Sunday, December 5, 2021

India's Economy Grew Only 0.2% Annually Over the Last Two Years

The Indian government has reported an 8.4% jump in economic growth in the July-to-September period compared with a contraction of 7.4% for the same period a year earlier. The average GDP growth in India over the last two years has averaged just 0.2% per year. The news appears to indicate strong recovery after a big economic hit suffered from the COVID pandemic since early 2020.  Pakistan's economy fared relatively better during the pandemic. Pakistan's GDP rose 0.5% in 2020 and 3.9% in 2021. As a result, Pakistan now fares better than India on multiple indices including Hanke Misery Index, World Happiness IndexFood Affordability Index and World Hunger Index

India's Economy:

Welcoming the news, renowned Indian economist Kaushik Basu tweeted:  "India's growth of 8.4% over Jul-Sep is welcome news. But it'll be injustice to India if we don't recognize, when this happens after -7.4% growth, it means an annual growth of 0.2% over 2 years. This is way below India's potential. India has fundamental strength to do much better".

Indian Economist Kaushik Basu's Tweet 

Indian-American Nobel Laureate  economist Abhijit Banerjee, too, spoke out in agreement. He said, "I think that we (Indians) are in a moment of great pain. The economy is still well below as against what it was in 2019". "We don't know how much below, but it is substantially below. And I am not blaming anybody, I am just saying", he added.   

India's Rising Public Debt:

India's debt to gdp ratio is nearing 90%, the highest in the South Asia region. It has risen by 17% in the last two years, the most of any emerging economy. By contrast, Pakistan's debt to GDP ratio has increased by a mere 1.6% to 87.2% from 2019 to 2020.


India's Rising Debt. Source: Business Standard

The International Monetary Fund (IMF) has projected the Indian government debt, including that of the center and the states, to rise to a record 90.6% of gross domestic product (GDP) during 2021-22 against 89.6% in the previous year. By contrast,  the percentage of Pakistan's public debt to Gross Domestic Product (GDP) including debt from the International Monetary Fund, and external and domestic debt has fallen from 87.6% in Fiscal Year (FY) 2019-20 to 83.5% in FY 2020-21.    

Hanke's Misery Index: 

Pakistanis are less miserable than Indians in the economic sphere, according to the Hanke Annual Misery Index (HAMI) published in early 2021 by Professor Steve Hanke. With India ranked 49th worst and Pakistan ranked 39th worst, both countries find themselves among the most miserable third of the 156 nations ranked. Hanke teaches Applied Economics at Johns Hopkins University in Baltimore, Maryland. Hanke explains it as follows: "In the economic sphere, misery tends to flow from high inflation, steep borrowing costs, and unemployment. The surefire way to mitigate that misery is through economic growth. All else being equal, happiness tends to blossom when growth is strong, inflation and interest rates are low, and jobs are plentiful". Several key global indices, including misery index, happiness index, hunger index, food affordability index, labor force participation rate,  ILO’s minimum wage data, all show that people in Pakistan are better off than their counterparts in India.   The rankings for the two South Asian nations are supported by other indices such as the World Bank Labor Participation data, International Labor Organization Global Wage Report, World Happiness Report, Food Affordability Index and Global Hunger Index.  


Hanke's Annual Misery Index 2021. Source: National Review

Employment and Wages:

Labor force participation rate in Pakistan is slightly above 50% during this period, indicating about a 2% drop in 2020.  Even before COVID pandemic, there was a steep decline in labor force participation rate in India. It fell from 52% in 2014 to 47% in 2020. 

Labor Force Participation Rates in Pakistan (Top), India (bottom). Source: Trading Economics

The International Labor Organization (ILO) Global Wage Report 2021 indicates that the minimum wage in Pakistan is the highest in South Asia region. Pakistan's minimum monthly wage of US$491 in terms of purchasing power parity while the minimum wage in India is $215. The minimum wage in Pakistan is the highest in developing nations in Asia Pacific, including Bangladesh, India, China and Vietnam, according to the International Labor Organization.

Monthly Minimum Wages Comparison. Source: ILO

Global Food Security:

Pakistan (with 52.6 points) has scored better than  Bangladesh (48.8), Nepal (48.3) and India (50.2 points) in terms of food affordability.  Sri Lanka scored higher with 62.9 points in this category on the GFS Index 2021,  according to a global report released by Economist Impact and Corteva Agriscience recently. 

