person in a country. It is estimated by dividing the total GDP of a country by its population. Both these parameters gave an excellent notion of how much wealth the population holds in a particular region. Ranking by the GDP of Indian states is a good way to figure out our country’s richest and poorest states.

The Gross State Domestic Product (GSDP) and per capita GDP of Indian states provide insightful metrics that reflect the financial health and prosperity of the nation in a fiscal year.

Forbes relies on Indian government statistics, basically CSO figures and population, needed to calculate per capita is based on 2011 population census. The top ten states as per GSDP is led by Maharashtra followed by Tamil Nadu, Gujarat, Karnataka, Uttar Pradesh, West Bengal, Rajasthan, Andhra Pradesh, Telangana and Madhya Pradesh. Among large states Telangana and Karnataka have per capital income of a little over Rs 3 lakh. Sikkim has the highest per capital income of Rs 5.19 lakh followed by Goa at Rs 4.72 lakh. Chandigarh, a union territory too has over Rs 3 lakh per capita at Rs 3.33 lakh.  Haryana and Tamil Nadu and Delhi have per capita income surging towards Rs 3 lakh annually. States like Kerala, Himachal Pradesh and Uttarakhand and to some extent Jammu and Kashmir have done reasonably well in per capital income despite the fact that their GSDP is not very high. But these states have high Human Development Index like education and healthcare.

Forbes, which  has analysed the top ten states in terms of GSDP in 2023-24, says Maharashtra, topmost states in terms of GSDP has a population of 11.2 crore. Its FDI inflows from October 2019 to March 2023 was the highest in the country at $53.97 billion. It is the third-largest state in India by area. It describes Maharashtra as the creative hub of India with its thriving design, fashion, film, music, performing arts, publishing, and TV and radio industries. However, the service sector contributes most to the economy here, representing 61.4 percent of the value addition and 69.3 percent of the value output.

Tamil Nadu is the second richest state in terms of GSDP in 2023-24 has a population of 7.2  crore. Its FDI Inflows  from October 2019 to March 2023 was not that impressive at $8.5 Billion. According to Forbes, Tamil Nadu is renowned for its vibrant cultural heritage and strong industrial base. The automotive, textiles, and information technology sectors drive the state’s economy. Chennai, the capital city, is a major hub for IT and manufacturing.

Gujarat is the third largest state in terms of GSDP with a population of six crore. It also recorded an impressive FDI Inflows from October 2019 to March 2023 at $31.9 billion. Gujarat is India’s fifth-largest state by land area. The agricultural sector acts as the primary source of income for the region, with agriculture and industrial production being the prime occupations for most of the Gujaratis. Prominent produce from Gujarat include cotton, milk and dairy products, groundnuts, dates, and sugarcane.

Karnataka follows next by way of GSDP with a population of 6.1 crore. Its FDI Inflows from October 2019 to March 2023 at $44.46 Billion was the highest in the country. Karnataka is known for its thriving technology industry. Home to the city of Bengaluru, often referred to as the “Silicon Valley of India,” Karnataka boasts the fourth-largest technology cluster in the world. The state’s rich cultural heritage, diverse landscapes, and strong emphasis on education and innovation make it a prominent player in India’s economic landscape. Its strategic location and business-friendly policies have attracted investments from multinational corporations and fostered a robust start-up ecosystem.

Uttar Pradesh comes next. It is the largest state in the country with a population: 19.9 cr. The FDI Inflows from October 2019 to March 2023 was a mere $1.3 Billion. Though fifth largest state in the country in terms of GSDP, its per capita income is not that impressive at a meagre Rs 83,000 annually. But Uttar Pradesh has a multifaceted economy with significant contributions from agriculture, manufacturing, and services. With a focus on sectors like agro-based industries, information technology, and handicrafts.

West Bengal is again a populous state with 9.1 crore population. It too has not done that well per capital income wise or in FDI flows though its GSDP was the sixth highest in the country.FDI Inflows from October 2019 to March 2023 stood at just $1.42 Billion. The state has agriculture as the leading industry. The state is responsible for a significant portion of the Indian rice harvest. Further, the petrochemical industry in Bengal is thriving, and other integral manufactures consist of automobiles, ships, chemicals and fertilisers, jute, cotton textiles, and electronics.

Rajasthan has a population of 6.8 crore and its FDI Inflows (October 2019 to March 2023) was $2.07 Billion, Rajasthan is the largest state in India by area and agriculture, mining, and tourism primarily drive the state’s economy.

Andhra Pradesh has a population of 4.9 crore and has FDI Inflows (October 2019 to March 2023) at a low of $796 Million. Andhra Pradesh has the second-largest coastline in the country and is rich in natural resources. The state significantly contributes to the GDP of India, focusing on sectors like agriculture, textiles, pharmaceuticals, and information technology.

Telangana has a population of 3.5 crore has FDI Inflows (October 2019 to March 2023): $4.74 Billion, which was not that bad considering the state is not that big. The state home to the tech-savvy populace of Hyderabad, has seen remarkable industrial growth and foreign direct investment inflows. The state’s focus on information technology, biotechnology, and manufacturing has positioned it prominently among the top Indian states by GDP.

Madhya Pradesh, the tenth largest state in terms of GSDP with a population of 7.2 crore. FDI Inflows (October 2019 to March 2023) was a low $529.89 Million. The state is a hub for agriculture, boasting diverse crops. It’s also the largest producer of soybeans in India. With a mix of modern industries and traditional crafts, Madhya Pradesh offers a unique blend of economic activities. The state’s tourism sector thrives, attracting visitors to its historical sites and natural par. (IPA Service)

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By K R Sudhaman

Finance Minister Nirmala Sitharaman has reeled-out statistics on what the Indian economy would be in 2047. The projections she gave at the Global Fintech festival in Mumbai recently are quite interesting. She quoted a SBI research to say that India’s per capita income is to increase 7.5 times from Rs two lakh annually in 2023 to Rs 14.9 lakh annually by 2047. In dollar terms, it would increase to $12,400 in 2047 from $2,500 in 2023. India’s workforce is expected to increase by 19.5 crore to 72.5 crore in 2047-48 from 53 crore in 2023-24. Workforce share in population will increase from 37.9 per cent in FY 2023 to 45 per cent in FY 2047. Workforce eligible to pay Income taxes to increase to 85.3 percent from the present 22.4 per cent. That is there would be 48.2 crore IT filers in 2047 from 7 core at present, which means seven times more.

These figures are certainly mind-boggling, if it comes true and that there will be no poverty in India if the per capita income increases to such a high level by 2047. Of course, inflation and macro-economic instability can play a spoilsport. Strangely she avoided saying what Prime Minister Narendra Modi repeatedly asserts that India would be the third largest economy in terms of GDP in the next few years or for that matter second largest economy by 2047. Perhaps Modi’s promise to make India a $5 trillion economy by 2023-24 did not materialize, she chose not to talk about GDP or economic growth.

There has also been criticism from opposition especially from former finance minister P Chidambaram, that being the fifth largest economy or for that matter becoming third largest economy in next few years makes no sense unless 16 crore people still living below poverty line that is having an income of less than 2 dollars a day, are uplifted. While growth is necessary and that India should aim to grow at 8-10 per cent annually, it is not sufficient if poverty is not eradicated and the inequality is narrowed substantially. Top one percent of the Indian population account for about 50 per cent of the country’s income.

Statistics is something one can always quarrel with but the rapid economic strides that India is making since opening up in 1991, is an undeniable fact. It is therefore quite possible that India would become an economic superpower in the near future. When many countries are tottering after Covid, India is among a handful of countries that have been growing at a reasonably high level and seems to be resilient to shocks notwithstanding economic gloom all over in the World.

A Harvard business review points out that not just enthusiasts within the country, but a chorus of global analysts have declared India as the next great economic power: Goldman Sachs has predicted India will become the World’s second largest economy by 2075 and FT’s Martin Wolf suggests that by 2050, its purchasing power will by 30 per cent larger than that of the U.S.

There are several positive trends converging, from different sides of the Indian business ecosystem-wide facilitating factors; in combination they can transcend economic cycles, macro shocks, and policy reversals. Some are new, and older ones are reaching critical mass and they can finally reinforce each other to create a growth flywheel, the review says.

At the same time the review rings warning bells. It is better not to be over-optimistic about India’s growth story. It is better to be cautious and mindful of some of the pitfalls or shocks that may come in the way. “But as with all flywheels, it is important to remain vigilant about rattling noises and burning smells, and in India’s case, these exist in abundance. It’s essential for both business and government leaders to pay attention and act before the flywheel breaks,” the review cautions.

The review highlighted several positives in the Indian economy that could enable the Indian economy to achieve this but listed some negatives that could derail it as well.

The review indicated there are three forces on the demand side that could fuel India’s economic growth. They are consumer boom, appropriate innovation and aspirational consuming class and green transition. On the supply side there are several positive forces like demographic dividend, access to finance, infrastructure upgrades, both physical and digital. On top of these forces, there are several system-wide facilitators, many regulatory and policy reforms. There is also a geopolitical sweet spot for India. Besides there is a diaspora dividend.

While these factors reinforce each other, the review says many barriers remain implying negatives that they could cause the multiplier effect to stall. The three major bumps in the road that could derail the growth process is the unbalanced growth. Despite impressive growth numbers at the national level, the economic benefits have been highly unequal. The top ten percent of Indians hold 77 per cent of the national wealth. Almost 2 people every second are pushed into poverty because of health care costs alone.

Linguistic fault-lines, regional imbalances and new inter-regional tensions as some of the issues that will require deft handling, besides management of the political economy. There are other imbalances, which are growing due to divisive politics. An increasingly assertive form of Hindutva ideology is overshadowing core issues such as job creation, enhancing productivity and shared economic benefits.

Affirmative actions since independence without a sunset clause have created new challenges of exclusion and identity politics. There is also discontent over minority appeasement. All these have not helped and as a result India’s position in the World Press Freedom index has declined. Consequently, potentially, bottled up sentiments in large sections of the disaffected and minority segments of the population can explode, triggering a downward spiral. Such developments can undermine objectives of shared prosperity, the review warned.

Overall, India’s economy is certainly on a bright spot to become an economic powerhouse in a decade or two, but there are pitfalls, which needs to be handled deftly to ensure the growth process is not derailed on the way. It required some great political and intellectual sagacity. (IPA Service)

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By K R Sudhaman

The G20 summit on September 9-10 could not have come at any time better to highlight India’s great strides in digitalization, that has revolutionized payment system in the country and provided common man easy and quick solutions to his financial problems. With India taking the lead in becoming the voice of voiceless south in such fora that accounted for 85 per cent of the world GDP, an opportunity has come New Delhi’s way particularly from African countries and other developing economies to sell its transformational and cost-effective digital payment systems, produced in house.

India’s central bank, Reserve Bank of India has done pioneering work in digitalization of the payment systems that has revolutionized in money transfer in the country especially to needy farmers, poor, migrant labour and lately lending to micro, small and medium enterprises.

Reserve Bank of India has set up a pavilion at the G20 summit at Pragati Maidan in Delhi where it is not only exhibiting but also providing live demonstration to the delegates. RBI is showcasing five digital platforms that it has adopted successfully in the country.

They are Public Tech Platform (PTP) for frictionless credit, Central Bank Digital Currency, Digital Payments initiative – that is UPI One World, Rupay on the go, an alternative to Visa and Mastercard secured payment systems and lastly Bharat Bill Payment System (BBPS) for cross border bill payment.

These digital platforms on which tremendous work has been done since the launch of AADHAR unique digital identification in 2012, provided easy, affordable and quick solutions to payment woes of common man in the country.

Now it is being extended to take care of lending to MSMEs, which took a severe hit in the country after demonetization and Covid. There are over 60 million MSMEs in the country. They accounted for size-able employment and manufacturing output in the country. MSMEs, are largely dependent on informal lending, which dried up after demonetization. The situation worsened with the abrupt closure of production during Covid. The digital platforms have solutions to some of their financial and marketing woes.

Public Tech Platform has ensured that loans to farmers under the Kisan Credit Card (KCC) are provided frictionless and through digital mode plugging all leakages. KCC has been one of the predominant modes of financing farmers in India since 1998 to provide revolving credit. However, the manual process for such loans has frictions, such as high turn-around time (TAT) of 2-4 weeks, operational cost/out of pocket expenses, and multiple visits to branches and related opportunity cost.

Digitalisation of the KCC, after successful pilot projects in different parts of the country, is now being extended to the whole of India. Now this platform is being extended to Dairy Loans, MSME loans without collateral, personal and home loans, especially in rural India. Several banks are already participating in this transformational technological platform. This had potential to extend more types of loans. The platform unlocks the value of digitised date to channel frictionless credit for all segments of loans.

The RBI has already launched digital currency on a pilot basis and based on the feedback, necessary steps would be taken for introduction of constitutional amendment for this purpose. When introduced this will provide risk less currency and drastically reduce operational cost in holding physical currency. This will also help in checking corruption and illegal activities.

Bharat Bill Payment System launched in 2014 as an integrated bill payment system platform that offers customers an anytime and anywhere bill payment experience for a variety of services, including electricity, water, gas, telephone, DTH, and insurance. Payments can be made through a network of agents, enabling multiple payment modes, with instant confirmation of payment. This aligns with India’s push towards enhancing digital payments, financial inclusion, and promoting efficient and secure transaction systems. At present, there are more than 21,000 billers (the service providers who collect payments from customers) spread across all categories of recurring payments that have been on-boarded onto the platform.

With BBPS cross-border bill payment, a facility has been extended to Non-Resident Indians (NRIs) to undertake utility, education and other bill payments on behalf of their families in India, even as NRIs are residing in other countries. BBPS is enabled to accept cross-border inward payments from the UAE. Bharat Bill Pay’s Cross Border Bill Payment solution enables payment of bills seamlessly with absolute security from any corner of the world. G20 offered an opportunity for India to explore this system to more countries.

Launched in 2016, Unified Payments interface (UPI) One World is a mobile-based, 365x24x7 fast payment system which enables users to send / receive money and make person to person (P2P) as well as person to merchant (P2M) payments instantly through a Virtual Payment Address (VPA), mobile number or by scanning a Quick Response (QR) code. UPI is now one of the most preferred payment solutions in India, with close to ten billion transactions every month.

To enable foreign nationals from G20 countries to have the experience of breezing payments through UPI, UPI One World was launched in February 2023. This facilitates the foreign visitors to take care of their hassle – free and secure payment needs during their stay in India by using UPI. Eligible travellers are issued Prepaid Payment Instruments (PPI) wallets linked to UPI for making payments at merchant outlets. Delegates from G20 countries can also avail this facility at various meeting venues. One can transact seamlessly with ~50 million merchant outlets across India that accept UPI payments along with various added benefits that include going cashless and ease of expense tracking in UPI One World Mobile Application.

The advantage of these payment systems is that they are much cheaper than the solutions provided by the advanced economies and many of the developing economies could draw lessons from Indian experience to replicate them in their countries. This could be true south-south cooperation to transform life in poor economies. (IPA Service)

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By K R Sudhaman

Prime Minister Narendra Modi might be happy to announce that the Indian economy would become the third largest in the World in the next 4 or 5 years. These numbers do not mean anything as long as millions of people are still living below the poverty line in India. Statistics can be juggled upon to paint a rosy picture but the reality is far from it. The feel good factor generated by these selective number crunching does not amuse the vast majority in Bharat like the India Shining campaign of BJP leaders of Vajpayee era in 2003-04 Modi govt needs to take a lesson from it and project a realistic picture of the economy so that correctives are taken to reverse the derailed economy.

