Economic Highlights
New Delhi, 5 April 2021
UN ESCAP Forecast
WARNS OF TROUBLED
ECONOMY
By
Shivaji Sarkar
India is growing and ought to grow after
unplanned devastating lockdown of all economic and social activities. But the growth
story for 2021 remains a mystery. The Economic Survey projected it at 11 per cent,
RBI 10.5 per cent, International Monetary Fund 11.5 per cent, World Bank in a
wide range of 7.5-12.5 per cent, and UN’s ESCAP puts it at 7 per cent over a
contraction of 7.7 per cent through 2020.
The Economic and Social Survey of Asia and
the Pacific (ESCAP) report 2021 states, India entered the pandemic lockdown
with subdued GDP growth and investment. “The pace of recovery further moderated
in the fourth quarter 2020-21 with estimated year-on-year growth still close to
zero.” Plus, India’s 2021 economic output is expected to remain below the 2019
level or K-shape. This is almost at par with National Statistical Office (NSO)
projection at 8 per cent contraction 2020-21, showing the lockdown impact. It
estimates that the pandemic has pushed an
additional 89 million people in the region into extreme poverty in 2020.
On the other hand, ESCAP praises China for
becoming the only major economy worldwide to achieve a positive annual economic
growth rate in 2020. But for the rest of the region, including India, the
recovery is likely to be K-shaped. The economists use U, V and W to forecast
different kinds of financial future. The K-shape is a new symbol and portrays a
troubling, divergent economic future, one where the economy rebounds unevenly
and where the wealthy benefit while everyone else gets left behind.
This also bares the reality that the pandemic
or not lockdown devastated economies like that of India, which were trying to
improve their conditions pre-pandemic. The repeated fear psychosis and
threatening of partial or complete lockdown again is likely to create more
business uncertainties and delayed recovery.
Coupled with high policy quandary,
officially-sponsored price rises through heavy taxes on petroleum, other fuels,
increasing toll-taxes on roads and consequent rise in fare, freight and rail
costs, caused 5.03 per cent inflation in February, 2021, meaning despite wage
contraction an individual’s expenses increased by over 5 per cent. It may show
a ‘better’ GDP in monetary terms but in reality it will be a regression, where
people’s purchasing power reduces. This leads to shrinkage in production as is
indicated by fall in February core sector output by 4.6 per cent. It is
exacerbated by lowering of deposit interest rates, taxes on provident fund and
other accumulations, spree on privatisation, including that of giant public
sector banks to private swindlers. These add to the market uncertainties and
further possible regression.
The flip-flop policy on normalising relations
with Pakistan, as the US Defence Secretary visits India and consequent refusal
of Islamabad to walk the talk adds to further uncertainties. So does certain
Indian companies’ truck with Myanmar’s military-controlled firms, slapped with
UN sanctions.
The recent accidental blockage of the Suez
Canal route could add to further inflationary pressures as India’s 5 lakh
barrels a day of crude import is to become expensive with tanker rates rising
at least in the short run.
The disinvestment drive too has not succeeded
during the past three years. Even now the policy, though being steamrolled, is
raking up issues of how India would manage its future through an oppressive
private sector for which all labour and financial policies, including interest
rates are being compromised. Had India not accumulated such productive public
sector organisations and nurtured banks, how could it have taken to the sales
of family diamonds?
It has also raised questions of disposing off
assets worth Rs 2.10 lakh crore without a public discussion and at the whims of
some people at the helms of a few institutions. The powers of money bill and
whether this should be put in check or not is being continuously debated.
Nobody has answered whether such sales would help the country or pauperise it.
There is no answer either to how the
government promising two crore jobs would be able to provide employment to
jobless. The unemployment rate in the country
declined to 6.52 per cent in March from
6.90 per cent in February, as per think-tank Centre for
Monitoring Indian Economy (CMIE). This conceals the real numbers, of
job losses during 2020 lockdown and does not included millions of
under-employed or semi-employed. The rural sector is in twin-crisis of poor
cash flow and glut of agricultural produce. This is giving rise to
discrimination, puts brake on industrial and manufacturing recovery and
restoration of economic health.
It is about a world, including India, where a
miniscule rich own most of the wealth while the rest are at the bottom, owning
a measly one or two per cent as in the US. The Oxfam reports that the top 10
per cent of the Indian population hold 77 per cent of the total national
wealth, 73 per cent of the wealth generated in 2017 went to the rich 1 per cent,
while 67 million Indians, the poorest half of the population, saw only a 1 per cent
increase in their wealth. The number of billionaires in India rose from only
nine in 2000 to 101 in 2017 and 119 in the last four years.
The rising forex reserves to $582 billion in
March are not a very positive sign either. It speaks of contracting imports by
46 plus per cent and notional value increase (of about 21.7 per cent) in gold
prices held by RBI since March 27, 2000.
India’s taxation system has also drawn ire of
the US on retrospective tax and digital service tax, as per a policy
restricting imports in tune with Atmanirbhar
Bharat. Various income-tax rules, TDS oppression and many other such set of
laws like opening up of ten-year old cases is causing havoc of uncertainties.
The uncertain Indian growth story, distress
of the people due to complicated tax policies or little boost to production
tells of a peculiar lack of thought process. The planning process needs to be
reactivated for turning the economy to a fast track. The Narendra Modi
government has to be proactive in reviewing the policies to regenerate the
economic process, even thawing its bid for privatisation. India needs to
consolidate; the economic growth would be a corollary. ---INFA
(Copyright,
India News & Feature Alliance)
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