Ireland, Australia, the UK, Finland, Switzerland, the Netherlands, Canada, Japan, France and the US shared the top rank with the overall GFS scores in the range of 77.8 and 80 points on the index. 

In overall food security, Pakistan ranked 75th with a score of 54.7, ahead of Sri Lanka (77), Nepal (79) and Bangladesh (84), but behind India ranked 71st with a score of 57.2 points on the GFS Index 2021 ranking 113 countries.

Pakistan improved its GFS score by 9 points (to 54.7 in 2021 from 45.7 in 2012) while India’s score improved only by 2.7 points to 57.2 in 2021 from 54.5 in 2012.  Nepal improved by 7 points (to 53.7 points in 2021 from 46.7 points in 2012) and Bangladesh by 4.7 points (to 49.1 in 2021 from 44.4 points in 2012). China’s score improved by 9.6 points to 71.3 in 2021 from 61.7 in 2012, the report said. “The GFSI looks beyond hunger to identify the underlying factors affecting food insecurity around the world,” said Tim Glenn, Executive Vice-President and Chief Commercial Officer, Corteva Agriscience.

The cost of living in Pakistan is the world's lowest despite recent inflationary trends, according to the Cost of Living Index for mid-2021 as published by Numbeo.  Numbeo Grocery Index reports that the food prices in Pakistan are the second cheapest in the world. 

History of Inflation in Pakistan. Source: Statista



Global Hunger Index:

Global Hunger Index 2021 report has ranked Pakistan 92nd, ahead of India ranked 101st among 116 countries.  Pakistan's other South Asian  neighbors are ranked better: Nepal (76), Bangladesh (76), Myanmar (71). 

Hunger Trends in South Asia. Source: Global Hunger Index 

Pakistan has been reducing hunger at a faster rate than India but slower than other South Asian neighbors like Bangladesh and Nepal.  

World Happiness Index: 

Amid the COVID19 pandemic, Pakistan's World Happiness ranking has dropped from 66 (score 5.693) among 153 nations last year to 105 (score 4.934) among 149 nations ranked this year. Neighboring India is ranked 139 and Afghanistan is last at 149. Nepal is ranked 87, Bangladesh 101, Pakistan 105, Myanmar126 and Sri Lanka129. Finland retained the top spot for happiness and the United States ranks 19th. 

Pakistan Happiness Index Trend 2013-2021


One of the key reasons for decline of happiness in Pakistan is that the country was forced to significantly devalue its currency as part of the IMF bailout it needed to deal with a severe balance-of-payments crisis. The rupee devaluation sparked inflation, particularly food and energy inflation. Global food prices also soared by double digits amid the coronavirus pandemic, according to Bloomberg News. Bloomberg Agriculture Subindex, a measure of key farm goods futures contracts, is up almost 20% since June. It may in part be driven by speculators in the commodities markets. These rapid price rises have hit the people in Pakistan and the rest of the world hard. In spite of these hikes, Pakistan remains among the least expensive places for food, according to recent studies. It is important for Pakistan's federal and provincial governments to rise up to the challenge and relieve the pain inflicted on the average Pakistani consumer.  

Pakistan's Real GDP: 

Vehicles and home appliance ownership data analyzed by Dr. Jawaid Abdul Ghani of Karachi School of Business Leadership suggests that the officially reported GDP significantly understates Pakistan's actual GDP.  Indeed, many economists believe that Pakistan’s economy is at least double the size that is officially reported in the government's Economic Surveys. The GDP has not been rebased in more than a decade. It was last rebased in 2005-6 while India’s was rebased in 2011 and Bangladesh’s in 2013. Just rebasing the Pakistani economy will result in at least 50% increase in official GDP.  A research paper by economists Ali Kemal and Ahmad Waqar Qasim of PIDE (Pakistan Institute of Development Economics) estimated in 2012 that the Pakistani economy’s size then was around $400 billion. All they did was look at the consumption data to reach their conclusion. They used the data reported in regular PSLM (Pakistan Social and Living Standard Measurements) surveys on actual living standards. They found that a huge chunk of the country's economy is undocumented. 

