India is complex. So is its economy. It is stated to be in crisis, its merchandise sales, core sector and GDP growth, global competitiveness move downwards, sensex tanks and fiscal deficit touching 75 per cent mid-year, indicating higher government borrowings. On the other it enters into dialogues with not so friendly economies like the US and China, doles out billions to government employees, farmers and battles inflation.
The RBI in October monetary policy cut growth forecast for 2019-20 to 6.1 per cent from 6.9 in the August policy. This is despite sudden spurt in sale of high end Mercedes and newly-launched foreign branded cars, gold price rise, and Rs 19,000 crore or $3 billion festive sales of e-tailers.
But housing sales dip by 20 per cent. Job growth except seasonal farm jobs is in a thaw. Even Surat not only cuts down on diamond cutters, it also slashes bonus to employees, which, however, Indian railways raise to 78 days’ productivity bonus.
The RBI finds the growth not easy in a protective world market. This is aptly supported by IMF, which says “global economy is now in a synchronised slowdown and 90 per cent countries will see a slower growth in 2019. It is more pronounced in emerging markets like India and Brazil.”
There is little hope for the stability of the rupee, says the RBI. The outflow of foreign funds and volatility in financial markets has hit it further. Foreign institutional investors (FII) sold Rs 3246.42 crore in October so far. In short, FII inflow is not only squeezed, its outflow has also increased. Indian stocks are in a tizzy. There are more sellers and occasional sensex rise is cosmetic.
The global crisis is reflected in millennial and India is not an exception. Like everywhere they are delaying marriages meaning they are consuming less may be except on entertainment or sharing experiences on “free” social media. That is what even the less paid daily wagers are also doing.
Another problem with the new upcoming youth is they do not have much disposable income affecting savings at national level. Is that also a cause for the banking sector credibility? The banks are suffering more for losing trust of the depositors as there have been galore of defaults, crashes and mergers.
The latest 25 basis RBI rate cut, 135 points in a short span, is not being transferred to the lenders though depositors are hit in a continuous inflation-ridden economy. The banks are not slow in rising rates whenever RBI does it. Declining savings rate, post-demonetisation slump in lending and little let up in real NPAs are telling on the bank health.
It increases as the system squeezes it with more bankisation, tougher rules, so-called Aadhar linkages and other harassments almost every day. Even government departments, which have all those details of their beneficiaries or customers, are chiseling out new rules every day demanding they come to their offices to submit hard copies of their crossed cheques and other proofs.May be it is a process to delay payments in a cash-crunch economy. Even the third tranche of PM Kisan pension beneficiaries have been withheld despite officials admitting that they have all their details.
The rules rigmarole is naturally reflected in India slipping 10 ranks to 68th among 141 countries in Global Competitive Index of World Economic Forum. It is stated to be the worst performing BRICS nations along with Brazil at 71st this year. The GCI ranks India at 128 in ratio to female workers and 109 health and life expectancy.
Does it look grim? May not be, but it certainly reflects certain reality despite the efforts of the Narendra Modi government. It is also true that growing population and demand on economy is rather too big. Balancing is not easy. The NITI Ayog like its predecessor, the Planning Commission, functions more centrally though allows the States to have their say.
It has been mulling over a 45-year job crisis, savings drop, medium and small industries dilemma and demand slowdown. The solution is eluding. Jobs are being cut in textiles, consumer goods, diamond cutting, manufacturing, industry, mines and even real estate in a supposedly worst slowdown.
The Smart city programme was intended to create hi-class cities with jobs. It has gone awry. The farm sector despite some attention of late, is not in the focus to be made pivot of the economy with still has about 80 crore dependent on it. The Gandhian economy is not about protecting farms but also turning the farmer-families into productive consumer and semi-industrial producers.
A farm economy with mere dependence on crops needs to be profitable with off-sowing, off-harvesting economic activities. The NITI Ayog has not been able to come out with new socio-economic production blueprint. Land fragmentation is high on the one end and consolidation of it in the hands of a few better off. It is a complex issue awaiting a simple solution.
The solutions are global. IMF Managing Director Kristalina Georgieva blames it on trade disputes between the US and China, Brexit and other geo-political tensions. “Global trade growth has come to a near standstill. Even if growth picks up in 2020, the current rifts could lead to changes that last a generation — broken supply chains, siloed trade sectors and a ‘digital Berlin Wall’ that forces countries to choose between technology systems”, she says.
That is crucial. Georgieva is candid in hitting out at dishonesty of tech-firms, who go on changing it for their profits. Countries have become dependent on them or rather being exploited but without raising their voice or trying to correct these global giants. India is no exception.
However, India has yet to realise how the ‘digital Berlin Wall’ is robbing its economy or hindering growth. Since the research is also supposedly led by the same Western giants, the solution further eludes. The move to a ‘desi’ system has not succeeded.
The stymied growth that both the RBI and IMF see has to be countered in India by simplification of rules and creating counters for breaking the global digital wall. The complex socio-economy has to be simplified for fast pace and demand generation through a continuous dialogue.