There are external factors which could pull down the economy further. All the hype about economic recovery after Covid is certainly a bit inflated. Analysis of latest India’s exports figures says it all and the spurt is temporary.

With a fall in International crude prices, the decline in overall merchandise exports continued to be led by oil exports, which fell a massive 43.7 percent on year-on-year to $4.6 billion. Interestingly oil exports fell sequentially as well despite an on-month rise in oil prices. This implies, according to Crisil, that the decline in the dollar value of oil exports was purely on account of a decline in volumes and fortifies the slowing demand for the commodity amid slower global demand.

July this year also saw some softening in electronic goods exports, which have hitherto grown at a stellar pace and reflect the government’s early success in pushing these exports. At $2 billion, electronics goods exports were up 13.1 per cent on-year, compared with a much stronger 48.6 per cent growth achieved in the previous three months. Likewise, Pharmaceutical exports lost some steam, registering a sequential decline and paltry annual growth of 0.1 per cent, down from 5.5 per cent in the previous three months. The readymade garments, which form the bulk of India’s textile exports, continued to be in the red. Gold exports too fell.

In August 2023, food inflation scorched and the Index of Industrial Production slackened. These do not augur well for the economy. Consumer Price Index surged to 7.4 per cent in July from 4.9 per cent in June. This was driven mainly by food inflation, which accelerated sharply to 11.5 percent from 4.5 per cent, led by vegetables inflation, which jumped to 37.3 per cent from negative 0.7 per cent. Crisil is right in saying that with the sharp surge in the July CPI print, and early signs that August would see minimum relief on food prices. Consequently Crisil has revised upwards its inflation forecasts for this fiscal to 5.5 per cent on average, from its earlier estimate of 5 per cent.

Though overall manufacturing activity remains healthy, Crisil expects GDP to grow 6 per cent this fiscal compared to 7.2 per cent in the previous fiscal. This meant that the economy is slowing down and certainly not on the uptick.

Clearly the economy is not moving towards a high growth trajectory. In fact it is slowing down compared to the previous year implying all is not too well. India may be the fastest growing economy in an overall gloomy world economy but that does not mean anything as long as economic revival after Covid becomes steady and growth recovery not bumpy.

The recent spike in food inflation has created an upside to the RBI’s July-September CPI forecast at 5.2 percent , a number it now sees rising to 6.2 per cent. For the current fiscal, it expects CPI inflation print to be 5.4 per cent, 30 basis points higher than the June forecast. The spike in vegetable inflation is a recurrent, and often transient, phenomenon and the central bank can afford to look through it at the moment by not hiking short-term rates. But Crisil is of the view that high food grain inflation amid threat from weather and global development, is difficult to ignore, given its higher weight in the CPI basket.

FIEO too has raised a red flag regarding slowing exports, which does not augur well for India’s economic revival. FIEO President A Sakthivel is of the view that sluggish global demand, especially in economies like China and EU coupled with contraction in growth has led to the continuous decline in India’s exports during the recent months. Manufacturing across the Euro Zone and US has contracted due to persistent policy tightening measures by both the US Fed and the European Central Bank squeezing finances. With Britain’s pace of decline steepening, the optimism faded further. The Asian economies too are showing mixed economic recovery. Many Asian economies are struggling to maintain the momentum. The softening of the commodity prices has also pulled down value-wise exports. Monetary tightening and recessionary fears have accentuated the problem particularly with consumer spending falling across the globe.

Though Modi government may be optimistic about the possibility of a booming Indian economy and do pep talks about revival of the economy from the ramparts of the Red Fort, going forward, the economic scenario does not look all that rosy given the slowing world economy and difficult geo-political situation. India’s economy still needs a lot of fixing and demand revival is not going to be all that easy. Slowing demand world over is a matter of concern and it is going to take some time for economic recovery not only in India but world over. The government should learn to grapple with this reality and prepare the economy accordingly instead of being in election mode all the time spreading falsehood about the economy to hoodwink the people. (IPA Service)

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By K R Sudhaman

There is jubilation all over in BJP circles and the Indian media after the recent visit of Prime Minister Narendra Modi to United States, where he got a rousing welcome. This is no doubt a landmark bilateral visit which has laid the foundation for taking Indo-US relations to a new high. India is looking for technology and United States is looking for a large market in a slowing global economy and strained Sino-US relations. It is therefore interesting to note how China sees this Indo-US relations that has been put on high pedestal now in the emerging geo-politics.

No doubt, Indo-US bilateral trade is expected to increase five-fold to $500 billion in the next few years. There will be transfer of technology for manufacture of fighter jet engines, which at the moment India is struggling to make on its own and whole lot of other strategic and economic cooperation including chip manufacture, space, software and movement of personnel for mutual benefit.

This is a sort of economic bilateral cooperation that began between US and China thirty years ago and next thirty years it is going to be India’s turn for the United States to cooperate to protect mutual interests. China was made the Factory of the world and slowly United States and the developed world are dumping it and looking at India to fill the vacuum to create another manufacturing hub as part of the China plus one geo-political strategy to keep the supply chain going uninterrupted. US and advanced countries took advantage of huge Chinese market and cheap labour to shift all its mundane and dirty production during the last 30 years. Now it will be India which will fill the gap to keep the advanced nations economy growing. In the process New Delhi too gets some technology and investments as China got.

While there is celebration about transfer of technology of GE 414 jet engines to India, in reality these engines are not used in top US jet fighter aircraft F35 and F 16. So in a sense it is slightly dated technology, which US is transferring. Nevertheless, India does not have even this technology and to that extent, it will be beneficial to upgrade its nascent aero engine development. So there is some element of mutual benefit. As far as drones are concerned, it is a sale and hence will help US to earn more and create more employment as part of its economic revival strategy. Chips manufacture is going to be only assembly in India and the mutual benefit is loaded more in favour of the United States.

Indian analyst based in China Sumeet Jain is right in saying China is more amused by the growing U.S-India relations rather than being worried. China is apparently amused at what is happening to India. The way China became victim of US machinations by Washington opening its doors to Beijing thirty years back, India is going to be next in line for US to exploit in the next 30 years. But China also feels it has also managed to hoodwink US by getting technology including some hi-tech, which it has been able to successfully copy. This Beijing feels India is not capable of. So China has a sort of condescending view on India and this is the atmosphere that exists in Beijing at the moment with regard to Modi’s visit to Washington, Jain points out adding whatever Chinese leadership perceives, the same thing percolates downwards. Also Chinese views keep changing like weather and like Gujaratis, business interests are uppermost for Chinese as well.

Jain is also of the view nothing comes free in this world. U S is rolling out red carpet to India now mainly to cut to size China, nothing more, nothing less. This, all the three countries are aware of. Of course since 2019, there has been a steady decline in Chinese economy and with emphasis on China plus one US policy to ensure supply chain is not disrupted, India will stand to benefit to some extent.

As far as Sino-Indian relations are concerned, there is mutual distrust at the moment particularly after the Galwan Valley episode in 2020. But Chinese are shrewd businessmen. If US thinks India is now in a bright spot and is the only large economy with huge market growing rapidly at the moment, China would not be far behind to exploit it for its mutual benefit. Since 2019 Chinese exports are down. It has built huge production capacity which are now idling. China too wants to kickstart its economy and the opportunity and market exists only in India with its huge growing middle class.

With US the relations are strained and hence the opportunity of expanding trade is not that encouraging. Europe is in recession and hence only India provided the market for Chinese products. So If US and European countries are looking to India for reviving their economies, so also China and hence it will not be far behind them in mending ways with India to enter into the Indian market including production by Chinese companies for economic sustainability.

India too is clever just as US and China. In the event of a confrontation between China and United States, New Delhi will not fight anybody’s war. It may not remain neutral but it will do things to protect its interests just as it is doing in the case of Russian-Ukraine war. It is maintaining its good relations with its age-old friend Russia as well as United States. It has also been friendly with Ukraine.

China too is not keen to antagonize India, even though it made a tactical error in fomenting trouble in the Galwan valley. Apparently it was an error of judgment on the part of Chinese President Xi Jinping. Prime Minister Narendra Modi has in the process has sent a clear message to Xi that Beijing cannot pressurize New Delhi by such actions. Though China feels it has arrived as a superpower, its weaponry is no match to that of United States, which are not only superior but also tested in various wars all over the world. Though there is a war of words, the leadership in China is astute enough not get into a confrontation with United States.

So going forward it is India’s turn to march ahead economically in the next decade or two. So United States and other advanced economies will look up to India for investments and trade. China and Russia too will do the same. India’s oil refining capacity is being stepped up to benefit Russia. It is not merely Apple which is setting up production in India, but also several Chinese mobile and solar companies. It is ultimately business interests that will influence geopolitics. (IPA Service)

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By K R Sudhaman

The Narendra Modi government seems to be on cloud nine after more than expected growth in the fourth quarter of 2022-23. There are certain warning bells in the macroeconomic fundamentals, which should not be ignored. Morgan Stanley is in all praise for Modi government for economic achievements during the last ten years. There are certainly some path-breaking achievements like digitization, managing inflation, though lately not comfortable, covid handling and so on, but there are certain weaknesses which needed to be handled so that the economy gets back to high growth trajectory.

Rating agency Moody’s have rightly flagged one of the issues that is a matter of concern. Fiscal slippage arising from weaker-than-expected government revenues in the current fiscal is certainly needed to be worried about. As it is fiscal deficit is high since Covid, which has not yet been fully reigned-in. Moody’s Investors Service Associate Managing Director Gene Fang has been quoted as saying that India has a relatively high level of general government debt at around 81.8 per cent of GDP for 2022-23, and low debt affordability. In the light of this, Moody’s expects the Indian economy to grow by 6-6.3 per cent in June quarter.

Government may be happy by the more than anticipated GDP growth of 7.2 per cent in 2022-23 on the back of unexpected fourth quarter growth of 6.1 per cent against projections of 4.2 per cent. This is welcome but RBI and finance ministry forecast only 6.5 per cent growth for 2023-24, which was slightly higher than April forecast of 6.4 per cent. But going by Moody’s forecast, that is going to be difficult considering the possibility of fiscal slippages.

Moody’s expect India’s growth to come in around 6-6.3 per cent in the first quarter of the current fiscal year, which remains relatively flat from the 6.1 per cent recorded in the final quarter of fiscal 2022-23.

But Moody’s have acknowledged that India has high growth potential as well as sound external position. As multi-lateral agencies put it, India is certainly in a bright spot in a gloomy global economic situation. But this potential can be realized only through structural reforms, tackling wide-spread corruption, massive push to job creation, particularly in rural areas and correcting the huge infrastructure deficit. Private investment is yet to pick up to the desired level. India is yet to get back to high level of over 35 per cent of GDP. This was achieved during UPA regime. Both savings and investments rates have been steadily declining and dropped much below 30 per cent of GDP especially after COVID. They are slowly picking up but still far from reaching that high level.

There are some weaknesses in farm sector as well, which required reforms to make agriculture smart and improve the rural economy. Tight monetary policy has tamed inflation no doubt during the last one and half years but this has also dampened investments and demand pick up due to high interest rates. So growth will certainly be impacted in the current year and the next year and hence economy will find it difficult to grow to its potential. Nevertheless this will help in bringing about macro-economic stability, critical to help growth momentum in subsequent years. (IPA Service)

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By K R Sudhaman

United Nations declared in Mid-April this year that India has become the most populous country overtaking China at 1.43 billion. Can it do the same with regard to GDP to become second largest economy in the world? On the face of it, the proposition seems difficult in the next few decades as China is the second largest economy in the world at over $18.5 trillion as against United States’ nearly $25.5 trillion. There have however been suspicion for quite some time that Chinese figures are exaggerated and the size of its economy is not as big as it is made out to be. If this is true, it is within realms of reality that India overtakes Chinese economy in the foreseeable future.

This is because of new evidences emerging now to show that Chinese economy can at best be around $5-6 trillion and hence it is around the size of Japan and not at around $18 trillion. Japan’s GDP is put at around $5.16 trillion and is the third largest economy after US and China. India is the fifth largest economy at around $3.5 trillion. It recently overtook Britain and is widely expected to overtake Germany and Japan to become third largest economy in the next few years. Germany and Japan are the two other economies ahead of India apart from United States and China. While India is now on a bright spot with foreign investors looking up to India, experts lately say that China’s economy has tuned slippery and its reopening boom is a charade.

According to John Burn Murdoch of Financial Times, China has stopped publishing many date points like electricity consumption on a periodical basis ever since Xi Jinping came to power in 2012 implying Chinese economy is not doing well and that downslide had started in several sectors. But more importantly, according to a US based Chinese analyst, Lei, China’s real GDP is less than half of what the Chinese government claims to be. She argues that China’s GDP was just $9 trillion officially in 2012 and wondered how is it that its economy has doubled to over $18 trillion in the next ten years when the economy has been on the downslide since then. She says China’s published GDP in 2022 was $17.9 trillion against US $25.5. However, people believe that China’s GDP is “overstated and manipulated”.

According to the method adopted by Louis Martinez of Chicago University, data are exaggerated by 35 per cent in autocratic countries including China. He had come to this conclusion after analyzing data using satellite images of various countries based on when people turn off their lights on a daily basis since 1984. His study is silent on the data prior to 1984.

Lei used this as a deflator to calculate the real GDP of China since 1992. China’s official GDP in 1992 was $493 billion and in 2022 it was $17.99 trillion. This meant that China’s annual GDP growth was 12.7 per cent annually. If Martinez method was used as deflator, then the GDP growth rate comes down after the adjustment to 8.25 per cent annually. This meant that China’s real GDP in 2022 was just $5.3 trillion, about the size of Japan.

But Japan’s population is just one tenth of China, which meant Japan’s per capita income is ten times more than that of China. Also Chinese currency is administratively pegged at 6.3 Yuan to a dollar. But in the grey market, which reflects the real value, is around 10 Yuan to a dollar. If this also is factored in an economy where exports accounted for more 40 per cent of the GDP, the China’s GDP will be much less than $5.3 trillion, some analysts argue.

That apart a recent study by experts said nominal and real GDP growth of China was over calculated by two percentage points year after year from 2008 to 2016 and that the miscalculation only got compounded in those years. As a result China’s GDP said to be $ 13.5 trillion in 2018 is actually 18 per cent lower at around $11 trillion. The study is authored by Chen Wei, Chen Xilu and Michael Song of Chinese University of Hong Kong and Chan-Tai Hsieh from University of Chicago. But even at around $11 trillion after the necessary correction of the figures, Chinese economy is still quite large and is twice the size of Japan. But the new evidences by Lei indicate that China’s GDP would be just half of $11 trillion arrived at by these professors. The Chinese GDP was merely $5.3 trillion or around that of Japan.

Many indicators of growth in China are underwhelming. A growth model dependent on stimulus and debt was always going to be unsustainable and now it has run out of steam, Ruchir Sharma, who is Rockefeller international chair, wrote in the Financial times. Confidence that China’s economy can rebound from Covid restrictions is untethered to economic realities. “Something is rotten in the Chinese economy, but don’t expect wall street analysts to tell you about it, “Sharma said listing several indicators that point to underlying weakness.