Pakistan's service sector which contributes more than 50% of the country's GDP is mostly cash-based and least documented. There is a lot of currency in circulation. According to the State Bank of Pakistan (SBP), the currency in circulation has increased to Rs. 7.4 trillion by the end of the financial year 2020-21, up from Rs 6.7 trillion in the last financial year,  a double-digit growth of 10.4% year-on-year.   Currency in circulation (CIC), as percent of M2 money supply and currency-to-deposit ratio, has been increasing over the last few years.  The CIC/M2 ratio is now close to 30%. The average CIC/M2 ratio in FY18-21 was measured at 28%, up from 22% in FY10-15. This 1.2 trillion rupee increase could have generated undocumented GDP of Rs 3.1 trillion at the historic velocity of 2.6, according to a report in The Business Recorder. In comparison to Bangladesh (CIC/M2 at 13%), Pakistan’s cash economy is double the size. Even a casual observer can see that the living standards in Pakistan are higher than those in Bangladesh and India. 

Related Links:

Haq's Musings

South Asia Investor Review

Pakistan Among World's Largest Food Producers

Naya Pakistan Housing Program

Food in Pakistan 2nd Cheapest in the World

Pakistan's Pharma Industry Among World's Fastest Growing

Pakistan to Become World's 6th Largest Cement Producer by 2030

Pakistan's 2012 GDP Estimated at $401 Billion

Pakistan's Computer Services Exports Jump 26% Amid COVID19 Lockdown

Coronavirus, Lives and Livelihoods in Pakistan

Vast Majority of Pakistanis Support Imran Khan's Handling of Covid19 Crisis

Pakistani-American Woman Featured in Netflix Documentary "Pandemic"

Incomes of Poorest Pakistanis Growing Faster Than Their Richest Counterparts

Can Pakistan Effectively Respond to Coronavirus Outbreak? 

How Grim is Pakistan's Social Sector Progress?

Pakistan Fares Marginally Better Than India On Disease Burdens

Trump Picks Muslim-American to Lead Vaccine Effort

Democracy vs Dictatorship in Pakistan

Pakistan Child Health Indicators

Pakistan's Balance of Payments Crisis

Panama Leaks in Pakistan

Conspiracy Theories About Pakistan Elections"

PTI Triumphs Over Corrupt Dynastic Political Parties

Strikingly Similar Narratives of Donald Trump and Nawaz Sharif

Nawaz Sharif's Report Card

Riaz Haq's Youtube Channel


17 comments:

Riaz Haq said...

Impact on livelihoods in developing countries during #COVID #pandemic #lockdowns was particularly severe in countries with large informal #labor force. #Bangladesh (85%) #India (80%) #Pakistan (70%) . #Economy #Jobs #employment https://www.economist.com/asia/2020/04/18/asias-workers-cant-afford-to-stay-at-home


https://twitter.com/haqsmusings/status/1470559112677052418?s=20


Bangladesh went into lockdown on March 26th, but that didn’t stop Zohirul from taking his bicycle rickshaw out onto the backstreets of Dhaka, the capital, a couple of times. On his first outing he earned just 200 taka, or $2.40, less than a fifth of what he normally makes. On the second he was caught by the police, who beat him, injuring his leg so badly he can no longer pedal his rickshaw. Since then he’s been nursing his wounds and husbanding his stores of rice. “I don’t know how I’m going to earn or buy food once this runs out,” he says.


https://www.economist.com/asia/2020/04/18/asias-workers-cant-afford-to-stay-at-home


As Asian governments impose quarantines to curb the spread of covid-19, the continent’s usually hectic streets have gone quiet. Restrictions vary, but almost everywhere the message is the same: stay home. Such measures threaten to ruin the majority of Asians. Seventy per cent of workers in Asia and the Pacific do not have formal jobs, with contracts, salaries or sick leave, but instead do things like driving rickshaws for a living, according to the Economic and Social Commission for Asia and the Pacific (escap), the un agency for the region (see chart). In many places there is not much of a safety net for the poor or unemployed either. Some workers feel they face a choice between getting sick and going hungry.

Governments in poorer Asian countries realise there is little point declaring a lockdown if their citizens cannot afford to abide by one, and so are trying to help. It is a daunting task. Informal workers are “not in the government databases”, says Hamza Malik of escap. Identifying them is “extremely challenging”, according to Guy Ryder, director-general of the International Labour Organisation (ilo). Bureaucrats are consulting censuses or lists of those who already receive some sort of help from the state. But these often miss people, and quickly go out of date. Indonesia’s Unified Database, which contains the details of the poorest 40% of the population—some 100m people—is supposed to be updated twice a year by local governments. However, two-fifths of them don’t have the budget or capacity to do so, reckons Vivi Yulaswati of the planning ministry.

