Economic Highlights
New Delhi, 12 June 203
‘India Grows 3.3% 2020-23’
North-East’s GDP SHARE 2%
By Shivaji Sarkar
The Reserve Bank of India monetary policy is only a
small part of India’s economy. A tighter rate regime only corrects the loan
portfolio and helps the industry that has strange ways to have the maximum
benefits out of government’s policies, in any regime. It pressurise governments
to listen to it and believe that it alone can add shine to the economy. It did it
with the UPA and is repeating with the NDA.
Once again RBI paused the rate button even
realising that inflation despite low rate is a greater malaise preventing growth
acceleration. The RBI being in Mumbai gets a magnified view of the industry. By
the same token it can be said that it may not have a full view of the economy
of the North-East.
Agriculture still provides livelihood to 70 per
cent people of the N-E. In Sikkim the figure is 89 per cent and Mizoram 51 per
cent. It is as uneven as the region is. It should also be realised that except tea,
bamboo and some oil there is hardly a major industry there. Conflicts,
inter-state and intra-state are high. The burning Manipur highlight it. It remains a quagmire how it impinges on
India growth story. The NDA-I under Atal Behari Vajpayee had laid special
emphasis on the region resolving major part of the Naga issue. But a tribally
divided society is complex.
Nobody is sure whether the RBI takes a holistic
approach in assessing India. The monetary policy pegs its eyes on four per cent
inflation, its prime target that it believes would correct many ailing issues.
The figure is certainly away from reality as the base of inflation had been
high. Till August 16, 2022, India had a
galloping wholesale inflation of over 10 per cent for 16 months touching a high
of 16.63 per cent in May 2022, in June 15.18 per cent and 13.93 per cent in
July. The Wholesale Price Index (WPI) started rising since 2018. Retail
inflation added to the fire. In 2022 fuel and power inflation resurged from
40.38 per cent in June to 43.75 per cent in July.
The high base effect has kept the prices abnormally
high and the RBI even hoping it to come down at even four per cent means an
uncomfortable price regime. The concern is legitimate as it affects overall
cost of living and consequently growth.
The RBI Annual Report released on May 30, suggests the
Indian economy is poised to touch greater heights. But perusal of RBI tables does
not support what it professes. RBI Governor Shaktikant Das says, “Let me
emphasise headline still remains above the target and being within the
tolerance limit, 2-6 per cent, is not enough”. He adds, “Geo-political
tensions, uncertain monsoon, and international commodity prices like sugar,
rice, crude oil and volatility in global financial markets pose upside risks to
inflation”. It means he foresees consumer inflation to cross the latest target
of 5.1 per cent.
There are contradictions and implications that the
RBI report does not even dwell on. It
does not highlight the declining share of industry in the economy, the fall in
FDI, the dangers of poor focus on education, and the consequences of spending
too much on subsidies.
The RBI also says that the GDP growth can be
misleading. As Kaushik Basu points out, India’s growth at 7.2 per cent in
2022-23 looks good but disappoints as in 2020-21 growth was -5.8 per cent, one
of the world’s lowest, causing the baseline from where India’s growth is
computed to drop. It notes that India’s annual growth over 2020-23 is 3.28 per
cent – too low for a nation with so much of talent.
It also observes the fall in export growth, despite
the import of components for assembly and export. The RBI finds worrisome the
slippage in gross capital formation. It is concerned about investment not
happening, leading to continued and worsening unemployment. The figures RBI refers to are from the National
Statistical Office (NSO).
The RBI has also tightened the norms for loan
guarantees. It has to have cash components. It is an indication that in the
prevailing circumstances slippages could be high. Thus its optimism on real
estate recovery is guarded.
On a previous occasion the RBI has obliquely called
for caution on high infra spendings and burgeoning debt portfolio. It said states are showing warning signs of building stress,
and the five most indebted ones -- Punjab, Rajasthan, Bihar, Kerala and West
Bengal -- need to take corrective measures by cutting down expenditure on
non-merit goods.
State finances are vulnerable to a variety of unexpected
shocks that might alter their fiscal outcomes, causing slippages relative to
their budgets and expectations, said the RBI article, prepared by a team of
economists led by Deputy Governor Michael Patra. It noted that the state
finances are exacerbated implying severe caution.
Largely the approach is to have higher growth
through building, demolitions, road, rail and other infrastructure spendings
mostly in the mainland. The RBI wants a moderation in it as it hints that high
debt cycle may not be in the interest of growth.
There are regional variations. The North-east
contributes to only 2.8 per cent of India's GDP, which is scratching the surface of
its immense potential. The region's strengths are also its unique culture,
reverence for nature, and pristine beauty.
Conflicts are not uncommon among states and tribes.
The recent Manipur situation speaks volumes in the sensitive region that is
planned to be the gateway to South East Asia. Despite political will to
integrate the region as per the Vajpayee doctrine many states remain isolated.
The Kuki-Meitei violent conflicts now for over a month is having its effect on
the other states as well. It is shearing the delicate socio-religious fibre.
Lack of sufficient jobs is one of the key issue
bothering minds of ordinary people. Conventional method of GDP -the sum of
goods and services produced- as measure of success of economy does not provide
the succour. The key issue is the well- being of the people. For India’s growth
more inclusive policies are needed. People want jobs, civic facilities and
peaceful coexistence. Niti Aayog has to chart out the path and help the RBI
come out of its own pessimism. Where required all-party mediation with
imaginative gestures is possible for the ruling establishment.
Once this is corrected, the growth path would be
smooth in tune with the vision 2047.---INFA
(India News & Feature
Alliance)
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