Economic Highlights

New Delhi, 18 December 2023

MP Meat Ban Disturbing

CAN RISK GLOBAL BIZ

By Shivaji Sarkar 

The new Union Budget will be tabled in less than two months from now and is supposed to pave the course of the biggest popular electoral process in the world. In a rising world inflationary situation and uncertainties all around in West Asia to Europe, would India be able to keep off the difficult realities amid the US Fed move to cut rates? 

More than that some decisions such as the Madhya Pradesh government banning egg and meat product sales could have serious repercussions. If it becomes the norm also in other states like Rajasthan or Chhattisgarh, the country may goo though a difficult phase. 

India being the highest seller of buffalo and other meat products would be having a dichotomy. In Madhya Pradesh alone there are 60 producers who export rabbit, crab, emu, chicken, pork, buffalo and a variety of other meat products. Would they be functioning? If they are made to shut down, India’s global business phenomenon could be treated as fickle paving way for flight of capital. 

The new syndrome could lead to law and order and difficult business-oriented phenomenon. Number of non-vegetarians are high. Most tribals are meat eaters. There could be law and order problems apart from clandestine sales and smuggling. Rent seeking could be high. Perhaps in lure of propaganda for flaunting religiosity, the new leaders have barged on to an uncharted course. The central government has been making efforts to increase all sorts of exports, which are seeing a decline for some time. 

This might aggravate the US rate-cut syndrome and impact the budgetary process. In normal circumstances it is expected to pour in the US and western funding. Besides, it would also depend on how the Israel-Hamas situation impacts overall the US monetary movements. It is raising losses for Israel in terms of casualties and a daily loss of an estimated $269 million. The heavy assaults in Gaza have its own repercussions. The businesses are suffering in Israel and its economy heads for contraction. Its political repercussions are not easy to predict, particularly in a year that the US heads for polls and sustains many of the losses of Israel. 

India, of late, has been seeking closer ties with Israel. Haifa port investments by the Adani group is considered strategic for financial gains and diplomatic clout. Besides, the disturbed West Asia has so far almost jettisoned the India-Europe Middle East trade corridor that was to pass through the region. It could have benefitted Indian companies immensely. 

The rate-cut was expected to lead to higher US investments in India and softening of the dollar. Each year that hope has been belied with dollar getting more expensive vis a vis rupee adding additional costs on Indian imports and higher forex outgo. On exports, it fetches fewer dollars. Outgo has increased on both counts. 

Despite petroleum prices falling, India has not been able to pass on the benefit to consumers. The rupee outgo has increased and cannot sail through even a softer international fuel price regime as dollar remains firm and hovers over Rs 83. It’s servicing on external debt of $629.1 billion is increasing.

The US dollar-denominated debt remained the largest component of India’s external debt, with a share of 54.4 per cent at end-June 2023, followed by debt denominated in the Indian rupee (30.4 per cent), SDR (5.9 per cent), yen (5.7 per cent), and the euro (3.0 per cent). 

India’s “Vikasit Bharat” narrative has led to demand for higher debt. The government says it was investing in the growth of India. Inflation was 7.4 percent in July and in November it is at 5.8 percent, a little below the Reserve Bank of India tolerance range of 6.5 percent. This means prices may go up further in normal domestic situation. If international situation worsens it would add to the pains of budgetary process. 

Surprise was the growth at 7.6 percent in the second quarter. It also sees rise in wholesale price index rising after a seven-month thaw. The concerns over rising prices are on the minds of the policymakers. Pulses and cereals denote significant rise in CPI food basket. Quite a few items’ prices such as onion, ginger, and garlic are rising continuously. Despite the ban on wheat exports, the prices have risen by about 25 percent. On the contrary, the farmers are not getting remunerative prices. 

The meat ban could increase “illicit sales” or smuggling of meat products, particularly in urban areas. Higher rents would add to inflation, costs on policing and harassment of business couriers vitiating the social atmosphere. All this increases costs and may lead to rework the budgetary process. 

If there are social disturbances, as the Lok Sabha election approaches nearer, Indian companies, renowned for their resilience and adaptability, creating opportunities amid global challenges, may get into a financial morass. It could also affect the ability to innovate, leverage technology, and respond swiftly.Such prudery also affects international business companies. Alarmed by such moves they might take decisions to postpone investments despite the additional finances likely to be available to the US investors. 

The changed milieu could create a stickiness that the US is trying to overcome. International community keeps a close watch on socio-political developments. An awry politico-social phenomenon in one part may have wider ramifications. The Manipur crisis has yet to subside. Mizoram has voted in a different way and the new BJP states are acting differently. These may not be considered welcome indicators by many global players, who are intrigued by increasing ethnic disturbances at different places. 

Global disruptions in supply chains, accentuated by events like the trade tensions between major economies, have prompted a reassessment of manufacturing and supply chain strategies. Indian companies, particularly in sectors like electronics, textiles, and pharmaceuticals, may have to drastically diversify or relocate to ensure they remain profitable. 

The inauguration of the Ram temple in Ayodhya is being seen as a jubilant phase in the society. If it gives rise to prudery, it might have undesirable impact on the ease of doing business. It is hoped that it might end in a whimper and would not majorly change the business syndrome. 

Any aberration could alter the business course. The leadership has to be pragmatic so that the economy thrives and does not get into a whirlpool that could disrupt economy, finance and political stability. Steering it deftly is the need of the hour.---INFA 

(Copyright, India News & Feature Alliance)