For example, Wall street’s assumption of 5 per cent GDP growth would suggest that corporate revenue growth of 8 per cent, but it rose by 1.5 per cent in the first quarter, he said adding in fact, corporate revenue is slower than GDP in 20 of the country’s 28 sectors, and MSCI China stock index down 15 per cent from a January peak. Imports, a strong indicator of consumer demand dropped 8 per cent while youth unemployment hit 20 per cent and is rising. “These facts point to the source of the rot,” he said. China’s economic model since 2008 has been driven by government stimulus and rising debt, particularly in real estate and now Chinese debt service already account for a third of disposable income. China’s growth potential is only half of 5 per cent target this year due to shrinking population.

Lei goes on further to say there are about 30 provinces in mainland China, of which only six are in a position to manage their finances. The rest are severely debt-ridden at an unsustainable level.

Given these data points and analysis, it is quite possible that Indian economy has the potential to overtake China in near future if its economy continued to fire on all cylinders. The figures do certainly indicate that Chinese economy is on the decline while Indian economy is on the rise India’s GDP in real terms may not take much time  to reach near the level of real GDP figure of China. The big gap which was thought earlier, is not that big after taking a realistic estimates of Chinese data. (IPA Service)

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By K R Sudhaman

The welcome development in Indian economy is that Inflation, riding on base effect, has moved below five per cent mark in April this year. But worrying factor is slowdown in Industrial and consumer goods production as IIP growth decelerated to 1.1 per cent in March this year. As a result rating agency Crisil expects India’s GDP growth to slow down to six per cent in the current year 2023-24 as against 7 per cent in just ended financial year 2022-23.

This is not a good news as it will worsen the job situation in the country, which is none too comfortable this year. However with RBI expected to cut interest rates in the latter part of this financial year in the face of slowing inflation, GDP growth may pick up next year with the increase in capital expenditure.

Crisil Market intelligence and analytics is right in saying that Inflation moving below 5 per cent will however give relief to the Monetary Policy Committee, which in its recent policy review kept the repo rate unchanged leaving room to assess the impact of cumulative rate hikes on inflation.

Reserve Bank of India has been hiking short-term rates for a while before the recent policy review in view of the rising inflation. In April consumer price index slowed down to below 5 per cent at 4.7 per cent, which was clear one per cent down from 5.7 per cent in the previous month March. According to Crisil chief economist Dharmakirti, a considerable part of the fall is due to a high base effect of last year when the Russia-Ukraine conflict intensified, pushing up fuel, metal and food prices.

Accordingly, there was an across-the-board benefit. Correcting for seasonal elements, there is perceptible sequential easing across most categories except pulses, sugar, spices, education and personal care and effects. Another noticeable aspect is the still-elevated inflation rates in cereal (at 13.7%) and milk (8.8%) and the recent creep-up in pulses (5.3%).

With the rabi harvest entering the market some respite for cereal and pulses prices could be felt. But the looming El Nino and monsoon threat causes worry. Similarly high procurement prices are expected to keep milk inflation high. Elevated inflation in these essentials can continue to pinch pockets. Expectation is that CPI inflation will average 5 per cent this fiscal as against 6.7 per cent last fiscal on the assumption of a normal monsoon.

For now, the finance ministry expects the MPC to maintain a pause as it continues to watch the impact of past rate hikes. As growth slowdown seeps in and inflation moderates, the RBI may cut rates by the end of this fiscal. This is a welcome development as interest rate cuts will spur industrial activity and thereby growth next year.

In the current year what is worrisome is the broad-based slowdown in the manufacturing. The latest Index of Industrial Production (IIP) data suggests a slowdown across the manufacturing sector. Both consumer and industrial goods growth moderated, with slowdown more pronounced for the former, Joshi said.IIP growth decelerated to 1.1% on-year in March compared with 5.8% previous month, driven by slowing manufacturing, and falling electricity production.

Within manufacturing, sharpest fall was seen in consumer durables (-8.4% vs -4.1%), followed by consumer non-durables (-3.1% vs 12.1%). Consumer durables declined consistently for the past 4 months, largely indicating hit from falling exports, and some impact of rising interest rates on domestic demand.

Support from infrastructure activity also seemed to wane towards the end of the fiscal, as reflected in IIP for infrastructure and construction goods slowing for fourth consecutive month (5.4% vs 8.4%). This should reverse as central government restarts capex push from new fiscal, Joshi said.

Industrial growth will continue to face headwinds from falling exports and moderating domestic demand. External demand is expected to be a bigger drag as western advanced economies face a sharper tightening in financial conditions, Joshi feared. While rising interest rates will moderate domestic demand as well, the key monitorable for India will be monsoon, and how it impacts rural income prospects.

Moderating inflation is good news for the people as any rise in prices is regarded as tax on common man. But the pick-up in the Indian economy so as to get back to high growth path will have to wait for some more time as 2024-25 could see actual big investments flowing in. (IPA Service)

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By K R Sudhaman

Agriculture and food are now back in the centre stage in the backdrop of the critical geopolitical developments. This has become necessary after food shortages witnessed in the face of Russian-Ukraine conflict in countries dependent on wheat imports from those two warring countries.

In this emerging scenario, it is worthwhile to analyse how this year’s union budget has handled the issue of agriculture as it sought to come out with a blueprint for accelerating India’s growth story post covid.

ICRIER Director Deepak Mishra says that the Finance Minister Nirmala Sitharaman has acted on the ‘window of opportunity’ to significantly reduce numerous subsidies in the face of falling global commodity prices and with the control of covid 19 outbreak. The has cut the spending on food subsidies from Rs. 2.87 trillion in FY2022-23 to Rs. 1.97 trillion in FY2023-24, and fertilizer subsidies decreased from Rs. 2.25 trillion to Rs. 1.75 trillion. Similarly, the MGNREGA budget was cut from Rs. 894 billion to Rs. 600 billion this year.

Though the rural poor are at a disadvantage from the standpoint of expenditure allocation, they will benefit from the plethora of new projects launched, Mishra emphasised.

Significantly, agriculture has recorded an average annual growth rate of 4.6 percent over the last six years, employed 45.6 percent of the workforce and contributed to 18.6 percent of the country’s Gross Value Added in 2021-22.

Still its viability, as an occupation, remains a major concern, according to agriculture professor in ICRIER, Ashok Gulati. Therefore, the budgetary provisions announced for agri-food policies in Union Budget 2023-24 need to be understood from the long-term perspective of agriculture sector development.

Gulati is of the view that the budget took a ‘bold step’ towards reorienting support in the agri-food-rural space, away from doles and towards development. Drastic cuts in food and fertilizer subsidy, and on MGNREGA, amounted roughly to Rs. 1.7 trillion. Savings from these doles have been redirected towards more productive expenditures on railways, roads, rural housing and jalshakti that will help rural India through ‘multiplier effect’.

Many key provisions have been made for Agriculture and Farmers’ Welfare in the Budget for the FY 2023-24, which is Rs. 1.25 lakh crore this time (including Agriculture Education and Research). Out of this, provision of Rs. 60,000 crore has been made for PM-Kisan, Rs. 23,000 for KCC and Rs. 13,625 for PM Fasal Bima Yojana. That means 77 percent of the agriculture budget allocation is for safety nets and merely 23 percent for agriculture development activities, Gulati said implying this is one aspect that is not encouraging in the budget. There is a need for re-orienting the agriculture budget towards development, at least 50-50, Gulati emphasised.

Gulati also regretted that the budget did not promise any critical policy towards fulfilling Prime Minister’s ambitious goal of doubling farmers’ income by 2022-23.

This has remained a dream and raising farmers’ income is vital for moving towards Amrit Kaal. According to The State of Food Security and Nutrition in the World 2022′, India has the largest undernourished population globally which stood at 224.3 million of the 702.7 million people in 2019- 21. There is also widespread acknowledgement that growth in agriculture sector has come with a cost to the environment, especially to air, water, soil, and green-house gas (GHG) emissions to the environment, Gulati pointed out and asserted that continuation of “business-as-usual” approach to meeting the rising demand for food will result in using natural resources beyond their ecological carrying capacity.

The only way farmers’ income could be substantially increased is through making Indian agriculture smart. This required whole lot of efforts, including structural reforms. To begin with, there is need to increase productivity through more R & D in improving quality of seeds, soil fertility and diversification. Farmers too should make serious efforts to shift from growing cereals to cash crops. Of course this has to be done without impinging upon food security by ensuring productivity in cereals is stepped up substantially. Farmers’ needed to augment their income through increased poultry, animal husbandry. Efforts are needed to step up food processing in rural areas so as to ensure that the problem underemployment in agriculture is dealt with besides providing jobs to surplus labour in the farm sector where there is seasonal employment as well.

Though the budget had several positives, it has not made any out of the box attempt to tackle the issue of significantly raising farmers’ income. While the budget had recognised some immediate problems including geopolitical in the farm sector, the efforts to bridge the yawning rural-urban divide lacked conviction. (IPA Service)

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By K R Sudhaman

Global debt and recession are two major challenges afflicting many parts of the World, particularly the global south. India, which heads G 20 this year, has a great responsibility to work with member countries to find a solution to these problems. In this connection, India’s G20 Sherpa Amitabh Kant is right in suggesting the group, which accounted major chunk of world trade and income, should stay “non-political” if it had to focus on development and global challenges. Kant made this remark ahead of the crucial meet of G20 countries in the backwaters of Kumarakom, a scenic place in God’s own country, Kerala. On challenges around global debt and recession, Kant was candid in saying “one issue can’t hold back other things,” apparently referring to Russia-Ukraine war.

There certainly appears to be double standards among the European countries and United States by attempting to treat European problem as world problem and linking development and global challenges to war through sanctions , as  per   their    whims.. Russian-Ukraine war has turned out to be a sticking point with advanced economies comprising G7 countries. But India however wants G20 to remain an economic and development forum. India has found support from Indonesia as well as Brazil. South Africa, a special invitee to the forum, too supported this viewpoint.

According to a top bureaucrat, V Srinivas, who has written a book on the roadmap to Indian Presidency of G20, sixty per cent of the low income countries are facing unbearable debt burden. “This is an extraordinary challenging macroeconomic environment.” Srinivas is of the view that it is likely that G20, under India’s presidency this year, come together to establish new rules and timelines for a common framework in this regard.

Srinivas elaborating on the issues confronting humanity, said climate financing, digital assets and capital flows are likely to continue to feature in the G20 agenda.

National Payments Corporation of India MD and CEO, Dilip Asbe, said G20 was a good platform to start conversations on taking UPI and other remittances and payments solutions globally. RBI and monetary authority of Singapore collaboration recently showed the way how digitally bank account transfers and fund transfers be done in two different countries in 20 seconds with all compliance and settlement. He was speaking at the Digital Public Infrastructure session ahead of G20 sherpas meet at Kumarakom.

India has done a pioneering work on digital payment system and this could be replicated in many developing countries so that overdependence on advanced economies payment system do not act as an impediment, especially during a crisis or sanctions.

India’s G20 presidency commenced from December 1, 2022. For a nation deeply committed to multilateralism and democracy, the G20 presidency represents a very significant moment in history. The G20 has been in the forefront in battling financial crisis and it represented 90 per cent of World GDP, 80 per cent of global trade and two-thirds of the world population.

Prime Minister Narendra Modi has said India’s G20 presidency will be inclusive and action-oriented. World is looking to India with hope and priority will be given to women led development. In the light of this approach, the utilisation of high quality digital connectivity for financial inclusion and digital transformation would be presented.  A session by Asbe was one such event.

According to Srinivas, India’s G20 presidency will seek to showcase the nation’s strengths in digital infrastructure, direct benefit transfer, digital health and pharmaceuticals.

In fact, India’s former Prime Minister Rajiv Gandhi, had said in 1980s that if one rupee was provided by the Government to the poor, only 16 paise reached the actual and poor beneficiary. At that time digital revolution had not happened, the money used to get siphoned off at various points enroute. The introduction of direct benefit transfer in India, first conceptualised by former Prime Minister Manmohan Singh and later effectively implemented by Modi, has revolutionised the payment system and transfer of money directly to poor beneficiaries without any leakage enroute. This has also curbed generation of black money.

Prime Minister  Narendra Modi has called on G 20 to promote transparency and integrity citing India’s zero tolerance policy on corruption and black money. He had also spoken of the need of greater international cooperation for return of illicit money to the country of origin. He emphasised on addressing the barriers of excessive banking secrecy and effective counter terrorism financing tools.

Many countries in global south did face this problem. Corruption is rampant, siphoning of scarce resources and stashing them abroad by influential people and authoritarian regime was common phenomenon resulting in majority of the population remaining poor, oppressed and living in abject poverty.

At the G20 Sherpas meeting, Kant said there are several issues put forward as deliverables for all G20 countries and they should work together on issues of development. Essentially it’s a forum for growth development and progress. “We want every country to work towards the developmental agenda for the World and that is what we will strive for.”

If the G20 summit in New Delhi  later   this   year    is    able  to find a solution to debt burden, particularly of global south after Covid, and introduce digital payment system to plug leakages in money transfer to the poor, India would have contributed greatly in tackling two major challenges confronting the poor countries. (IPA Service)

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By K R Sudhaman

After M G Ramachandran and Jayalalithaa, AIADMK, which was formed by MGR breaking away from DMK over issue of corruption during the leadership of M K Karunanidhi in 1970s, now has an undisputed leader in former Tamil Nadu Chief Minister, Edappadi Palaniswami, who became the unanimous party general secretary following the Madras High Court rejecting interim application filed by expelled leader O Panneerselvam (OPS) and his associates. Former Deputy Chief Minister, OPS had sought restraining AIADMK from implementing the party’s general council resolutions and the consequent notification issued on March 17 for general secretary election. The election was held but the result was withheld pending the court order. With the court verdict, the unanimous election of Palaniswami as general secretary was announced. But Panneerselvam faction has gone on appeal to division bench of the High Court.

But the court verdict is seen as a major victory for Palaniswami ending months-long feud between the two warring top leaders of the AIADMK. The Supreme Court had last month green flagged EPS’ continuance as the interim chief, but left it to the Madras High Court to decide on the legality of the resolutions passed, and changes to the party by-laws, during the general council. The organisational polls have to be held once in five years and the highest office is elected by primary members.

This verdict has amply made it clear that it is EPS, who is going to lead AIADMK in the next Lok Sabha elections in 2024 and assembly elections in 2026. There are talks of BJP emerging has a strong third force in Tamil Nadu under the leadership of Annamalai to take on the two powerful Dravidian parties, which have ruled the state ever since Congress was unseated in 1967. There are also talks of BJP parting ways with AIADMK to go it alone. But it is now increasingly becoming clear that it is only under EPS, AIADMK led NDA can take on powerful DMK under M K Stalin in the state electoral politics. BJP has to be junior partner to AIADMK and not the other way round. OPS, Sasikala and TTV Dinakaran can at best merge with BJP to widen the acceptance of the national party. On their own, they would get increasingly marginalised in the state politics.

Both DMK and AIADMK are rooted in Dravidian politics, AIADMK is more nationalistic in approach and does not believe in atheist approach to politics and appeasement of minorities like DMK even though it has a sizeable minority following apart from majority Hindus. When MGR formed AIADMK, majority of congress cadre joined over a period of time and hard core DMK cadre remained with DMK as only liberal cadre shifted to this splinter party of MGR. As former minister Arun Shourie described BJP as Congress plus cow, AIADMK is DMK plus nationalism. It is also not averse to upper caste Brahmins unlike DMK, which has pathological hatred towards Brahmins under the garb social justice movement. In fact, AIADMK supremo Jayalalithaa was a Brahmin.

