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Economic Highlights
New Delhi, 21 March 2022
Crisis-Hit India
MUSTN’T RUSH FOR
INFRA
By Shivaji Sarkar
The Ukraine war is upending India’s dream
budget and now gets further bruised with high rise in crude prices and retail
inflation beyond 6 per cent toleration limit of the Reserve Bank of India. The
nation has to tighten its belt, go slow on reckless infrastructure spending, and
be austere as indicators go for a toss amid efforts of the government batting
for a better economy as its energy expenses and defence alertness is to cost
more.
The government need not shy away on the
crucial indicators as crude jumps to pressure prices – 11th month
double-digit wholesale index at 13.1 per cent and the retail CPI touching
eight-month high at 6.1 per cent in February. As also people spending less and
shift to buy unbranded cheaper products.
Oil and gas is to bleed the country even as it
looks for alternative sources but has little capacity to face western sanctions
that have crashed Russian stocks by 50 per cent and currency by 20 per cent. The
war hardens the international market, soars energy prices and makes exports
difficult despite a plunging rupee at Rs 76 to a dollar. Imports are growing at
$ 616.91 billion, 55 per cent increase, exports at lower volumes at $ 335.88
billion. The trade deficit at $ 228.92 billion rises by 47 per cent.
The US and Britain frown upon India’s bid to
buy more oil from Russia at discounted rates. Meddling through a new cold war
of sanctions is not easy. It thaws India’s relations with Iran, a dependable
friend. It is also likely to fetch lower prices for LIC privatisation move.
Indian business and consumers are at the mercy of global winds.
Each move or a change has costs. So far the
nation is carrying out on its budgetary path but it is fraught with chances of compromising
on extra expenses. Borrowings are high and a likely cut on infra spending of budgeted
Rs 10 lakh crore looms large.
The criticality increases with youth
unemployment rising to 26 per cent in first quarter of 2021 and headline
joblessness remaining at 12.7 per cent and government seeking to spend Rs 1.58
lakh more mainly for PM Awas Yojana takes from National Small Savings Fund and
urea support. The rural India that had shaken the country on farms bill remains
unstable and urban shaky.
Prime Minister Narendra Modi has during his
election campaign repeatedly told the people about his government’s herculean
efforts in keeping its development objectives intact despite the hardships. The
economy remains shaky as the private sector is unable to maintain the façade of
keeping up their efforts and depends on government for support.
As per the World Inequality Report, the
country stands out as poor and very unequal with the top 1 per cent of the
people holding more than one-fifth of total national income in 2021 and bottom
half just 13 per cent. Average Indian’s income is Rs 204,200 or about Rs 17,016
a month and the bottom still less at Rs 53610. “India stands out as a poor and
very unequal country with an affluent elite”, the report says.
So the average Indian wants to rush to the
jobs but the National Education Policy, in its bid to align it with the
affluent US, has decided to keep the young bound in schools and universities for
about two more years, delaying the primary education by a year at age six,
though not at all needed, and graduation by another. As education is getting
prolonged, its funding by parents also become more expensive with high delayed
fee payment, if not default and dropouts. If a child for any reason loses
another year his joining the productive employment is to be delayed by three
years and would remain an economic burden on the society.
Apart it raises government and societal
expenses for apparently not much betterment in term of extended time. The
intended changes in syllabi could be made within the present timeframe. It is a
misnomer that change has to be expensive. It also needs to correct its mistaken
stress on PhD, considering it to be research. The PhD certainly is not
research, exceptions apart. Austerity can be achieved cutting down on similar
superfluous expenditures. If two years are saved for education, it means a
minimum savings of Rs 2.5 lakh by each student and in terms of faculty and infra
cost billions by the government and society every year.
Prime Minister Modi needs to intervene to correct
this NEP anomaly. Let Indians complete education faster, cheaper and the world
follow it. Extending terms do not make education better. But if the Indian
youth joins the work force early, they can make the competition tougher for the
rest of the world.
As of now it must do away with the unnecessary subsidy of Rs 2908
crore increased from Rs 800 crore for electric car (EV). Similarly, it needs to
review infra projects that defy Intergovernmental Panel on Climate Change
(IPCC) norms. It also can
consider cuts for many other infra projects.
Such austerities are needed in various areas
and the country must reconsider its decision to rush for EV. Maruti-Suzuki Chairman
RC Bhargava has appropriately suggested not going for it merely for the issue
of emission or pollution. He says, “EVs are not clean cars. These are far more
expensive and does not suit Indian needs. EVs depended on coal fired thermal plants
will not reduce carbon emissions or greenhouse gases in the next 10-15 years.
In other words it virtually goes against the basic concern of the IPCC. “If we just adopt whatever strategies the US and
Europe are following, I don’t think we will be doing justice to what we need to
do in India,” Bhargava says.
So India needs to rethink on its investments on unsettled EV
technology, building of charging stations and making the country dependent on
imports of battery. The battery, unless made with elements found in India would
remain extremely expensive and supply uncertain. So India may continue with CNG
and consider incentivising it something it does not now.
Inflation, low manufacturing and high toll like fees are hitting
the country. But these are not being addressed. The infra increases incomes of
large groups and rent seeking but does not accelerate growth. India to grow has
to carefully cut on infra and spend more on merchandise production. Times are
difficult and complex solutions have to be worked out.---INFA
(Copyright, India News & Feature Alliance)
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