Economic
Highlight
New Delhi, 20 September 2021
UNCTAD Predictions
RECOVERY ONLY BY 2030
By Shivaji Sarkar
An international agency UN Conference Trade
and Development (UNCTAD) has predicted highly uneven growth despite possibility
of a bounce back but global output trends of 2016-19 would resume not before
2030.The agency notes that growth has been the slowest since the post 2007-8
financial crisis, in the 2011-20 decade since 1945.
An important UNCTAD recommendation is to
revive the public sector as critical instruments of long-term development. The
report observes that the pandemic has seen an emergent consensus around the
need for significant public sector intervention. A call India needs to heed
amid its move for fast-paced privatisation. It suggests that expansionary
fiscal measures that most governments are doing may end up “only as
fire-fighting tools”. Consolidating these in public sector infrastructure could
come up as “critical instruments in long-term development”.
The UNCTAD Trade and Development Report 2021
expects India to grow at 7.5 percent in 2021 and 6.5 percent in 2022, but
“insufficient to regain the pre-Covid-19 income level. The world may grow at
5.5 percent, may be the highest in five decades, but amid too many pitfalls on
regional, sectoral and income lines. It does not rule out sharper than
accelerated deceleration next year.
It warns policymakers to trudge carefully
particularly on deregulation. The developing economies, which as per it include
India also have been hit harder than during the global financial crisis, while
“new heavier debt burden reduces their own room for fiscal policy”.
India’s growth despite being next to China
“is poised to slow down” because of the inherent fragility in coping with the
pandemic and restoring employment and incomes. Even the high growth is
insufficient to remove “the widened income and wealth inequalities and rising
social unrests”.
The UNCTAD warns of rising corruption and
rent-seeking saying, “Within advanced economies, the ‘rentier’ class has
experienced an explosion in wealth, while low-earners struggle”. The classic
statement by its General Secretary Rebeca
Grynspansignifies that the governments would have to be more careful in
observing the trends and act with caution to check widening gaps, both domestic
and international, so that growth luxuries are not enjoyed by “fewer and fewer
privileged people”.
Even then, in 2022, UNCTAD expects global
growth to slow to 3.6 per cent leaving world income still 3.7 per cent below
where its pre-pandemic trend would have put it; an expected cumulative income
loss of about $13 trillion, as per 2015 dollar values, in 2020-22. Timid policy
or, even worse, backsliding, could pull growth down further.
The world is not out of the woods. Indian
efforts of four-year Rs 96,000 crore reprieve for spectrum dues to telecom
companies; Rs 25,938 crore production-linked incentive (PLI) schemes for
automobile sector, Rs 120 crore for drone industry, Rs 10683 crore for textiles
and others announced for 13 sectors during the last one year is expected to
raise minimum production to around Rs 37.5 lakh crore over five years and
create additional jobs of about one crore.
While the aim is good and incentives should
be welcome, the UNCTAD points out the problem of inflation too. Rising prices
in India is a constant concern of the Reserve Bank of India. The WPI inflation
in August has touched 11.39 percent against 11.16 percent in July. It means
that retail inflation is galloping. It affects the purchasing power of the
people and has affected overall growth, wage and supply conditions. RBI Deputy Governor
Michael Patra on September 16 says that persistent supply shocks pass through
of imported price pressures to retail prices and building wage pressures. “The
easing of headline inflation from current levels is likely to be grudging and
uneven. Inflation will remain high till 2024 despite the RBI working for a 9.5
percent growth”, he adds.
Despite some seasonal moderation in food
prices in India, the UNCTAD believes food prices would rise and could pose a
serious threat to vulnerable populations in the South, already financially weakened
by the health crisis.
The RBI is under pressure to increase its
lowest interest rates. This is also affecting yields of depositors and hits the
overall economy. The nation has witnessed that higher interest yields in the
past had helped the country grow. Interest is mistakenly considered as income
where as it is mere hedging against inflation. If inflation is high and
interest rates low on deposits, it hits capital building. The policy parameters
as pointed out by UNCTAD need sharpening for having a critical balance.
Tax levying in India has also irrationality.
Taxing the deposits appears retrograde, GST on self-managed housing societies
has come under scanner of Madras High Court on September 14; the retrospective
tax on corporate has caused serious loss of foreign investment and maligned the
country. The policy of taxing commodities and fuel is leading to an overall
distress.
With over 40 to 45 percent indirect taxes,
tolls, cesses, fees, user charges and continuous hike of all other levies like
municipal and property taxes, it is necessary to review why the country should
have income-tax at all or why it can’t be at par with corporate income tax of
15 percent. Taxes on individuals repress growth and international institutions
also feel that tax burdens should reduce. The governments would have larger
revenue returns with higher turnovers.
The UNCTAD is concerned of the decades of
declining wage share and wants wages to rise for a better balance between wages
and profits. Despite a decade of massive monetary injections from leading
public sector and central banks, economic stability remains missing.
It may be a sequel to this that National
Crime Research Bureau finds crimes rising during the pandemic - digital crimes
and cyber monetary frauds, including internet banking by 11.8 percent; social
disorders rise 21-fold; other IPC crimes four-fold; 12.4 percent rise in
offences against public tranquility, and 78.1 percent in environment crimes.
Cyber frauds are growing the most in Telangana, Maharashtra, Odisha, Bihar and
Assam. It may be a mere tip of the iceberg as there are many cyber crimes that are
difficult to investigate like cyber bullying and forcing people to pay money
through digital transfers. These hit the growth processes and policing cost is
high.
The UNCTAD also wants global reforms to the
international economic architecture promised after 2008-09 crisis, but
abandoned “in the face of ‘rentier’ class” is now implemented for definite
growth worldwide”. India needs to take cue for correcting the policies and path
for taking the country ahead.---INFA
(Copyright, India
News & Feature Alliance)
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