DMK’s hatred is so pronounced that there is no university in Tamil Nadu named after great scientists and Nobel laureates from the state C V Raman, S Chandrasekhar and Venki Ramakrishnan. It is because all the three belonged to Brahmin community. This is the only other state in India to have 3 Nobel laureates apart from West Bengal.

BJP does want to get into state politics in a big way but so far it has been able to do so only in Karnataka among the southern states. In Kerala, though RSS is more active than other southern states of Tamil Nadu, Andhra Pradesh and Telangana, the entire political and administrative system is left-oriented. Even the mind-set of RSS in Kerala is left-oriented, so much so the politics is violent just as West Bengal and every issue is looked from the prism of communism irrespective of party affiliation.

Likewise in Tamil Nadu every issue is seen from Dravidian viewpoint, which means anti-Hindi and anti North Indian, even though, unlike in the past, there is a sizeable migrant labour in all the southern states as most of the local and skilled labour are working abroad in Middle East, Far East, Africa and even in Europe and North America. Every southern state now has around one crore each Hindi speaking migrant labour, mostly from Odisha, Bengal, Assam, Bihar and Uttar Pradesh. Some of them do have voting rights and in Tamil Nadu, they prefer AIADMK to DMK as the party being more tolerant than DMK.

Though BJP wants to capture power in Tamil Nadu, Annamalai of BJP, though belong to same gounder caste as EPS, is no match to Palaniswami yet to take on DMK and Stalin. It would be in BJP’s interest to go with AIADMK as a junior partner. If it all it wants to go it alone, it can’t be before 2031 elections as the party has now got only toe-hold and not even foot-hold in the state electoral politics. This is despite the fact Prime Minister Narendra Modi has huge following in the state. Both DMK and AIADMK have committed cadre even at the booth level and most of them are well entrenched as they have been working for the respective parties for at least a decade or two, so much so they have individual connect with the local people. It will take at least a decade for BJP to become that influential at the booth level though in a few districts like Kanyakumari and Coimbatore, RSS penetration is visible and substantial.

OPS, belonging to Thevar community just as V K Sasikala and his nephew TTV Dinakaran used to be seen as the political heir of late party chief J Jayalalithaa, while EPS enjoyed overwhelming support from party workers. The AIADMK suffered four consecutive losses under the dual leadership model of EPS-OPS since the 2019 Lok Sabha polls, including the recent Erode (East) by-election where the DMK-led ruling coalition candidate, EVKS Elangovan of the Congress trumped Mr Palaniswami’s pick KS Thennarasu by more than 66,000 votes. After a series of electoral losses, EPS has said the model is not working while OPS desperately approached courts to retain power over the party.

The court verdict has only strengthened the hands of EPS and rightly so as he is the only one at the present juncture capable of taking on DMK in the state. As Lok Sabha elections draws near there is some talk among a section of the Congress leaders for talking to EPS led AIADK for more seats if DMK refuses to reduce the number of seats to the Congress. Some DMK leaders are in favour of lower allocation of seats to the Congress in view of its depleted strength.

But the latest political developments have ruled out this possibility. M K Stalin is firmly with Rahul Gandhi and he will ensure that the front of DMK with the Congress, Left and others remain strong for the 2024 Lok Sabha polls. There is every possibility of a three way fight in Tamil Nadu in Lok Sabha polls between DMK led front, EPS led AIADMK and the third front led by BJP along with others, even including OPS faction of AIADMK which has become depleted in the recent months. (IPA Service)

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By K R Sudhaman

It is now clear that Chinese data are quite overstated and the Chinese economy now at over $18 trillion as officially announced, is grossly overestimated. Recently reports appeared in some newspapers including popular Hong Kong-based South China Morning Post, to suggest that Chinese growth figures were exaggerated by two percentage point for several years from 2008 to 2016. The reports quoted a study by experts from universities as saying that nominal and real GDP growth was over calculated by two percentage points year after year from 2008 to 2016 and that the miscalculation only got compounded in those years. As a result China’s GDP put at $13.5 trillion in 2018 is actually 18 per cent lower at around $11 trillion.

The study is authored by Chen Wei, Chen Xilu and Michael Song of Chinese University of Hong Kong and Chan-Tai Hsieh from University of Chicago. There were always allegations that China’s data were fudged and grossly exaggerated. This study has only confirmed it and there are indications that the miscalculation had compounding effect on exaggerating GDP figures. If that is the case, Chinese economic growth is not that big and are far behind United States, whose GDP is put at over $21 trillion.

But even at around $11 trillion after the necessary correction of the figures, Chinese economy is still quite large and is twice the size of Japan, which is now at $5.16 trillion.

With Covid impacting Chinese economy badly in the last couple of years, growth had dropped rapidly. That apart Sino-US stand-off, which has impacted Chinese exports badly, the economic recovery is going to be very difficult for China. There are other factors as well. Russian-Ukraine war and slowing global economy too have severe impact.

China’s cannot expect growth to be around 2 per cent this year. It was in the negative territory in the previous years. Next year the projections are around 4-5 per cent, which also appears to be difficult considering the widespread economic woes in China including protests over zero covid tolerance and lock down. There are piles of empty containers stacked in Shanghai and is true of several other ports in the country with exports dipping considerably. Container charge, which was around $4000 per container last year has dropped to $1300 and Shipping liners are finding it difficult to find customers in China. Many large multi-national companies too are shifting their production base from out of China to countries like India, Vietnam, Bangladesh and South East Asia. This is expected to impact the economy further. The job market might become more difficult. As it is, labour cost is going up in China.

There is also a massive real estate collapse in China, non-performing assets of banks have mounted manifold. Reports suggest that ghost towns, unoccupied flats are common features in many towns and cities. There are also reports of people occupying half-finished flats as builders were increasingly finding it difficult to mobilise resources for their completion. Several owners too are finding it difficult to pay their EMIs for their flats due to loss of jobs. The problem is accentuated with food security being fragile. Though China has huge land mass, only one seventh of its total land on the eastern China is arable. The Western China is mostly Gobi Desert and Mountains. The attempt is on to cultivate land as much as possible in Tibet and Xinjaing. China’s increasing interests in Afghanistan and African countries is believed to be aimed at cultivating food crops in these countries. There were unconfirmed reports suggesting that China may look at leasing huge tracks of fertile land in Pakistan’s Punjab in the event of Pakistan defaulting in the repayment of loan it has taken from China, which is suspected to be in commercial terms. One report suggests that Pak debt to China is over $30 billion. The money mostly spent on CPEC projects in Pakistan was not yielding any revenue aggravating the situation.

China has 22 per cent of World population but has only 7 per cent of arable land, which is also shrinking.  There are reports to suggest that China’s arable land has shrunk by 6 per cent in the recent years so much so China is increasingly looking at cultivating rice in saline water. Egypt is already doing it. China’s population is huge at 1.41 billion. Though China is nearly self-sufficient in rice, it imports huge quantity of meat, oilseeds, corn, sugar, wheat from Ukraine, fruits, vegetables and dairy products to fill the supply gaps.  China is among the largest importer of meat, particularly beef. Even oil cakes for animal feeds are imported. But one good thing is that China has huge foreign exchange reserves at over $3trillion. The problem is the quantity of food that is required for the huge 1.4 billion population is difficult to procure from abroad because there cannot be one single source for such large imports. India too faced similar problems in the import pulses some years ago when there was scarcity. Of course, the problem of pulses shortage was overcome through increased cultivation of the crop within the country. China ranked 34th in the food security index, which is not encouraging considering the huge population in that country.

China may still be the second largest economy even after the necessary correction to the exaggerated growth figures. But their economic woes are many and may need some drastic steps. The recovery is certainly going to be bumpy and prolonged but one thing is certain that the catching up by Indian economy is going to be faster as exaggerated Chinese growth data makes it that much easier. (IPA Service)

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By K R Sudhaman

Whenever joblessness arises, parochial issues like migrant labour raise their ugly head in different parts of the country. Be it the attack on South Indians in Mumbai in the 1960s by the late Bal Thackeray-led Shiv Sainiks, or on UP bhaias and Biharis in 2000s.

Migration has always taken place in India as market forces operate in job market and movement of workforce takes place accordingly. The locals, who are generally laidback because of better security, do not want to take menial jobs, if avoidable. As they move up the social ladder due to education, locals prefer white-collar work to keep up with joneses, resulting in migrant workers from poorer states taking up the daily wage jobs.

As Brahmins started moving out of Tamil Nadu, other Indian cities like Hyderabad, Bengaluru, Delhi, Mumbai and Kolkata became favoured destinations, with Dravidian politicians hounding them out. Their vacuum was filled by non-Brahmin Malayalees in Tamil Nadu in the 1960s and 70s, as Dravidian parties felt they were one amongst them. With the advent of Gulf jobs, lot of workers, particularly in the construction industry, moved out of Kerala and that vacuum was filled by workers from Tamil Nadu. Workers from Karnataka and the then Andhra Pradesh filled up the vacancies in Tamil Nadu.

Subsequently, Tamil workers too started migrating to Southeast Asia, the Gulf and elsewhere and people from Andhra and Karnataka too started gradually going abroad. This resulted in huge shortage of workforce in South India, which was industrializing rapidly since liberalization of the economy in 1991. Today, there is hardly any local construction labour available in South India. Take any major project, including metro rail, airports, ports, highways in South India, the construction workers are mostly from Bihar, eastern Uttar Pradesh, Odisha, Assam and some from West Bengal and other northeastern states.

Many in Tamil Nadu speak or understand Hindi and North Indians today do not consider their lack knowledge in Tamil as a handicap. Many North Indian workers too have picked up Tamil. Migrant workers dominate construction industry in Chennai, Bengaluru, Hyderabad, Visakhapatnam, Kochi, Coimbatore and other cities in South India. The restaurant boys and girls in Chennai are no longer Tamils, Malayalees, Telugu and Kannadigas.  Now, one finds only Nepalis and Northeast people as restaurant servers in Chennai.

Usually, there is not much of a problem when the economy is doing well and demand for workers is high. There are reports suggesting that plane-load of construction workers were brought from Odisha, when there was a shortage during Covid.

But the issue gets blown out of proportion, when local politicians, especially from regional parties, create narratives, mostly negative on migrant workers, particularly at the time of elections. Just as all South Indians were derogatorily known as ‘Madrasis’ in the North, all from the North are referred to as panipuriwallahs in the South. In fact, one DMK leader was accused of calling a migrant worker as a panipuriwallah during a recent stand-off.

Such issue surfaces first in cities and then spreads elsewhere, subsiding once regional parties succeed in getting some political mileage. This is really unfortunate because those who are targeted are poor workers, who go to far-off places from their home in search of decent livelihood, that too mostly at subsistence level.

Be it Shiv Sena, DMK or other parties, the politicians will not attack the rich migrants but only the poor, who have no help or any place to go. These parties also have the ability to switch-off and switch-on the issue whenever the need arises. These issues get more pronounced when in opposition. When these parties come to power, the issue is brushed under the carpet only to be resurrected when the need arises. Local thugs, who are supporters of these parties, will invariably catch hold of poor migrant workers or some poor brahminarchaka for harassment. But they will not touch rich North Indians or Brahmins, who are in good jobs or rich business with some political clout.

Even late M Karunanidhi of DMK used to regularly spearhead anti-Hindi, anti-Brahmin and anti-North Indian agitations, held a “Bada Khana” for 5000 North Indian construction workers, who built his pet project, Tamil Nadu Legislative Assembly building in 2010. The building was subsequently converted into a top hospital when late Jayalalithaa of AIADMK returned to power. In fact, Karunanidhi, who never liked anybody speaking in any language other than Tamil, got his address at the Bada Khana event translated into Hindi to enable the workers understand the praise he showered on them for the great construction. There are also reports to suggest that his relative Dayanidhi Maran was made Union Communication Minister in Delhi during UPA government because he spoke and understood Hindi well. Karunanidhi’s daughter and DMK MP Kanimozhi was provided private tuition to acquire good knowledge of Hindi.

Ironically, DMK opposes three language formula in Tamil Nadu schools so as to deny opportunity for Tamils to work in other states in the country. Such double standards by politicians is true of not only DMK, Shiv Sena, regional parties but also of BJP and Congress on various issues that impact common man. There is always political hypocrisy when it comes to language, corruption, reservation, Hindutva and other emotive issues. The only aim and goal of raking up such issues to get political dividends at the cost people and their welfare.

The same Dayanidhi Maran praised Google CEO Sundar Pichai for his achievements saying he was able to do it because he studied in English, but not in Hindi. But he did not say the same Pichai and other Brahmins were hounded out of Tamil Nadu by his grandfather Karunanidhi and other DMK members resulting in many brilliant Tam-Bram going abroad for higher studies, as they were denied opportunity in Tamil Nadu by the rampant caste-based politics practiced by Dravadian parties. This also resulted in brain-drain. Nearly 40 CEOs of fortune 500 companies are Indians, many of whom are South Indian Brahmins. In fact Tamil Nadu government led by DMK’s M K Stalin has appointed former RBI governor, Raghuram Rajan and former chief economic advisor, Arvind Subramanian as members of his economic advisory council.

But one thing is very clear, states like Tamil Nadu, Karnataka, Gujarat, Maharashtra, Punjab, Andhra Pradesh, Telangana and Kerala can no longer carry out their industrial, construction and farming activities without migrant labour. In Tamil Nadu alone, there are over 800,000 migrant labour from northern and north-eastern states.  The state can ill-afford to antagonize them as economic activities will come to a stand-still without migrant workforce. It therefore goes to the credit of the state government, particularly chief minister M K Stalin for diffusing the situation and winning over the confidence of the migrant workers. He has rightly used his political offices to assure safety and security of migrant workers to the respective state governments as well.

It is time that political parties shun emotive issues from political discourse as enough damage has been done to the fabric of the society in the last 75 years by raking them up time and again at the cost of development. In fact, the political parties should now take a vow to ensure that only developmental issues will be part of political discourse and nation-building efforts.  Caste-based and religion based politics should be buried for ever so that India moved in rapidly to cash-in on the economic opportunity that has come its way. That alone can ensure India became a developed economy by 2047 with proper education, health care and jobs for all. In fact moral education too should become part of educational curriculum. Moral education does not mean religious education. (IPA Service)

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By K R Sudhaman

The ruling Bharatiya Janata Party may be upset by the utterances of noted economist and former RBI governor Raghuram Rajan that India may be heading towards Hindu rate of economic growth meaning the economy is drifting towards an era of low growth. But this is something worth pondering over by the BJP led Modi government so as to take corrective measures to reverse the trend rather than getting angry and pouncing on Rajan for flagging an issue that needed serious debate.

After clocking over 8 per cent growth in July-September quarter of 2022-23, the GDP growth slipped to 4.4 per cent in October-December quarter and it is projected at 4.2 per cent growth in January-March quarter of 2022-23. This is a clear indication that the GDP growth is on a declining trend. India may be among the fastest growing economies in the World but the global economy is slowing down and geo political situation is not that conducive to push growth. That apart domestically, private investment has not picked up to the desired level.   Further, higher than trend inflation will act as a dampener coupled with slowing exports growth.  These are immediate and short-term vows.

But there is need to analyse in a serious and professional manner if there is some merit in what Raghuram Rajan is saying. Rajan’s staunch critique Subramanian Swamy, who is an Harvard economist, too admits that GDP growth during the few quarters before the Covid Pandemic in 2019 had started declining in India and Prime Minister Narendra Modi needed to take measures to reverse it. Modi’s announcement that India would be a $5 trillion economy by 2024-25 was a piped dream and not a realistic target in the timeframe he had earlier envisaged.

