Reactions to India’s so-called “slowing” economy are flowing thick and fast. Some are in mainstream broadsheets. More often than not they are relying on and echo chamber of quotes in expert reports and more elaborate thinkers’ pieces online.
India Story going sour is the new fetish. Blaming PM Moḍi's economics is easier than bemoaning his politics.
For example, "India's economy in 'downward spiral.' What did Modi get wrong? is the headline of a CNNMoney story that’s popping up unfailingly on Google search results.
The story (also) quotes from an SBI Research report which said almost a month before the Government admission of a lull that the slowdown in not a near term crinkle - “We certainly believe that we are in a slowdown mode since September 2016 and a slowdown that has been prolonged to Q1 of this fiscal year is technically not short-term in nature or even transient.”
India was the fastest growing major economy in the world last year, clocking 7.1 percent GDP growth during the first quarter. Exactly the same time last year, when Finance Minister Arun Jaitley was in Washington D.C for the IMF Fall meetings, he told Firstpost how a low interest, low GDP rate world looks in awe at India.
Some of that still holds because the rest of the world’s GDP outlook, on balance, is still in the under-5s.
But the point of the latest “vigorous debate” as RBI Deputy Governor Viral Acharya describes the noise surrounding the “slowdown” is not about the numbers per se but the elephant that may be hidden within the stats.
Kaushik Basu, former Chief Economist of the World Bank and Professor of Economics at Cornell University minces no words in his commentary for Project Syndicate.
“Not long ago, India was a poster child for political stability and economic growth among emerging economies. Though the country had a long way to go to eradicate poverty and extreme inequality, when it came to steady GDP growth, it was among the world’s strongest and most consistent performers. Not anymore.”
Basu, a former chief economic advisor of government of India who was appointed by Modi's predecessor government, compares the 5.7% number to neighbouring economies’. India, he says, is now tied with Pakistan and behind China, Malaysia, and the Philippines while Bangladesh is now growing at over 7% per annum. The numbers quoted by Basu are from The Economist.
Former TRAI chairman Rahul Khullar says stand by for more “bad news”, in his column "A hard rain's gonna fall" for Business Standard: "We should brace ourselves for more bad news in the coming quarters - on economic output and growth, strains on the fiscal deficit, export slowdown, small and micro enterprises in distress, and further accumulation of NPAs in the banking sector. We are in a bad place; but it looks like it is going to get worse. I desperately hope that I am wrong, but that’s what it looks like."
Khullar was allowed to serve his full term at ṬRAI by Moḍi and his bureaucrat wife Sindhushree became the first CEO of Niti Aayog when staff was transferred from its predecessor organisation, the Planning Commission.
“How did we come to this pass? First, was the demonetization (DeMo) disaster. It did not achieve any of the objectives announced by the Prime Minister and it wreaked economic havoc (Articles in this paper dated 7 and 26 December 2016 and 27 June 2017). DeMo led to the foreseeable collapse of economic activity. Worst hit were construction, the entire informal sector, and, of course, agriculture. The lagged effects have resulted in the continuing bad economic news,” writes Khullar.
"The projection of real GVA growth for 2017-18 has been revised down to 6.7 per cent from the August 2017 projection of 7.3 per cent," RBI Governor Urjit Patel said.
GVA is different from GDP, the measure typically used to show a country's economic growth.
Put simply, it is a measure of total output and income in the economy. It provides the rupee value for the amount of goods and services produced in an economy after deducting the cost of inputs and raw materials that have gone into the production of those goods and services. It also gives sector-specific picture like what is the growth in an area, industry or sector of an economy. GVA is indicative of how the GDP could move, although not by the same amount.
Speaking at the World Economic Forum India Summit in New Delhi, newly minted Railways Minister Piyush Goyal said the RBI should help “reignite stalled projects”.
“The stalled projects need funding and I think if we can get the support of RBI to help create a framework by which this stalled project can be restarted, we would love to start them yesterday," he said.
Goyal was speaking on the sidelines of the India Economic Summit of the World Economic Forum (WEF).
He did not elaborate however what help the government wants from the Reserve Bank of India.
On inflation, YES bank Group President Shubhada Rao tells Bloomberg Markets “Four to four and a half is the band of inflation that we are looking at. That’s why food disinflation becomes critical so the upside risk on inflation gets contained. How inflation behaves over the next couple of months will determine that.”
Picking up from where Rao left off, on food disinflation - onions are selling anywhere from Rs 40 to Rs 60 a kilo but it’s debatable whether high growth or low inflation wins votes in an election. Same with no rate cut - “no political gains there, although we are unhappy”, say business leaders, on background.
“Most likely his strategy will be to push for growth in 2018, before the next election cycle warms up. His speech was agressive, GST issues will be addressed next week,” they say.
Prime Minister Modi is already past the half way mark after a historic electoral sweep in 2014.
Onions, for now, are not more eye watering than the GST.