The pandemic makes the task of identifying the needy all the more challenging by swelling their ranks. The ilo estimates that the reduction of working hours in Asia this quarter equates to 125m people losing their jobs. The World Bank expects the impending recession will push up to 11m Asians below a poverty line of $5.50 a day. That may be optimistic. Indonesia may need to start giving handouts to an extra 50m people, Ms Yulaswati speculates.


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Inevitably, there have been flaws and oversights. In Bangladesh several local politicians have been arrested for funnelling free rice to friends and supporters. (Zohirul, the injured rickshaw-driver in Dhaka, has yet to receive any.) Technical glitches prevented many Kazakhs from applying for a cash grant. Protesters in Thailand say the handout scheme there is too narrow. Even when assistance does reach the poor, it is seldom enough. The sum being given to the 12m poorest households in Pakistan is 3,000 rupees ($18) a month—less than a fifth of the minimum wage.

Riaz Haq said...

Budget 2021-22: Minimum wage increased from Rs17,500 to Rs20,000
Salaries and pensions increased by 10%

https://www.samaa.tv/money/2021/06/budget-2021-22-minimum-wage-increased-from-rs17500-to-rs20000/

The government has increased the minimum wage from Rs17,500 per month to Rs. 20,000.

Federal Finance Minister Shaukat Tarin on Friday presented the budget for the next financial year 2021-22.

Introducing the budget, the Finance Minister said that low-income earners have been affected more by inflation. In order to reduce the burden of inflation, the minimum wage has been increased from Rs. 17,500 to Rs20,000 per month.

The finance minister said that the salaries of government employees are being increased by 10% and the pensions of retired employees will be increased by 10% from July 1.

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In purchasing power parity terms, one PPP US$ is equal to about PKR 40.

So Rs 20,000 per month minimum wage translates to $500 in PPP terms.


Riaz Haq said...

India’s Stalled Rise: As the #COVID19 #pandemic spread in 2020, #India's #economy withered, shrinking by more than seven percent, the worst performance among major developing countries. Reversing a long-term downward trend, #poverty increased substantially https://www.foreignaffairs.com/articles/india/2021-12-14/indias-stalled-rise

INDIA’S LOST DECADE
To answer the question of whether India is back, it is important to first understand when and why India went away. The answer lies in plans that went badly wrong. During the boom years after the turn of the millennium, Indian firms invested heavily, on the assumption of continued rapid growth. So when the financial crisis brought the boom to an end, causing interest rates to soar and exchange rates to collapse, many large companies found it difficult to repay their debts. As companies began to default, banks were saddled with nonperforming loans, exceeding ten percent of their assets.

In response, successive governments launched initiative after initiative to address this “twin balance sheet” problem, initially asking banks to postpone repayments, later encouraging banks and firms to resolve their problems through an improved bankruptcy system. These measures gradually alleviated the debt problem, but they still left many firms too financially feeble to invest and banks reluctant to lend. And with lackluster investment and exports, the economy was unable to recover its former dynamism.



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As growth slowed, other indicators of social and economic progress deteriorated. Continuing a long-term decline, female participation in the labor force reached its lowest level since Indian independence in 1948. The country’s already small manufacturing sector shrank to just 13 percent of overall GDP. After decades of improvement, progress on child health goals, such as reducing stunting, diarrhea, and acute respiratory illnesses, stalled.

And then came COVID-19, bringing with it extraordinary economic and human devastation. As the pandemic spread in 2020, the economy withered, shrinking by more than seven percent, the worst performance among major developing countries. Reversing a long-term downward trend, poverty increased substantially. And although large enterprises weathered the shock, small and medium-sized businesses were ravaged, adding to difficulties they already faced following the government’s 2016 demonetization, when 86 percent of the currency was declared invalid overnight, and the 2017 introduction of a complex goods and services tax, or GST, a value-added tax that has hit smaller companies especially hard. Perhaps the most telling statistic, for an economy with an aspiring, upwardly mobile middle class, came from the automobile industry: the number of cars sold in 2020 was the same as in 2012.

