|
Economic
Highlights
New Delhi, 31 July 2023
India Leaps ToBe 3rd
largest
PRICES, LOW CAPITA
CONCERN
By Shivaji Sarkar
India is on its way to be the world’s three
top economies in terms of monetary terms, as Prime Minister Narendra Modi has
assured in his possible third term.
From ‘dus numbari’ to ‘teen
numbari’ is no mean achievement. A guarantee at a time when the government
faces a token no-trust motion, turmoil in Manipur and prepares for many State
elections speak volumes. Though even some Reserve Bank of India observations
find that the task if achieved would be through severe inflationary process.
Its surmise that infra spend would curb inflation has gone awry.
The rupee is gaining currency in almost 20
countries, including Saudi Arabia for equal exchange rate, and partially with
France accepting Rupay card. Again, a good move to de-dollarise the world
continuing even at the BRICS summit in South Africa. A pious aim with gradual
larger thematic reach though still the dollar sways. With a slight change in
dollar rate or interest rate firming, the capital flows back to the US market.
Even the foreign portfolio investors dump Indian share markets to the US for
quick gains.
There is much beyond for a country that is
obsessed with big numbers, high speed and every bit becoming magnanimous and
grand. It dazzles but those with less income or who cannot ride a metro train
for high fares still wonder what it exactly means. It does not easily percolate
down to them. The trickle-down theory also called A-ardali, B-bavarchi,
C-chaprasi and D-driver has not marked the changes deep down, despite
guarantees by many prime ministers. Of course, Modi is different, and they look
at his guarantee. But infra has come with destructions of structures, forests,
lands, and ecology for roads and other activities adding to the inflated value.
A SBI Ecowrap report says that the country’s
GDP is projected to grow at a rate of 7.1 percent in the current fiscal and by
2029 to take a major leap. It hopes India to have 8 percent growth in
April-June quarter of 2024 though the current fiscal, the growth to remain
around 6.5 percent. This aligns with the National Statistical Office second
advance estimates. The RBI has also indicated that the GDP to grow around 7
percent. The International Monetary Fund also says that India may surpass Germany
and Japan, too high an expectation. Despite slowdown the inherent strength of
those economies is greater than that of India.
In 2014, India at $2 trillion ranked 10th
in the world. A year later it jumped to seventh, by 2017 it was sixth and
by 2021 touched the fifth and now IMF projections show that it can achieve the
third rank by 2027 behind the US and China. India has to grow at a continuous 8
percent between 2024 and 2027. During recent times it has not achieved that
rate. Many economists ascribe the present growth rate to low, minus 23.9
percent, numbers during covid19 lockdown. Economies grow but usually it does
not leap with the pious wishes. India’s export numbers also remain low and so
does its share of the world market.
Another aspect that concerns the economists
and RBI is the inflation numbers. It remains beyond its toleration limit. Till
last year the high wholesale rates rattled it. This heats up the economy and
numbers swell with prices. The large figures though are important, the actual power
of the rupee does not grow.
The inevitable rise in GDP though an
important indicator, is rattled by the lowest per capita GDP among 10 largest
economies. In dollar terms, the average income of the countryman was $1560 in
2014. A normal American earned $55,084, 35 times more. Germans had 31 percent
more income, Britons 30 times; and the Japanese, Italians and French 20 times
than an Indian. Even a Chinese earns five times more.
By 2027, an Indian is to have $3,466 income
while a US national to earn $90,231; German $ 59,053; Briton $58,009; French
$49,896; Japanese $41,569; Italian $40,899. Even a Russian would earn $15, 752;
Chinese $18,317; and poor Brazilian $11, 658. Thus, India despite a national
standing may not be congenial for the workers.
This has impacted the Indian rupee as well.
Despite being stable at a low of above Rs 80 for some years -- Rs 82.19 on July
28, it suffers in its international standing for two primary reasons. It has
low domestic purchasing capacity and that marks its intrinsic value. The
international exchange remains high despite an intense diplomatic effort at
increasing its acceptability. Unless rupee’s domestic power rises, its
acceptability in the international market dithers. Nobody wants to have a
currency that is not easy to exchange. Russia has never rejected the rupee but
its companies insist on payment in dollars or in even in yuan.
It becomes more ticklish as the US has raised
its interest rates between 5.25 and 5.5 percent, highest since 2001. It
immediately changes the international scenario and causes capital flow back to
the US. Bravado is not an asset in international economics. This has to be
taken care of.
India’s GDP numbers are larger than France
and the UK. But its per capita GDP struggles with unstable economies of
Zimbabwe $1415, Yemen $1580 and Pakistan $1415 as in 2014. Some years later in
2027, India with $3466 expected per person income would be behind
Bangladesh-$3748; West Bank $3728 and Vanuatu $3593 and slightly above Angola
-$3458 and Nigeria- $3288. In fact, even a Bangladeshi would earn $282
more than an Indian in 2027.
Indian ranking at per person income was at
157 of 195 countries in 2014 and is likely to be 138 among 189 nations.Even to
achieve the gross GDP ranking it depends whether Germany and Japan slip or not
from their fourth and fifth positions. Japanese had slipped from $5 trillion
level in 2022. Overall, it still is a stronger overall economy than India.
Hopes are with India for a rapid rise. But
holistic gains would still need to be achieved with better social, governance,
corporate and job opportunities. The rank of being third means a lot if all
other parameters support and boost the living conditions. Overall indicators
may mean that GDP growth in itself is not the end unless the country grows on
all of its parameters.---INFA
(Copyright, India
News & Feature Alliance
|
Archives 
