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Indian Economy

Fiscal Deficit Woes

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An important macroeconomic indicator that matters but does not often connect with the common man is the fiscal deficit target. It is an important parameter to assess how well the government budgets its revenue and expenditure. Hence, if the total expenditure is greater than the total revenue, the government needs to bridge this gap by borrowing money.

Being expressed as a percentage of GDP, the Modi led BJP government had set a target for a fiscal deficit of 3.3% of GDP or Rs 6.24 lakh crore for itself for the financial year ending 31st March 2019. However, by November of 2018 itself, the fiscal deficit surpassed its target and stood at 114.8% of its full-year estimate which translates into a Rs 7.16 lakh crore deficit.

Fall in GST collections, lower than expected disinvestment receipts, farm loan waivers, MSP hikes, disappointing IIP numbers and populist spending measures adopted by the government being an election year, all add to the overall expenditure and are putting further strain on the fiscal deficit.

A majority of recently polled analysts and experts also believe it will be very difficult for the government to meet its target. However, Finance Minister Arun Jaitley still firmly believes that the government can meet this target by ramping up its revenue. It is a matter of pride for the government to meet its fiscal deficit target and show that it is capable of meeting its budgeted expenditure.

 

Indian Economy

Focus on ‘blue economy’ will boost growth: Venkaiah Naidu

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Naidu

Panaji | Vice President Venkaiah Naidu on Sunday said a focused approach in areas such as minerals and energy from oceans can help India become the third largest economy in the next 10-15 years.

Addressing scientists at the CSIR-National Institute of Oceanography (NIO) near here, he said that at the same time, further degradation of marine ecosystems should be prevented.

“I strongly feel that focused approach in some of the areas such as minerals and energy from oceans can make India a global leader and serve our national goals,” Naidu said.

India should tap the enormous potential of ‘blue economy’ to achieve higher economic growth and initiate programs for “sustainable harnessing of ocean resources”, he said.

“However, while pursuing ‘blue growth’, every effort must be made by all stakeholders, including private and public sectors, to prevent further degradation of the ocean and its ecosystems,” the vice president said.

Blue economy is the sustainable use of ocean resources for economic growth, improved livelihood and jobs, and ocean ecosystem health.

Naidu said there was a need to conserve oceans and the CSIR-NIO should play a major role in meeting the challenges to understand different ocean processes due to climate change.

“It is important to prioritise our efforts in ocean science and technology to achieve the national goal of transforming India to be the third largest economy in the coming 10-15 years,” he said.

“Government of India has already planned development of ports and allied facilities through Sagarmala (project). Coastal economic zones are planned,” he said.

Naidu said that with India looking towards oceans for economic growth through ‘blue economy’, important institutions like the NIO will have to step up research in areas such as ocean energy.

“India is meeting most of its oil and gas requirements through imports. Scientists should study the potential of renewable energy derived from the ocean– from wind, wave and tidal sources,” he added.

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Indian Economy

The jobless have no Achhe Din

Akhilesh Bhargava

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India needs a million new jobs per month, to provide gainful livelihood and employment to the graduating adults. But these new jobs are not being created in enough numbers. The government denies it and wants us to believe otherwise, with the support of statistics from the NSSO, Niti Aayog and the EPFO, all of which tend to be taken with a ton of salt. These positive and bright employment figures put up by the government agencies, get countered by the likes of the CMIE, which instead of challenging the figures related to jobs, shockingly says that there are 8 million less jobs today, than there were in December 2016, when demonetisation was enforced, thus contending that the number of jobs have shrunk instead of going up. The job and unemployment scene in India, is not so bad as the CMIE says, and is neither so good as say some government influenced economists, who say that 6.2 million new jobs were created in 2017/18 and 5.2 million in 2016/17.

 

The ground reality is that not enough jobs as promised have been created during the past five years and that the lack of jobs, which is unemployment, as well as under employment is a huge social, economic and political problem, with more and more youth entering the Indian job market each month. It is this lack of promised jobs, that will challenge whether achhe din finally came or not, in the ensuing elections, and also stands testimony to the fact that the flagship reform programs of the government viz. Make In India, Skill India and Smart City India, have not been a success by this measure. While a weak and disunited Opposition seems to be unable to get this lack of jobs as the main issue on the centre stage of the current elections, but yet this undercurrent of unemployment will swing votes away from the BJP. A family with jobless adults is bound to be disenchanted with the ruling party, and is bound to vote for alternates.