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Adding to a decade of stagnation, the ravages of COVID-19 have had a severe effect on Indians’ economic outlook. In June 2021, the central bank’s consumer confidence index fell to a record low, with 75 percent of those surveyed saying they believed that economic conditions had deteriorated, the worst assessment in the history of the survey.

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Disaffection is also manifest in politics. The national government in New Delhi has been bickering with the country’s state governments for more than a year over the sharing of revenue from the GST. Several states have imposed new residency requirements on job seekers over the past two years, thus directly challenging the principle of a common national labor market. There has also been a revival of the policy of “reservation,” India’s version of affirmative action, in which some jobs are reserved for people from traditionally disadvantaged social groups.

Riaz Haq said...

India’s Stalled Rise
How the State Has Stifled Growth
By Arvind Subramanian and Josh Felman
January/February 2022

https://www.foreignaffairs.com/articles/india/2021-12-14/indias-stalled-rise



For the Indian economy to achieve its potential, however, the government will need a sweeping new approach to policy—a reboot of the country’s software. Its industrial policy must be reoriented toward lower trade barriers and greater integration into global supply chains. The national champions strategy should be abandoned in favor of an approach that treats all firms equally. Above all, the policymaking process itself needs to be improved, so that the government can establish and maintain a stable economic environment in which manufacturing and exports can flourish.

But there is little indication that any of this will occur. More likely, as India continues to make steady improvements in its hardware—its physical and digital infrastructure, its New Welfarism—it will be held back by the defects in its software. And the software is likely to prove decisive. Unless the government can fundamentally improve its economic management and instill confidence in its policymaking process, domestic entrepreneurs and foreign firms will be reluctant to make the bold investments necessary to alter the country’s economic course.

There are further risks. The government’s growing recourse to majoritarian and illiberal policies could affect social stability and peace, as well as the integrity of institutions such as the judiciary, the media, and regulatory agencies. By undermining democratic norms and practices, such tendencies could have economic costs, too, eroding the trust of citizens and investors in the government and creating new tensions between the federal administration and the states. And India’s security challenges on both its eastern and its western border have been dramatically heightened by China’s expansionist activity in the Himalayas and the takeover of Afghanistan by the Pakistani-supported Taliban.

If these dynamics come to dominate, the Indian economy could experience another disappointing decade. Of course, there would still be modest growth, with some sectors and some segments of the population doing particularly well. But a broader boom that transforms and improves the lives of millions of Indians and convinces the world that India is back would be out of reach. In that case, the current government’s aspirations to global economic leadership may prove as elusive as those of its predecessors.

Riaz Haq said...

#India's #economy growing fast but problems remain: November inflation 14.23%. #Fuel and #energy prices rose nearly 40% last month. Urban #unemployment – most of the better-paying jobs are in cities – has been moving up since September and is now above 9%. https://aje.io/ytyan4

That will not be easy, say experts. The pandemic has devastated India’s micro, small and medium enterprises (MSMEs), which contribute 30 percent of the nation’s GDP as well as half of the country’s exports and represent 95 percent of its manufacturing units.

The government of Prime Minister Narendra Modi told Parliament in December that a survey it had conducted suggested that 9 percent of all MSMEs had shut down because of COVID-19. And that might be just the tip of the iceberg. In May, another survey of more than 6,000 MSMEs and startups found that 59 percent were planning to shut shop, scale down or sell before the end of 2021.


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Baldev Kumar threw his head back and laughed at the mention of India’s resurgent GDP growth. The country’s economy clocked an 8.4-percent uptick between July and September compared with the same period last year. India’s Home Minister Amit Shah has boasted that the country might emerge as the world’s fastest-growing economy in 2022.

Kumar could not care less.

As far as he was concerned, the crumpled receipt in his hand told a different story: The tomatoes, onions and okra he had just bought cost nearly twice as much as they did in early November. The 47-year-old mechanic had lost his job at the start of the pandemic. The auto parts store he then joined shut shop earlier this year. Now working at a car showroom in the Bengaluru neighbourhood of Domlur, he is worried he might soon be laid off as auto sales remain low across India.

He has put plans for his daughter’s wedding on hold, unsure whether he can foot the bill. He used to take a bus to work. Now he walks the five-kilometre (three-mile) distance to save a few rupees. “I don’t know which India that’s in,” he said, referring to the GDP figures. “The India I live in is struggling.”