In fact if one analyses the quarterly GDP figures put out by Central Statistical organisation, it is quite evident that non-Congress led governments have not done well in achieving high economic growth, be it Janata Government, Vajpayee-led NDA government or BJP led Modi government. Some structural reforms might have happened during their period, but somehow they could not take the economy to a higher growth trajectory. Even among Congress governments, Rajiv Gandhi did not do all that well in achieving high growth even though some attempts were made to reform the economy. But there was total mismanagement of the economy during Rajiv Gandhi regime despite the fact his government got the highest ever mandate from the people. But one thing is clear that ruling dispensation got jolt whenever the trend growth during their regime was low.

India did not do all that badly in economic growth during the era of Prime Minister Jawaharlal Nehru despite the fact the nation adopted socialistic pattern of economic development. Given the magnitude of the problems after independence due to partition, his achievements were commendable in building the national economy. During Nehru’s era the average growth was 4.5 per cent. This was not bad considering India inherited a war-torn and drought stricken economy with very few industries. To top it all, 4.5 per cent growth was achieved despite population growing rapidly negating some growth. In the present day situation wherein population control has been achieved by and large has certainly acted as catalyst to economic growth.

A deeper analysis of quarterly growth data during the last three decades showed NDA government did not perform all that well. Government statistics show that during the last 106 quarters, 23, quarters achieved a growth rate of less than 5 per cent and the rest higher than 5 per cent growth. Of these 23, 10 quarters were during Modi period, 7 were during Vajpayee’s NDA regime and 6 were during UPA. World Bank data showed that India, which was achieving an average 4.5 per cent growth during Nehru era clocked negative growth after the war in 1965 coupled with drought situation. Of course India came out of this crisis with agriculture booming after the green revolution. But the Bangladesh war in 1971 pushed the Indian economy to the negative territory again in 1972 but the economy recovered during Indira Gandhi’s regime despite a global oil crisis in 1973.

There was however some political turmoil because of the emergency. After two years of Janata regime, Indian economy slipped in 1979 only to recover after Indira Gandhi came to power. But what is noteworthy is economic growth has been below par both during Vajpayee’s regime and Modi’s era. Vajpayee witnessed economic sanctions after Pokhran Nuclear test in 1998, which was followed by Kargil War. Modi too faced unprecedented Covid Pandemic in 2019. Both Vajpayee and Modi did carry out and continued structural reforms but none can deny the fact that Both Narasimha Rao government during 1991-96 and UPA government led by Manmohan Singh, 2004-14, did achieve better economic growth despite the fact they too faced crisis like Babri Masjid, balance of payment problem and 2008 global financial crisis.

Of course, Manmohan Singh did face slowing economic growth during the last two years of his regime due to policy paralysis and scams like2G and Coal. But there is also a lesson to political parties. People do not vote out ruling dispensation if the economic slowdown is due to global situation like 2008 global economic crisis or Covid in 2019. But if it is due to joblessness arising out of slowing economy, then people do react differently as India shining campaign did not lead to favourable electoral outcome for Vajpayee government.

So instead of blindly attacking Raghuram Rajan for flagging a serious issue, BJP will do well to take necessary correctives as 2024 general elections are not far away. Economic well-being of people may not be sufficient condition to win elections but it is certainly a necessary condition. (IPA Service)

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By K R Sudhaman

As is the practice, there is a demand galore before the 2023-24 budget for tax sops, whether justified or not. Finance Minister Nirmala Sitharaman has a difficult task cut out for her as she may have to address some of the genuine demands this time as it will be the last full-fledged budget of BJP led Narendra Modi government before the Lok Sabha polls in April-May 2024.

As it is, Sitharaman will have  to make a tight rope walk to balance the growth momentum with inflation, though slowing down is still at uncomfortable levels, partly triggered by global economic situation. Also with recessionary trends in Europe and difficult geo-political situation arising out of the prolonged Russian-Ukraine war, Indian industry do expect some handholding with exports growth not expected to be that buoyant.

While every section of the society expects some sops or others as all were badly hit during the two years of Covid, none is willing to understand government’s difficulty in raising more resources to meet their demand. In view of the impending elections, she cannot afford to be harsh, particularly to the middle-class, chunk of whom formed a major constituency of the ruling BJP. Certainly BJP government or for that matter any government does not have a magic wand or a milching cow to mop up additional revenue to present a please all budget.

Some genuine concerns may be met partially, but the government cannot let go of the revenue mobilization efforts in the wake of the need to bring about fiscal prudence, to meet the high food, fertilizer and fuel bills and more importantly the need to push up public expenditure to maintain the growth momentum. India’s tax-GDP ratio is still much lower than advanced economies. But high growth gave some room for tax mobilization efforts. This year both indirect and direct tax collections are buoyant. In Covid year direct and indirect tax collections grew by around 40 per cent at over Rs 27 lakh crore in 2021-22. In 2023 till now the over all growth has been good with government mopping up over 85 per cent of budget estimates till December 2022. The direct tax collection has increased nearly by 25 per cent, while indirect tax by around 20 per cent. This trend is quite healthy. But revenue mop up efforts from disinvestment is not that encouraging so far.

Coupled with this, there is a valid reason to step up defence expenditure in the face of belligerent China on the Northern and eastern borders. The military spending was increased by 10 per cent to Rs 5.25 lakh crore in 2022-23 budget. This time there would be sizeable increase in defence budget in the wake of Chinese  attitude and difficult Indo-Pak relations. There is bound to be further push to Atma Nirbhar Bharat in defence acquisitions.

The emerging situation in neighbouring countries like Afghanistan, Pakistan, Nepal and Sri Lanka is not all that encouraging. This may result in India extending helping hand particularly in the light of food shortage in war-torn Afghanistan and terror-infested and flood affected Pakistan on humanitarian considerations. As it is, India’s food subsidy bill is very high after government decided rightly to provide food ration during Covid to 80 crore population, some of whom lost jobs. This food ration under garib kalyan yojana has already been extended till December 2023.

India has supplied some sizeable quantity of wheat aid to Afghanistan and rice aid to Sri Lanka. Some more shipments are likely.  This came at a time when government is committed to ongoing efforts to reduce its subsidy bill for quite some time but Covid has thrown this process out of gear. India’s subsidy bill, comprising food, fertilizer and fuel is expected to be around Rs 5 lakh crore this financial year 2022-23. Expectations are it could be reduced by nearly 25 per cent to Rs 3.8 lakh crore with some savings on food and fertilizer subsidy bill on account of some strategic imports long-term on reduced commodity prices.

The middle-class and salaried class were sandwiched during Covid the most as many lost jobs or took salary cut, while at the same time they did not have any safety net to fall back upon They are going through severe hardships, that too with high inflation. The senior citizens had it worse with bank interest rates falling and their savings eroding with increased medical expenditure during Covid. It has been a double whammy for them. Sitharaman has said she herself belongs to middle-class family and she understands their woes better.  Also middle-class is BJP’s constituency particularly in North India.   From BJP’s political   considerations, this constituency needed to be addressed ahead of the election to nine state assemblies in 2023 and Lok Sabha elections in April-May 2024.

It is still a wild speculation if Sitharaman will reduce income tax rates as it has been broadly rationalized. At the most there could be small tinkering here and there. What is expected is raising of the exemption limit so that salaried class at the lower rung, middle class and the senior citizens depending upon pensions and interest on their savings get some relief. To push real estate sector which is not looking up, Sitharaman may give some additional tax benefit on housing loan interest. The quantum of standard deduction could be raised to benefit urban and salaried middle class with the gradual phasing out of work from home in service industries in vogue during covid. There could also be some rationalization of capital gains tax. There may not be much relief in corporate tax rates though there is a popular demand from chambers and industry. But some specific tax incentives could be there as the private sector investment is looking up. Schemes like PLI could be extended to more sectors.

Public expenditure which was pegged at Rs 7.5 lakh crore is expected to go up in view of the demand to improve logistics and infrastructure, which still had huge deficit. The raise might not as steep as in 2022 budget when it was increased by over 35 per cent and roughly by Rs 2.5 lakh crore as compared to around Rs 5 lakh crore in the previous years. It may be increased to around Rs 8.5 lakh crore taking into considerations the absorptive capacity. The capital expenditure in resurgent railways may be pushed up to Rs 2 lakh crore in 2023-24 as compared to about Rs 1.5 lakh crore in 2022-23 with several new projects expected. The public expenditure increase was steep in the previous two years to kick-start the slowing economy during covid period. Now that the economy is pump-primed. Less than steep increase in public expenditure would also meant that much less borrowing, which would not only help in reducing fiscal deficit but also not crowding out private investment now buoyant.

The reeling MSME sector, one of the main job creating sector, certainly needs major help and the budget may provide some sops. One proposal that is doing the rounds is introduction of  MSME credit cards on the lines of Kisan credit cards to address the financial woes of the sector. The informal lending virtually dried up after demonetization and an alternative has not emerged as yet. Also covid made the situation worse resulting in closure of 10-20 per cent of over 6 crore MSMEs in the country. Ninety-seven per cent of MSMEs are micro industries.

Overall the budget may have some good news for middle class, MSME sector while maintaining the growth momentum and tax mobilization efforts. (IPA Service)

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By K R Sudhaman

World Bank and International Monetary Fund might be gung ho about Indian economy, but emerging geo political situation in the neighbouring countries is a major source of concern and tottering economies in the sub-continent make the situation worse. India might be in a bright spot in otherwise sagging and recessionary global economy but neighbours, Sri Lanka, Pakistan, Nepal, Myanmar are virtually bankrupt and heading towards severe debt trap. The economic situation in Bangladesh and Maldives is not that comfortable and facing severe downside risks.

Coupled with this, the rapidly slowing Chinese economy with the fallout of uncontrolled Covid situation, raise several difficult questions to Indian policy planners. The geopolitical situation emerging from Sino-Indian stand-off on the line of actual control particularly in Galwan and Tawang raise several issues. The Chinese belligerence on the Indian borders notwithstanding, the stand-off between US and China over Taiwan made things worse. The internal strife due to agitating masses over various issues including lockdown, need to democratize Chinese polity, highhandedness of officials makes the geopolitical situation very difficult. A cold war-like situation between India and China can only lead to hike in defence expenditure at the cost of development.

The emerging situation in Pakistan is most worrying. There is political instability, foreign exchange reserves have dipped to $4.5 billion, just enough for 10 days imports. More dangerous is the virtual civil war in FATA, Kyber Pakhtunkhwa and Balochistan with TTP’s all out war against Pakistan establishment. The militant group has taken virtual control in many of these areas and Pakistan army is having a tough time in dealing with the guerrillas. The TTP terrorists were trained by ISI and they are now going all out against ISI and Pak armed forces. What former US Secretary of State Hillary Clinton once told Pakistan that “if snakes are bred in the backyard, it will come to bite you one day” appears to have come true now. Pakistan is in a virtual mess – politically and economically. Pak has no money now to sustain an all out fight against TTP. Pakistan is selling whatever ammunitions it has to Ukraine at the behest of US as well.

The internal strife in Pakistan is in a way good for India as it would keep them engaged and refrain from misadventure along the Indian borders at their plate being full at the moment. But an unstable Pakistan with tottering economy and uncontrolled terrorism unleashed by TTP could pose a headache for India. Afghanistan and TTP never recognized Durand line that artificially divides nationalist pashtoons and Afghanistan-Pakistan. The Baloch never integrated with Pakistan right from independence and they too are demanding separation. Baloch separatist movement has now joined hands with TTP, which has made the situation far more worse.

There are also widespread protests in Pakistan occupied Kashmir to merge with India because of high handedness of Pakistan establishment and new laws that are discriminatory to them. While Gilgit-Baltistan wants to merge with Ladakh, POK wants to merge with Jammu and Kashmir. These developments may have some spill-over effect on India, which has to ensure its borders remain secure. India could not afford to lower its guard.

Sri Lankan economy is already in doldrums and thanks to the largesse of India, the island republic has managed to keep its head above water. One good thing that has happened is the move reduce the size of its armed forces in a phased manner. This will reduce the burden on the exchequer. This is a welcome development as it does not require that huge army, that too with militancy being virtually eliminated. Pakistan too can draw lessons from Sri Lanka to streamline its expenses by reducing the unwieldy strength of 600,000 men in its armed forces in a phased manner. The situation may not be ripe at the moment with Pakistan’s western borders not secure. But it could be suggestion for action in the medium term as such a large army had led to corruption and huge drain on its resources.

One of the major cause of economic concern in Myanmar too is the large and unwieldy armed forces. Myanmar has been mostly ruled by military junta, which commits frequent political atrocities to remain in power. The movement against the military junta has gained momentum. Myanmar military establishment has no time to look after economic needs.

The recent elections in Nepal had resulted in communists capturing power in the landlocked country. Nepal has been traditionally friendly to India, but that situation is changing rapidly now Nepal’s Communist government led by Prime Minister Prachanda is widely expected to dance to the tune of China and already there are proposals to give new thrust to the stalled Chinese BRI project. Also Prachanda is looking for strengthening further economic relations with China which shares a long border in Nepal’s north.

Culturally, Nepalese are very close to India and even today recruitment is made for Indian Army’s Gorkha regiment. Nepal also shares a long border with India on the southern side in particular. This border is very porous and is widely used for smuggling drugs and counterfeit notes from Pakistan. Pakistan’s ISI have set up several sleeper cells along the UP border using mainly Bangladeshi refugees. These are matter of concern but Indian authorities, aware of this problem are taking actions the check the menace.

There may not be significant geo-political concerns from Bangladesh. But its slowing economy particularly after covid is matter of concern. The increasing Chinese presence the country too needed to be watched carefully. The political situation is also volatile in view of the coming general elections in 2024 and the hard campaigning by the anti-India opposition party BNP to unseat Awami League.

In sum, the emerging geo-political and economic situation in countries surrounding India in the sub-continent is certainly a matter of concern for India. Political instability and sagging economies surrounding India needed to be handle deftly so that spill-over effect is minimized. So far India has played its cards well, diplomatically, politically and economically. It has extended support to countries like Sri Lanka and a bailout is happening there. Nepal could turn out to be a headache in the face of emerging political situation, which needed to be handled carefully.

Pakistan however is major source of worry and some hawks there may indulge in some misadventure to divert attention of the local population. There is not only economic woes, the frequent attacks by TTP terrorists have made life insecure there. The inflation is now around 24 per cent and one roti costs Rs 25 Pakistani rupee there. There is widespread food shortage as well particularly after the unprecedented and widespread floods in KPK area and Balochistan. Pakistan has also run out of fuel reserves and the foreign exchange is at its lowest level. (IPA Service)

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By K R Sudhaman

The preliminary official estimates by Ministry of Statistics has corroborated multilateral and other rating agencies forecast that India’s economic growth would be around 7 per cent in financial year 2022-2023. This only confirms that Indian economy is on a revival mode. The projected GDP growth may be less than 8.7 per cent achieved last financial year. The year 2021-2022 was the first year after Covid Pandemic and the growth looked impressive because of base effect as in the previous 2020-2021, India clocked a negative growth due to lockdown and other disruptions.

This indicated that the economy has certainly rebounded from the deep pandemic-related downturn.  The 8.7 per cent growth in FY  21/22 enabled the total output in the economy to be above pre-pandemic levels and that the momentum continued this fiscal supported by a recovery in the labour market and increasing credit to the private sector, according to the International Monetary Fund, which recently concluded 2022 article IV consultation with India.