 

The signs of unemployment and its reasons are many. The very fact that household savings are falling, consumer spending has receded and lakhs of applications are received for an ordinary job, mean that jobs are not there, as much as are needed. The unwillingness of the private sector to invest in new projects, falling corporate profits, several big companies like RCom, Jet Airways, Zee etc. being in a problem and the banking crisis remaining unresolved, only mean that the corporate sector has not generated new jobs worth talking. The rural distress and the suffering SME sector too means that these segments of our economy, which are huge generators of jobs, are not doing so. If companies are unwilling to put capital into new projects and the likes of the auto sector are cutting back production, it only raises a question mark on the employment claims, and supports the fact has not enough new jobs are being created. Other symptoms that are of concern are that India’s GDP growth per quarter has been receding, industrial production grew at its lowest in January in the past 15 months, and India’s manufacturing exports have not been able to take off in a big way, such as to generate enough new jobs.

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Indian Economy

The slowdown in our economy

Akhilesh Bhargava

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The warning of many economists that the Indian economy is slowing down may not suit the BJP in an election year, but the signs of a sharp slowdown in our economic growth abound. The Indian GDP grew at a mere 6.6% in the December quarter, its slowest in five quarters and that continues. The CSO has thus reduced its annual growth estimate of our GDP in FY 2019, to just about 7%. The slowing economic growth is clearly reflected in the sharp fall in consumer demand, leading to a cut of 26.8% in vehicle production by Maruti Udyog in March 2019. All other auto companies face a similar situation. This cut in production comes after three years of double-digit growth clocked by Maruti Udyog. It has been due to declining urban sales and slowing rural demand. A slowdown in consumer spending, which accounts for 60% of our economy is worrisome, due to its ripple effect across many other sectors of the economy like engineering, textiles, manufacturing etc. This deceleration in consumer spending is further reflected in the fall in our non-gold imports, for a second consecutive month.

There are many other signs of a downturn in the Indian economy. Industrial growth receded to 1.6% in January, as against 2.6% in December 2018, exports grew by 2.4% in February, as against 3.7% in January and GST collections fail to meet their target, month after month. Despite the heavy-handed income tax collection/coercive recovery measures unleashed by the Income Tax Department, the government faces a likely shortfall of Rs.50000 crores in its targeted income tax collection and that too, after withholding tax refunds of over Rs. 1.50 lac crores. The SME sector continues to suffer and so does the core sector growth, with the Reserve Bank reporting that new investments in the economy contracted for a seventh successive year. While the unwillingness of the private sector to pump in investments into new projects is a matter of serious concern, so are the challenges in a build-up of employment, which ultimately reflects in the reduced consumer spending, for want of household income. In the meanwhile, the litany of populist election sops have failed to alleviate India’s rural distress.

While there is no doubt that the global economy has been witnessing a continued slowdown, but yet India, with its huge domestic market of crores of young consumers should be relatively immune to it. The present downturn in the Indian economy negates the inherent upsurge in demand due to the unmet consumer aspirations of our millions, which has more to do with government policy errors. If demonetisation hit growth where it hurts the most and sent it into a downward tailspin, from which we are yet to recover, so has been the case with unemployment which remains untamed. Millions of SMEs have closed down due to the impact of demonetisation and heavy handed legislation by an insensitive government, which prefer closure than policy uncertainty. The fact is that the two key sectors of the economy that are job and growth generators viz. SMEs and the farm sector remain in distress with no respite in sight. The unresolved challenges remain on various fronts including unemployment, fresh investments, ease of doing business for SMEs in particular, banking crisis etc. which hold back our growth.

 

The fact is that the growth in our economy in the last few years has been funded and fuelled primarily by government spending, with a private sector unwilling to risk its capital. The government’s reforms and policy have failed to restore confidence, in the minds of the producer, as well as consumer as is indicated by the cutdown in production by Maruti. With the government having emptied its treasury on poll premises, its capacity to spend is eroded and the slowdown will continue in the coming quarters.

 

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