The country report that emanated from the IMF after such annual consultations indicates that India is in a bright spot but needed to push further structural reforms.  The growth is however expected to moderate in the face of less favourable outlook and tighter financial conditions. Real GDP is projected to grow at 6.8 per cent and 6.1 per cent in FY 2022-23 and FY 2023-24 respectively. This reflected broad based price pressures and inflation is projected at 6.9 per cent in 2022-23 and is expected to moderate only gradually over the next year. The current account deficit is expected to increase to 3.5 of GDP this financial year as a result of both higher commodity prices and strengthening import demand.

The IMF however said the government and RBI policies are addressing new economic headwinds. These include inflation pressures, tighter global financial conditions, fallout from the war in Ukraine and associated sanctions on Russia, and significantly slower growth in China and advanced economies.  The authorities have responded with fiscal policy measures to support “vulnerable groups and to mitigate the impact of high commodity prices on inflation.” Monetary policy accommodation has been gradually withdrawn and the main policy rate has been increased by 190 basis points so far in 2022.

Though IMF has acknowledged India’s efforts to deal with the emerging economic situation, It has also highlighted the pitfalls that could derail this growth process. Uncertainty around the outlook is high with risks tilted to the downside, it warned and said a sharp global growth slowdown in the near term would affect India through trade and financial channels. Intensifying spill-overs from the war in Ukraine can cause disruptions in the global food and energy markets, with significant impact on India.

Over the medium term, it said reduced international cooperation can further disrupt trade and increase financial markets volatility. Domestically, rising inflation can further dampen domestic demand and impact vulnerable groups. On the upside, however, successful implementation of wide-ranging reforms or greater than expected dividends from the remarkable advances in digitalisation could increase India’s medium-term growth potential.

In the light of improving growth prospects, the IMF directors was of the view that additional monetary policy tightening should be carefully calibrated. The directors also encouraged the authorities to make additional progress on the structural reform agenda. This included increasing female labour force participation, reducing youth unemployment and reducing informality remain critical to sustaining strong and inclusive growth. Strengthening regulatory framework would foster transparency and safeguard public accountability. The directors also welcomed new trade agreements and observed that additional tariff reduction would help India to integrate in global value chains and support growth.

Former Planning Commission Deputy Chairman Montek Singh Ahluwalia too emphasised that though deglobalisation is happening, India still needed to open up further and move away from protectionist tendencies. India should push further free trade agreements and make every effort to join RCEP. India has to reduce import tariffs besides improving its infrastructure and logistics to make Indian industry compete with the rest of the world. These are critical to pushing economic growth.

While noting the improvement in corporate and financial sector balance sheets, IMF Directors encouraged additional measures to counter risks stemming from tightening financial conditions. They observed that banks should be encouraged to build additional capital buffers and recognise problem loans and noted that targeted prudential tools could strengthen the banking system’s resilience to rising interest rate risks. The authorities should also make further progress in financial sector reforms.

Ahluwalia was of the view that the insolvency and bankruptcy code needed to be strictly implemented as there was some leniency during covid in view of the difficult situation. The growing NPAs in Mudra loans too needed to be addressed before it became out of control.

IMF felt that financial sector policies should continue to facilitate the exit of non-viable firms and encourage banks to build capital buffers and recognise problem loans.

IMF said the additional support to vulnerable groups this year is warranted but, with fiscal space at risk, polities should focus on a credible and clearly communicated consolidation, anchored on stronger revenue mobilisation and spending efficiency. Further improvements in public financial management, fiscal institutions and transparency would help. India’s digitalisation success can be harnessed to better target government services.

Indian economy at the moment is on a sound footing, but it cannot afford to be lax or lower its guard. IMF has warned about global recession and Indian authorities have to be prepared to   meet the challenge. The employment market has nosedived. Therefore job generation has emerged as the biggest challenge in the coming financial year. (IPA Service)

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By K R Sudhaman

World Bank has revised upwards its earlier GDP growth estimate to 6.9 per cent for India this financial year on the back of strong macroeconomic fundamentals and economic revival after Covid-19 mayhem. This is certainly music to the ears as India is perhaps a few countries looking up in otherwise gloomy global economy. Inflation is one factor, which is still daunting the economy and Reserve Bank of India has rightly taken measured monetary steps to bring it down to acceptable band. RBI has   raised short-term repo rate, a barometer of interest rates, by a mere 0.35 per cent as against expectation of 0.5 per cent. This has been done to ensure that growth momentum is not severely hampered by going all out contain inflation.  Consumer Price Index at 6.7 per cent is still higher than the RBI band of 4 plus-minus 2 per cent, but it has started slowing down. It is, however, still a source of worry as food and fuel inflation, which affects the poor most, are still high and are expected to continue for a few more quarters.

In such a scenario, speculation is ripe on what the general budget on February one can do to step-up economic recovery. This will be the last full budget to be presented by Nirmala Sitharaman, before the general elections in May 2024. Though there will be one more for BJP government present a budget in February 2024, it will be an interim one as the practice is to allow the newly elected government in the Lok Sabha elections to present the full budget in June-July. This is because in India general budget is not merely an annual statement of government expenditure and revenue but lays down the annual economic roadmap besides some medium term strategy and vision of the government of the day.

As has been pointed out by several economists, monetary actions alone cannot contain inflation in the present circumstances, as it is triggered by several factors including global. Monetary action of rising interest rates can only contain to some extent demand factors. The current inflation as supply factors as well besides slowing down of global economy and the uncertain geo-political situation arising out of the prolonged Russian-Ukraine war. There is also monetary tightening by many central banks in advanced economies to suck out excess liquidity pumped into the system due to covid 19 to alleviate the suffering of the people. So well thought out fiscal measures are required to deal with this peculiar inflation due to a combination of factors, external as well as domestic. So fiscal measures has to be calibrated  in a manner that it did not impinge upon growth momentum. This balancing act is going to be tough and is going to be tight rope walk for Sitharaman in the budget.

One positive factor in the economy is that Banks have adequate liquidity at the moment, their balance sheets have been cleaned up and have low bad debts. Also private investments have started picking up with most of the companies working 75-80 per cent of capacity after covid-19. The corporates, which had over-leveraged from banks during boom period, have cleaned their balance sheets as well and have started investing in creating fresh capacity. Rising interest rates at this juncture could act as a dampener, particularly in the real estate sector and automotives, which are on revival mode.  There could also be some impact on exports with global demand being subdued. But hopefully the situation improved in a few quarters.

Apart from usual prescriptions of keeping the fiscal deficit under check and targeting a lower fiscal deficit as per the recommendations of Fiscal Responsibility and Budget Management Act, Sitharaman needs to think out of the box to pump-prime the economy. The usual strategy in the budget is to step up public expenditure particularly in the infrastructure sector like rail, road, ports, airports and telecommunications. This has to be done to ensure revival of the economy. There will also be some tax proposals and PLI schemes to incentivize the private industries to make big investments. These are standard prescriptions, which are done year after year and perhaps done more vigorously when the economy is on a revival mode. Of course Corporates are now contemplating big-ticket investments. Tata sons have announced investment of $90 billion in next five years in various activities including semiconductors, Air India, Apple mobile phones, EVs and so on. MukeshAmbani has committed to over $75 billion in the next few years including hydrogen fuel and telecom. Adanis are making huge investments. Vedanta and a few other players too are investing big.  At least six Indian cities Mumbai, Delhi, Chennai, Kolkata, Bengaluru and Hyderabad, are going to be among the top ten cities in the World. Ahmedabad is not far behind. That apart, five states Maharashtra, Gujarat, Tamil Nadu, Karnataka and Uttar Pradesh will have GDP that is almost equivalent to India’s present GDP in the next 10 years or so. These are already happening

So, the budget could make a huge difference this time through out of the box thinking on how to revive struggling MSMES. It can come out with some drastic and big-ticket measures to revive the MSME sector, badly hit due to 2016 demonetization, followed by hasty implementation of GST and two years of Covid 19. At the moment, there is no statistics available on how many of the six crore MSMEs have closed down cumulatively in the last five to six years. Nearly 97 per cent of these MSMEs are micro industries employing less than10 persons and this sector is a major job creator accounting for over 30 per cent of India’s GDP and over 40 per cent of India’s manufacturing and exports. MSMEs account for nearly 80 per cent of employment in the informal sector outside agriculture.

Informal lending on which MSMEs depended has virtually disappeared after demonetization and an alternative has not yet emerged. Mudra provides only working capital loans. A similar scheme is needed to be created for term lending to MSMEs with the help of banks and institutions like SIDBI and NABARD. The good news is banks have already started increasing term lending to small industries. But unfortunately it is only established small industries, some of whom have now become medium industries. The lending problem is for micro and cottage industries. Banks at the moment do not have the wherewithal to reach out to them. Tamil Nadu government is contemplating some measures to improve term lending through the state lending arms. More states are expected to follow suit. Self Help groups too needed hand-holding. It would be worthwhile for the budget to consider even setting up of a separate institution for term lending to MSMEs particularly micro, cottage and small industries. SIDBI somehow has not delivered adequately on this score. (IPA Service)

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By K R Sudhaman

India’s former chief economic adviser Arvind Subramaniam had flagged in his economic survey some years ago that India faced a major economic issue – twin balance sheet problem wherein Indian banks suffered huge debts as corporates, which had overleveraged banks were suffering huge losses resulting in defaults. This piquant situation occurred as the corporate sector over-expanded during boom period leaving them with obligations that they cannot pay. This resulted in surging non-performing assets of banks choking their ability to lend. This had come to be known as twin-balance sheet problem meaning the balance sheets of both banks and corporates had gone awry.

But the two years of covid gave breathing space for both banks and corporates to clean up their balance sheets on the back of the Insolvency and bankruptcy code. Now the banks NPAs have come down drastically to less than five to six per cent gross NPAs and some of the public sector banks have as low as less than one per cent net NPAs.  This is in sharp contrast to huge NPAs some years ago, which were in double digits threatening viability of some of the banks. Many of the corporates, which had excess capacity earlier, have now started investing with demand picking up. Some of them had capacity utilisation as high as 80 per cent. This is a welcome development and augured well for the economy going forward. For the first time in many years health of Indian banks are looking good.

With revival of the economy after Covid, bank credit has started growing steadily this financial year. According to Reserve Bank of India, bank credit grew almost 17 per cent in the fortnight ending November 18, 2022. The data showed that bank credit grew to 133.29 lakh crore for fortnight to Nov 18, from 113.96 lakh crore on Nov 19 2021. But the deposit growth came at 9.30 per cent with the overall base at 177.15 lakh crore as on November 18, 2022. With huge pick up in credit growth, banks have aggressively started deposit mobilisation efforts to meet the growing demand for credit. In the financial year 2021-22, bank credit rose merely 8.59 per cent and deposits by 8.94 per cent. According to Boston Consulting Group, banks in India have come out stronger post the Covid-19 pandemic and are now firmly on the path of growth. Banking sector reported record profitability, robust credit growth and significant improvement in credit quality. Besides, the public digital platforms will further spur growth in lending with lower processing and acquisition costs.

Lately there have been several positive reports about revival of private capital expenditure. The chief economic adviser V Anantha Nageswaran has said that private capital expenditure in the first half of this financial year has crossed Rs three lakh crore and that the number could exceed Rs 6 lakh crore by the end of this financial year. This is also evident from the fact that top corporates are doing well in the stock market, there is general revival of real estate sector across the major cities and several companies have already announced fresh projects involving sizeable investments. It is quite obvious that there is revival of investment cycle in the private sector. These are positive signs but one has keep the fingers crossed as revival has not yet become across all sectors and global economic scenario not that bright to pump-prime exports.

Last year companies had reduced their borrowings significantly helping the process of cleaning their balance sheets. Now with the revival of demand and improved capacity utilisation, there is appetite for more investments, which is getting reflected through higher credit growth. All this point to kick-starting of capital expenditure cycle this financial year. But in the first half of this financial year a handful of companies accounted for bulk of the spending. For the cycle to gain momentum, more companies would have to start investing. Both central and state governments could incentivise companies to go for capital expenditure through supportive monetary and fiscal policies. This is important as top 22 companies accounted for 71 per cent of the private capital expenditure during April-September this financial year. The private capital expenditure had dropped to Rs 4.74 lakh crore in financial year 2021 as against Rs 8.19 lakh crore in the financial year 2020. The first half of this financial year has seen some revival but it is not visible across industries. Also it may take some time get back to pre-covid levels of private capital expenditure.

One area that requires specific attention is revival of MSME sector. It would be worthwhile for government to consider some package in the budget to handhold this sector which accounted for 45 per cent of India’s manufacturing and nearly 40 per cent of goods exports. One area that requires attention is lending to this sector for capital expenditure. An alternative has not yet emerged to informal lending that got killed after demonetisation. The MSMEs largely depended on informal lending for investments in the past. Government could look at setting up an institution for this purpose. Expanding PLI scheme to more sectors would be welcome. A sizeable number of manufacturing companies have seen a decline in their fixed assets because of some near term difficulties and it would be worthwhile for government to consider some special package to enable these companies to get back on the rails.

There appeared to be signs of revival but government will have to press on the accelerator to ensure it is sustained. (IPA Service)

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By K R Sudhaman

India’s economic growth might have dipped to 6.3 per cent in July-September quarter of this financial year but the good news is the slide is not going to be as pronounced in the whole year. The year 2022-23 may still end up with GDP growth of 6.5 to 7 per cent as forecast by India’s chief economic adviser V Anantha Nageswaran.  This has also been corroborated by former RBI Deputy Governor and renowned economist Rakesh Mohan, who said recently that if India achieved 6.3 per cent growth in the second quarter, there is every likelihood of it ending the year with GDP growth of 6.5 to 7 per cent, thereby meaning there is no validity in pessimistic growth projections of less than 6 per cent by some global rating agencies.

This however does not mean there are no concerns in the economy which required some tough decisions to fix them, which has become that much more difficult due to worsening global economic environment and geo-political situations. The comforting aspect of this second quarter growth, as Nageswaran says is that the economy is on road to recovery from pandemic and is growing faster than other countries, which are still struggling to find its feet.

This also indicated that the economy is on track for 6.8-7 per cent expansion in this fiscal year, though this appears to be slightly optimistic. At a little over Rs75 lakh crore, India’s GDP in the first half of 2022-23 was 5.7 per cent larger than comparable pre-covid level. So the dream of hastening the process to make India a $ five trillion economy has been pushed a little further. But none can deny the fact that in the current global economic situation, India is the only bright spot for sustaining high growth for a decade or two even though it could be bumpy in the immediate term.

Just as Covid provided some opportunity to push digitization, the next couple of year provides great opportunity for India to vigorously push job-oriented industries to reverse the jobless growth, that a populous India can ill-afford. There are lessons to be learnt from East Asian miracle countries. Be it Japan in the 1950s, South Korea or China later or Vietnam and Bangladesh at present, the economic success of these countries are attributed to expansion of labour-intensive industries. This lifted the living standards of poor and thereby creating self-generating demand to propel the economy.

India still needed to move at least 35 per cent of working age population from agriculture to other jobs. This can be achieved only through proper skilling and creating jobs in adjacent small town. This can happen only if labour-intensive industries are set up in semi-urban and rural areas like garments, leather, handlooms, food processing, railway and road projects. If these industries were to become export-oriented, then economies of scale will have to operate, which meant large units employing 20 to 30 thousand people have to be established as in China and elsewhere.

It is worthwhile to point out that MNREGA programmes, particularly in north and east India are acting as a disincentive for farm labour to move out of agriculture.

Unlike in Tamil Nadu, and to some extent Karnataka and Andhra, MNREGA workers do not put in more than two to three hours of work and yet they get Rs 250 per day. Tamil Nadu has recorded highest of 6 hours a day by MNREGA workers as against 2-3 hours in North India.

This meant MNREGA worker gets Rs 80 per hour in North India as against Rs 40 per hour in Tamil Nadu. As a result, the worker prefers to do MNREGA job rather that working in a tea shop or any other establishment where he has to work 8-10 hrs a day to earn the same amount. So there is no incentive for him to seek any other worthwhile occupation. This aspect needed to be seriously looked into so that surplus farm labour get adequately incentivized to move out of disguised unemployment in agriculture. One way could be to evolve better monitoring of outcomes of MNREGA programmes so that the scheme does not remain a mere dole.

The job creating industries will also ensure that more demand is created thereby encouraging more investments. Presently the biggest worry for the Indian economy is inflation, which is partly due to global factors. As former RBI governor C Rangarajan says, the Inflation at the moment cannot be tackled merely through monetary actions as it is not due to only excess demand in the economy. There are supply as well as global factors, which meant there has to be some well thought out fiscal measures as well. Inflation is here to stay for at least a year or so and in India it is partly expected to be driven by food and fuel inflation, thereby hitting the poor the hardest.

So this is the right time for government to push through incentives to encourage labour-intensive industries spread across the country. Money should not be a problem as banks have adequate liquidity at the moment. With global recovery still a couple of years away, the government could utilize this time to build the much-needed infrastructure like road, rail and ports so that connectivity is established when global economy starts recovery to facilitate exports. Another area, which needed to be seriously looked at is tourism.

This too is a labour-intensive industry. India has a huge untapped potential. Huge investments are required in this sector in cleaning up and beautification of heritage sites dotting all over the country. Besides, necessary infrastructure like hotels, transport and connectivity have to be established to attract tourists from all over the world apart from domestic. Sadly, this is one area which has not been tapped well unlike some other countries. Tourism could be job and money spinner apart from earning valuable foreign exchange. There is need to evolve a comprehensive strategy and establish full time department and minister both at the centre and states for tapping this potential.

In sum the economic situation is not as gloomy as made out to be and if steered well, it could turn out to India’s decade or two. There is certainly some validity in predictions like India could become $30 trillion economy by 2047, when it celebrates centenary of its independence. Stepping up both public and private investments and improving ease of doing business are critical components. (IPA Service)

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By K R Sudhaman

There is a general euphoria with a PIO Rishi Sunak becoming Prime Minister of United Kingdom.  This is natural as India being a vibrant democracy, politics is at its best even on a non-issue. In this, there is some case for celebration with Sunak being a practicing Hindu and for the first time a person of an Indian origin has become Prime Minister of a country which ruled India for nearly two centuries.

Be that as it may, what is more important is will Sunak hasten the much-touted India-UK FTA, which received a set back under the short-lived tenure of his processor Liz Truss. It got dampened when her Home Secretary Suella Braverman remarked that Indians overstayed in Britain in violation of their visa. Stating that the open border migration policy with India is against the objectives of Brexit, Braverman kicked up a storm. Shortly after her controversial statements, Braverman resigned for committing a “technical infringement” which subsequently led to the fall of the 44-day old Truss government. Same Braverman has now been appointed as Home Secretary under Sunak.

Of course, Braverman will surely not indulge in such loose talks now particularly after this episode that derailed important negotiations on the free trade agreement. Sunak, who had taken charge mainly to fix the mistakes made by Truss amidst  the  severe  economic crisis in Britain   will be showing more interest now   in  concluding   an early   deal   after Prime Minister Narendra Modi emphasised  on this aspect during his telephonic conversation with Sunak. Modi had telephoned to congratulate Sunak on his assuming office as British Prime Minister. After the US reluctance for an FTA, to bolster the economic fortunes, Sunak’s predecessor Boris Johnson placed his bets on India-UK FTA and pragmatically set Diwali deadline. Sunak was Chancellor of Exchequer, when Johnson was the British Prime Minister. Truss succeeded Johnson for a brief period.

Brexit has weakened the UK- economically and strategically. This has substantially contributed to economic woes of Britain. Covid Pandemic worsened the economy. Britain is no longer part of European Union. While the UK does not suffer from any direct threats from Russia, it has strongly backed Ukraine to be part of Western security systems. In fact, the UK is now the second largest military donor of Ukraine after the US. This support to Ukraine has been pledged by Sunak as well.

With the hopes of the economy getting back on track, the markets have responded positively to his appointment. Sunak’s commitment to pulling the economy out of economy, particularly high inflation has made his party chose him as person best suited for the job in this difficult situation. His fiscal relief packages as Chancellor of the Exchequer during Covid despite their flaws were well received.

The British High Commissioner to India, said with Sunak giving more emphasis to the economy, it was quite natural that both the countries will push early conclusion of FTA. India is a big investor in United Kingdom and vice versa and it is therefore necessary to push the FTA if the two countries were to double bilateral trade by 2030 as envisaged by Boris Johnson.  The FTA negotiations, which remained protracted for several years, got hastened in the one year and the two countries were very close to signing it. But unfortunately Johnson government fell in Britain, which was followed by some political instability during Truss.

Sunak as Chancellor during Johnson’s visit to India last April, has gone on record to say that he was committed to pushing FTA between the two countries. He had even identified financial services as one area that offered huge potential for cooperation between the two countries. Early conclusion of FTA will help towards this end. London is a major global financial hub. Fintech and insurance sector offered major opportunity in promoting the bilateral trade. India is now emerging as a major Fintech hub in view of its huge skilled manpower.  Mumbai, Giftcity in Gandhinagar, Bengaluru, Chennai, Pune and Hyderabad are emerging as major fintech cities. That apart Mumbai and Chennai have well established underwater cable connectivity with the rest of the world. So the much needed infrastructure for promoting fintech was already in place.

India’s bilateral trade has been growing at 22 per cent in the past decade. It stood at $16 billion. It is expected to more than double with the signing of the bilateral free trade agreement in the next few months. India’s free trade agreement with Canada and UAE too are in advanced stage of completion and they are expected to play a pivotal role in promoting trade alongwith India-UK FTA. (IPA Service)

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By K R Sudhaman

After International Monetary Fund recognized India as a bright spot in a gloomy world economy in view of the impending recession, high inflation and none too comfortable geo-political situation. It is true that India is better off than other major economies where the slowdown and economic woes are much more. This does not give us solace as Indian economy too is slowing down though not as rapid and drastic as other major economies. The future is bright but there are major economic woes which need immediate fixing that too through big ticket structural reforms. Immediate short-term prospects of the economy is not that bright as is made out to be as there are cracks in macro-economic fundamentals which were otherwise strong for quite a while now.

Ever since demonetization in 2016, India’s growth story had taken a hit with the economy slowing down quarter after quarter and during Covid Pandemic, it took a further hit as all the economies in the world, slipping into the negative territory. This year the economic recovery was quite rapid unlike other major economies earning kudos from IMF and World Bank. But structural weaknesses have come to the fore making the picture gloomy in the short-term. In the long-term, India could become a $25 trillion economy when it completes 100 years of independence in 2047, but all economic indicators paint a gloomy picture in the next few years. The problems are many.

To begin with, the immediate problems are jobless growth, inflation, sliding rupee, depleting foreign exchange reserves, widening current account deficit, slowing exports growth, poor infrastructure, tardy and delayed implementation of projects, poor health of power companies and bad state of affairs of public enterprises. There are too many problems in the plate and these needed to be fixed to get back to high growth path on a sustained basis.  India is needed to have high growth every year in the next couple of decades to ensure that poverty is eradicated and most of the working age population is gainfully employed. With majority of the 1.3 billion population being youth, it is necessary that India achieved a real growth of 6.5 to 7 per cent annually, which meant that GDP growth would have to be at least 8-9 per cent annually.

To elaborate this gloomy scenario, Consumer price index surged to 7.4 per cent in September as against 7 per cent in August. According to Crisil CPI inflation is expected to remain elevated above RBI tolerance band of 6 per cent and with food inflation accelerating, there is bound to be more hardship to particularly poor sections of the society. Steepening and broadening decline in Index of Industrial Production is not a good news for the economy. IIP declined 0.8 per cent on year in August compared to 2.3 per cent growth in the previous month. This marked the third successive month of IIP slowdown, and the first month of decline since February 2021.

Manufacturing sectors drove the decline in IIP.  Export oriented sectors were hit by slowing global growth. Domestic-oriented sectors too witnessed falling activity. Crisil, analyzing this data, is of the view that downside risks to the industrial outlook are expected to increase with intensifying global slowdown over the next 12 months. The hit to agricultural incomes from uneven monsoon could hurt domestic demand prospects. Overall the industrial outlook looks bleak in the immediate future, which meant more job losses, hurting poor, lower and upper middle class.

CMIE emphasized that headwinds of high inflation and high interest rates to dampen the festive spirit this year. It also felt that growth projections were being lowered because the estimates projected earlier were too optimistic. But the month of October has started off well with some positives in the economy.

CMIE feels there are some good news with regard to unemployment rate, which fell to 6.4 per cent in August 22. This is the lowest unemployment rate in India since August 2018. According to Mahesh Vyas of CMIE, this is a “bonanza” because it comes along with an increase in the labour participation rate. This meant that employment as gone up and the rewards are spread across rural and urban regions. This may be music to ears, but the fact is that jobs are still scarce commensurate with the requirement and hence it will be quite a while before the job market gets back its buoyancy that existed before demonetization in 2016. Notes economist, Pronab Sen is of the view that India needed to have a real GDP growth of 6.5 per cent at least to ensure adequate jobs are created to meet the growing demand. At the moment “we are not there” as real growth is around 4-4.5 per cent, he rued.

Another positive development, according to CMIE is that consumer sentiments at 30-month high as it vaulted by an impressive 7 per cent in September. Household expressed greater propensity to spend and also were quite gung-ho about their future wellbeing. Both the index of current economic conditions and the index of consumer expectations increased handsomely during the month.  Vyas said this is promising as India have changed track in recent months.

Yet another good news is private sector investment. Indian private corporate sector has increased its interest in setting up new productive capacities. New private corporate investment announcements have risen to Rs 4.6 trillion in 2022. But public enterprises investments are not that encouraging. This meant Industrial outlook is not firing on all cylinders.

There are some positives in an overall gloomy economic scenario. There are some signs of recovery but there is a long way to go. Continued efforts to push structural reforms is the key that India returned to high growth path when World economy recovered from the recessionary, inflationary and difficult geo-political scenario. India is certainly a bright spot. But if global recession persists longer than expected and geo-political scenario worsens in months to come instead of improving India’s economic applecart could face problems. So there is need to keep our fingers crossed. (IPA Service)

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By K R Sudhaman

As India celebrates its 75th year of independence this year, several roadmaps are being laid for it to become a developed economy in the next 25 years when India would celebrate its 100th year of independence in 2047. Some of us might not be alive to witness it but ever optimist Veteran banker K V Kamath, who is chairman of National Bank for Financing Infrastructure, said recently that he expects India to be a $25 trillion economy in 25 years. Presently India is around $3.7 trillion economy and recently overtook Britain, India’s colonial masters, to become a fifth largest economy in the World. But India is far behind topmost economic power United States, which is now a $26 trillion economy followed by China a $21 trillion economy.

India might have come a long way since independence in 1947 from an impoverished to a vibrant economy and is now among the fastest growing economies in the world.  But it is still a long way to go to become a developed economy. Kamath feels a 7-8 per cent growth if achieved on a sustained basis, India would double its GDP every nine years and a 10-11 per cent growth annually will make India the third largest economy in the next nine years.

All these statistics are fine but the fact is India is far behind the target of $5 trillion economy by 2023-24 set by Prime Minister Narendra Modi. India’s commerce Minister Piyush Goyal is talking of preparing a five-year road map through a new trade policy to aim $ 1 trillion goods exports and additional $1 trillion services exports by 2027-28. In reality, India is yet to achieve $500 billion goods exports originally planned to be achieved by 2015-16 by the previous UPA government.

Nevertheless Kamath’s optimism arises from the fact that Covid had helped in cleaning up Corporate balance sheets as well as that of Indian banks. Corporates have now become more frugal and thereby more efficient. The Indian banks NPAs situation too has steadily improved. The overall liquidity and lending capacity too is better. But monetary tightening due to inflationary pressure might pose some short-term problems and these are not insurmountable. Digitalisation and India’s efforts to get into hardware manufacturing besides rollout of 5G technology in telecom offered great prospects for the country to leapfrog in economic development.

Infrastructure is still a problem. Corruption, delays in getting clearances and other logistics and political impediments makes the improvement in ease of doing business a big joke. Many foreign companies still do not consider India to be an investment friendly destination. However the slowing down of Chinese economy, geopolitical situation and increasing labour costs in China makes India an exciting option with its large market and large pool of trained and skilled manpower with majority of 1.4 billion population being youth below the age of 35 years.

Situation is just ripe for India to take off rapidly. India is also a vibrant democracy with a sizeable English speaking population and it also has by and large stable laws with attractive taxation system and a competent judiciary. These are all big positives but the flip side: democracy is also a slow process of polity and many multinationals prefer authoritarian regime as there is a sort of single window and quick clearance despite manifold risks.

On balance though there are some difficulties, India’s time has at last come for it to march ahead with all cylinders firing and prospects seem to be exciting for agriculture, Industry and services sectors to just boom from now on. There is of course recession in some of the advanced economies, China is slowing down rapidly, commodity prices particularly oil are still high. There is global inflationary pressure and global trade is slowing down. These are challenges but it is also an opportunity for India. India’s investments as percentage of GDP is rising and slowly getting back to 35 per cent mark. This meant animal spirits among corporates are getting unleashed.

FDI inflow is likely to cross $100 billion for the first time this year. Private investments are looking up with excess capacity vanishing. Global recession may in a way be helpful as it may give that much time to build capacity and fix infrastructure problems. With the twin balance sheet problem behind us that is the balance sheet problem in Indian companies as well as Indian banks, things have started looking up. The two years of covid had in a way helped the corporates and the banks to deal with bad loans problem to a considerable extent. These are welcome developments along with several global companies exploring to have a second manufacturing hub to ward off supply disruptions.

More than anything else, digitalization and India’s prowess in software and hardware designs and R&D, make the coming years very exciting and the prospects look unstoppable for India. Here it is important, the Government, corporates and bureaucracy act in unison to ensure that this time around India does not miss the bus.  Though there are certain fixing required, Kamath may not be way off the mark. Indian economy is poised for a takeoff. (IPA Service)

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By K R Sudhaman

Prime Minister Narendra Modi is committed to making India a global manufacturing hub and his stress on the need to work on easy transit to promote trade in central Asia and Europe at the recently concluded  Shanghai Cooperation Organisation (SCO) is well justified. Stepping up manufacturing has huge potential for providing employment particularly at the semi-skilled level. But widespread digitization has opened up a huge opportunity for India to become a major global hub for providing healthcare for millions of people in not only rural India but in the entire world.

India has over the years have developed huge pool of qualified doctors and para-medics. With quality medical education, Indian doctors and para medics are sought after everywhere. Every major hospital in developed nations have sufficient number of Indian doctors. Besides large private hospitals providing top class medical treatment with five-star facility have come up in big numbers particularly in South India. The treatment provided there is comparable to the best in the world and are not cost prohibitive as compared to some of the advanced economies. By Indian standards some of those private hospitals are quite expensive.

Healthcare is a very expensive affair in developed world and increasingly medical tourism has caught on in India and patients from neighbouringcountries and gulf region get medical treatment done in India because of highly developed and well equipped hospitals in the country. Lately patients from US and Canada do frequent India for medical treatment particularly in private hospitals in South India as it works out cheaper even after including the cost of travel and stay in India along with an attendant during recuperation.

With 5G being rolled out soon in several parts of the country and digitization spreading in various walks of life including medicare, remote surgery has become a doable phenomenon.  India could be become a health care hub for the world. A surgeon sitting in Chennai can conduct surgery in a small town with the help of a trained nurse in that small town. The same surgeon can conduct a surgery in US or Canada as well. This can be a routine affair with the help of 5G network. Once fully established 5G network can transmit both real time granular view of the surgery in progress and the surgeon’s instructions that guide the robotic arms carrying out the operation. For this the nurse would need to be trained to assist in remote surgery. There may be some regulatory issues which can be evolved.

This development is at a nascent stage and regulatory issues have to be worked out on allocating responsibility among the telecom operators, robotics vendors, software providers and medical personnel especially when something goes wrong with the surgery. But this could become a major health industry for India with huge foreign exchange earning potential.

Once all these issues are sorted out, there is going to be huge opportunity for Indian medical fraternity. Medical treatment is very expensive in the advanced economies. This is one of the reasons that medical tourism has caught on particularly from neighbouring countries like Bangladesh, Maldives, Sri Lanka and Nepal. Some patients do come from Pakistan as well for complicated medical and surgical treatment. Many come from Gulf countries because it is much cheaper in India.

In countries like United Kingdom and Canada, healthcare is available to all and provided by the state but getting an appointment to meet a specialist doctor is not easy and take months together. This puts patients in jeopardy. If telemedicine and remote surgery from India is encouraged, there could be great relief to patients in those countries. In US, private hospitals are easily approachable but they are cost prohibitive and if there is a major and complicated ailment, the entire lifetime savings will be wiped out in treatment. Telemedicine and remote surgery from India could be a cheaper alternative.

As it is digitization has helped India to improve its governance. Direct benefit transfer for various social schemes of the government has helped to plug leakages to a large extent. Digitisation of ration cards has eliminated bogus cards.  These have ensured government resources running into lakhs and crores of rupees.

Just as India dominates in software development, healthcare delivery could be the next big area where Indian doctors sitting in India could provide healthcare to millions of patients world over through telemedicine and remote robotic surgery. With 5G taking off soon across India there is scope for not only remote surgery but also several other technology enabled service delivery. Of course both the centre and states will have to gear themselves and create conducive environment to cash-in on this huge opportunity. (IPA Service)

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By K R Sudhaman

It is a no brainer that India’s economic growth would look impressive after a virtual shut down in the previous year due to Covid Pandemic. But the question to be asked is the double digit growth is good enough and to the desired level and are their worrying factors in the economy?  One need not be naysayers and spread gloom all over but it is undisputable that there are worrying factors in the economy that has every chance of pulling down the growth momentum as the economy chugs along in the current financial year.

The data released by the National Statistical Organisation for the first quarter of financial year 2022-23 estimated the gross domestic product at 13.5 per cent as compared to the previous year. This double-digit growth is no doubt impressive but one should not forget the fact that this is mainly due to the economic recovery that was taking place after Covid that virtually shut down the economy in the same quarter last year. This is deceptively high level, given the base effect. April-June 2021 witnessed the second wave of the coronavirus epidemic, which raged through the entire country. In such a scenario the growth rate of 13.5 per cent is in fact a clear disappointment. Most expectations were for quarterly GDP growth in the 15-16 per cent range year on year.

The National Statistical Office, which is under the Union Ministry of Statistics & Programme Implementation, has released its estimates for gross domestic product (GDP) in the first quarter (Q1) of this fiscal year, 2022-23. The headline number is that GDP at constant prices in the first quarter showed 13.5 per cent growth year on year. This is a deceptively high level, given the base effect. It needs to be remembered that the equivalent quarter of the previous year, April-June 2021, was when the devastating second wave of the coronavirus epidemic was raging through the country. Even though there was no national lockdown as draconian as that observed during the first wave in 2020, activity nevertheless slowed considerably as a consequence of the high mortality and sickness. Given the base effect, the growth rate of 13.5 per cent is in fact a clear disappointment. Most expectations were for quarterly GDP growth in the 15-16 per cent range year on year. Rating agency ICRA has projected 15.7 per cent.

Crisil chief economist Dharmakirti Joshi has cautioned that the next few quarters will see slower growth as the base effect wanes. While the ongoing broad basing of domestic economic activity is supportive, the key risks is slowing global growth, which would curb India’s exports and create uncertainty in private capex plans. These would put downward pressure on our GDP growth forecast of 7.3 per cent for the whole of current fiscal year.

Joshi also said the first quarter GDP growth came in lower than expected. High net imports and weaker government consumption expenditure kept overall growth soft. Private consumption is improving, with urban demand getting support from contact-intensive services. Had it not been for high inflation and subdued rural demand due to negative real rural wage growth, private consumption would have grown faster.

RBI Governor Shaktikanta Das had said that the real GDP growth for Q1 of Fiscal Year 2023-24 is projected at 6.7%. So there is no need to be gung ho about the first quarter double digit growth, which is an aberration. Also RBI had forecast a growth of 16.2 per cent in the first quarter and it turned out be much lower despite the base effect, which is not a welcome development.

What is worrying  is “nominal GDP or GDP at current prices in q1 2022-23 is estimated at Rs 64.95 lakh crore as against Rs 51.27 lakh crore in Q1 2021-22, a growth of 26.7 per cent”. This meant WPI inflation is as high as 14.2 per cent, which is not sustainable. One often quotes consumer price Inflation which is around 7 per cent. This is what is worrying. High WPI, which reflects the real price pressure on the economy, is not good. Also because of the difficult geo-political situation and slowing global growth and high global inflation, India’s exports are bound to slow down. This will certainly impact Indian economy which has now started looking up.

Achieving 7-8 per cent GDP growth this financial year may not indicate returning to high growth path. India, which is just a trillion dollar economy, growing at 10 per cent annually on a sustained basis is not enough to catch up with China’s growth, now a $18 trillion. Even a 4-5 per cent growth in China in this difficult situation add more to its economy For example India growing at 10 per cent can add only $300 billion in one year. Whereas a five per cent growth by China adds $900 billion to its economy. So even at 5 per cent growth of China against 10 per cent growth of India adds three times more to the economy. So India needs to do a lot of catching up and one should not get carried away by this statistics. Hence a 13.5 per cent growth in first quarter is good but it is not something to be elated about as the Indian economy has a long way to go to become a developed economy. (IPA Service)

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By K R Sudhaman

India is in a sweet spot as global economy is not looking good in the face of market turmoil in China. A global recession triggered by poor showing of European economy had hit badly the export led growth model of China, whose economy grew by 6.9 per cent in 2015, the slowest in two decades. Following this slowdown, high commodity prices had started correcting exerting more pressure on China down turn. The massive over investment in China in steel, cement, shipbuilding, petrochemicals, real estate and other infrastructure sectors began to burst. This volatility in equity and commodity markets did not augur well for the global and Chinese economies. Global economy may not be in a crisis as in 2008 during the financial meltdown but it is certainly not out of the woods and outlook for global economy is certainly bearish in 2016.

In such a scenario, there will certainly be some ripple effect on India but there will be no menace as is happening elsewhere in the world. This is because India is now a reviving economy with strong fundamentals. The current account deficit is below one per cent of GDP, Inflation is down though there is some increase in food inflation lately and foreign exchange reserved comfortable and swelling. The fiscal deficit has been reined in and is within manageable limit of less than four per cent and is falling further partly because sharp fall in commodity prices particularly oil, which has pushed down drastically subsidy bill. It has also helped in increasing indirect tax revenue because increase in excise duty to pre-crisis level.

This is the time for India to get its act together and Finance Minister Arun Jaitley rightly put it at the World Economic Forum summit at Davos. Exuding confidence on the Indian Economy, Jaitley said India would utilise the headroom available to get some additional growth engines going through efforts to revive private investments.

Several speakers at the ongoing Davos Summit in stressing that India will be the next growth engine of the World with the picture in China and Europe gloomy. It is not very good in US as well. Reserve Bank of India Governor Raghuram Rajan has aptly summed up India’s comfortable situation. He termed India as a recovering economy, despite weak global markets and two consecutive years of poor rain. As these things turn, growth will get stronger, he said. When the growth rate is falling elsewhere in the World, India’s growth is increasing to become the fastest growing economy in the world. Of course India is growing to its potential as yet at 9-10 per cent annually. For that to happen, India needs to push investments in infrastructure and kick-start private investment to get the economy firing all fronts. The fall in commodity prices will help in pushing investments in infrastructure as input costs in steel, cement and the like will come down substantially.

The General Budget to be presented to Parliament by Jaitley on February 29 provides an opportunity to push reforms so as to get its house to convert the global challenges to opportunity to take the Indian Economy to new high. This is a golden opportunity for India to become an economic power. We had similar opportunity in 2004-05 and we missed the bus. Hope we do not miss the bus this time. If we get it right this time the 21st century would belong to India, which is not only in sweet spot but also it has the demographic dividend with 65 per cent of the 1.25 billion population below the age of 35 years. The country is geared to cash in on this once in a lifetime opportunity. The general budget, particularly game changing tax reforms like GST, bankruptcy law, make in India hold the key.

So far India has not been able to grow to its potential barring 2004-08 when the economy clocked nearly a double-digit annual growth. One of the major reasons for growing to our potential is corruption at all levels right from the top to bottom. This is a menace that is deep-rooted in the country and Prime Minister Narendra Modi showed lot of promise to end this menace, when he secured majority in Lok Sabha elections in 2014, first time any party has done in the last 30 years. But so far there is no visible effort to end this corruption menace so as to ensure the economy marched ahead. (IPA Service)

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By K.R. Sudhaman

Prime Minister Narendra Modi announced from the ramparts of Red Fort on the Independence Day that the two mantras of his government’s economic strategy would be job creation and to tackle farmers’ woes. In a country, where 10-12 million enter job market every year, no government can ignore this fact and rightly Modi from the day he assumed office in May 2014, has been laying emphasis on job creation. This is all the more important as 65 per cent of the vast 1.25 billion population in the country are below the age of 35.

If India were to cash-in on this demographic dividend, it needed to give a fillip to labour intensive technology, infrastructure and micro, small and medium enterprises. The make-in-India campaign, the digital India coupled with Skill India launched by Modi is aimed at creating the much needed employment in the country.

The make in India campaign launched last year is aimed at India becoming a global manufacturing hub, particularly that of labour-intensive production like textiles, garments and small and medium enterprises. SME sector accounted for nearly 40 per cent of India’s GDP and 45 per cent of exports. Sectors like handlooms, handicrafts too had huge potential for job creartion apart from IT and IT enabled services.

But if these sectors were to flourish, the youth should possess necessary skills so as to be absorbed in for production activity. The education provided by Indian schools and colleges do not make them properly employable and hence required to be skilled. It is precisely for this reason Modi had decided to lay emphasis on skill development. The target is to provide skill development to at least 500 million people in 5-10 years, which is nearly half the population.

The government has also made it clear that here on all public and private investments that required its clearance or assistance, will have to make a commitment on the number of jobs that the investment would create. Modi followed it up with a meeting with Indian businessmen in October last in which he emphasised the need for pushing investment in private sector and job creation would be the thrust of such investments. He nudged the businessmen to invest in labour-intensive areas that included textiles. Government’s decision to encourage electronics industry in the country is also expected to boost job creation. Government proposed to encourage $400 billion in electronics, IT software and hardware, mobile manufacture and so on. His visits to Middleeast, US, UK, Japan, Canada, France, South Korea, Germany, China and more recently to South East Asia have set the stage for attracting more foreign investment into India.

At the moment, India is the only attractive investment destination with growth slowing down in many advanced countries. The growth has slowed down in China as well. With no growth potential in advanced nations, the large global companies see opportunity only in India for investment with ever growing middle class and young population. India is the only country that can witness consumer demand pick up in the coming years and decades.

This is also the time when India could step up infrastructure development. India had huge infrastructure deficit and with global commodity prices of crude oil, steel, coal, cement and other materials falling, investment in infrastructure will yield better outcome with costs coming down. This will also push up jobs in construction industry.

The Indian Railways is investing over Rs one lakh crore this financial year and proposed invest Rs 8.5 lakh crore in the next five years in modernisation of railways. This would create substantial jobs besides creating much needed rail infrastructure.

Government proposed to invest $1 trillion in infrastructure development in the next five years. These investments in ports, airports, highways, rural roads, housing, telecom and power will not only kick-start the sagging economy but also create employment. The proposal to create 100 smart cities in the country, promotions industrial clusters and food parks in the country too would generate additional employment.

The emphasis on renewable energy and raising the target of solar power generation to one lakh Mw and wind power to 60,000 Mw in the next five years entailing investment of $150 billion. Both solar and wind power generation is labour intensive particularly at the time of installation. Off grid applications are spread all over the country.

If India were to shine and growth has to become inclusive, rural India comprising six lakh villages will have to develop. The fruits of development have to percolate down to village level This will happen only if there are jobs in small towns. In this context government’s proposal to encourage industrial clusters will half employment generation.

Urban development initiatives – AMRUT, Smart Cities Mission and Housing for all unveiled by Modi recently are expected to help create additional 34 lakh jobs. The initiative to build 100 smart cities across the country is a “decisive step” and will create a significant multiplier effect for over 250 core and ancillary sectors including infrastructure, logistics and modern retail.

Weak external demand means growth in labour-intensive sectors like textiles and gems and jewellery that are dependent on exports for growth will not see a pick up in the near term. So government would have to focus on newer areas like food processing, urban and rural infrastructure, highway development for job creation. The kick-starting of stalled projects is another area, which is receiving great attention. At one point of time there were Rs 18 lakh crore worth of stalled projects. The previous UPA government cleared Rs six lakh crore of projects and the NDA government has cleared close to that amount in the last one and half years.

There is opportunity for the economy to reach a new high but this required big push to economic reforms to take advantage of foreign investors queueing up to invest in India. The rollout of Good and Services tax, a game changing indirect tax reform will push India’s GDP by 1.5-2 per cent by creating free movement of good and services in the country besides a uniform tax rate. Also ease of doing business, stability in tax laws are some the issues, which are a source of irritation to foreign investors.

Government has already taking steps to improve ease of doing business by simplification rules and states have started competing with each other to promote single window clearance to attract foreign investment. All these augur well for for the economy and it has to be constant endeavour to improve the situation on the ground, which government and states have started working on.

The business confidence is returning, the feel good factor among foreign investors is visible but the government needs hasten reforms to fully win back the trust of investors. India is set to achieve economic growth rate between 7.5-8 per cent this year. The improvement in the ease of doing business coupled with rollout of GST will push the growth rate to 9-10 per cent, which will close to India’s growth potential. Also with inflation moderating, fiscal deficit and current account deficit under control, surging foreign exchange reserves and falling interest rates, the investment would pick up with consumer demand surging in the country. (IPA Service)

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