Kumar wasn’t exaggerating – even if Shah’s prognosis turns out to be correct.

Asia’s third-largest economy is indeed growing again, and faster than most major nations. Its stock market indices, such as the Sensex and Nifty, are at levels that are significantly higher than at the start of 2021 – despite a stumble in recent weeks. But many economists are warning that these indicators, while welcome, mask a worrying challenge – some describe it as a crisis – that India confronts as it enters 2022.

November saw inflation rise by 14.23 percent, building on a pattern of double-digit increases that have hit India for several months now. Fuel and energy prices rose nearly 40 percent last month. Urban unemployment – most of the better-paying jobs are in cities – has been moving up since September and is now above 9 percent, according to the Centre for Monitoring Indian Economy, an independent think-tank. “Inflation hits the poor the most,” said Jayati Ghosh, a leading development economist at New Delhi’s Jawaharlal Nehru University.

All of this is impacting demand: Government data shows that private consumption between April and September of 2021 was 7.7 percent lower than in 2019-2020. The economic recovery from the pandemic has so far been driven by demand from well-to-do sections of Indian society, said Sabyasachi Kar, who holds the RBI Chair at the Institute of Economic Growth. “The real challenge will start in 2022,” he told Al Jazeera. “We’ll need demand from poorer sections of society to also pick up in order to sustain growth.”


Riaz Haq said...

India's economy has some bright spots, a number of very dark stains: Raghuram RajanRajan said that one way to expand budgetary resources is through asset sales, including parts of government enterprises and surplus government land

Read more at: https://www.deccanherald.com/national/indias-economy-has-some-bright-spots-a-number-of-very-dark-stains-raghuram-rajan-1073755.html


The Indian economy has "some bright spots and a number of very dark stains" and the government should target its spending "carefully" so that there are no huge deficits, noted economist and former RBI Governor Raghuram Rajan said on Sunday. Known for his frank views, Rajan also said the government needs to do more to prevent a K-shaped recovery of the economy hit by the coronavirus pandemic. Generally, a K-shaped recovery will reflect a situation where technology and large capital firms recover at a far faster rate than small businesses and industries that have been significantly impacted by the pandemic. "My greater worry about the economy is the scarring to the middle class, the small and medium sector, and our children's minds, all of which will come into play after an initial rebound due to pent up demand. One symptom of all this is weak consumption growth, especially for mass consumption goods," Rajan told PTI in an e-mail interview.


Rajan, currently a Professor at the University of Chicago Booth School of Business, noted that as always, the economy has some bright spots and a number of very dark stains. "The bright spots are the health of large firms, the roaring business the IT and IT-enabled sectors are doing, including the emergence of unicorns in a number of areas, and the strength of some parts of the financial sector," he said. On the other hand, "dark stains" are the extent of unemployment and low buying power, especially amongst the lower middle-class, the financial stress small and medium-sized firms are experiencing, "including the very tepid credit growth, and the tragic state of our schooling". Rajan opined that Omicron is a setback, both medically and in terms of economic activity but cautioned the government on the possibility of a K-shaped economic recovery. "We need to do more to prevent a K shaped recovery, as well as a possible lowering of our medium-term growth potential," he said.

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Regarding the rising inflationary trends, Rajan said inflation is a concern in every country, and it would be hard for India to be an exception. According to him, announcing a credible target for the country's consolidated debt over the next five years coupled with the setting up of an independent fiscal council to opine on the quality of the budget would be very useful steps. "If these moves are seen as credible, the debt markets may be willing to accept a higher temporary deficit," he said.

Riaz Haq said...

#India's #jobs crisis exasperates its youth. #Economic growth is producing fewer jobs than it used to, and disheartened jobseekers instead take menial roles or look to move overseas. #BJP #economy #Modi #unemployment https://news.yahoo.com/off-canada-indias-jobs-crisis-052922928.html?soc_src=social-sh&soc_trk=tw&tsrc=twtr via @YahooNews

RAJPURA, India (Reuters) - Srijan Upadhyay supplied fried snacks to small eateries and roadside stalls in the poor eastern Indian state of Bihar before COVID-19 lockdowns forced most of his customers to close down, many without paying what they owed him.

With his business crippled, the 31-year-old IT undergraduate this month travelled to Rajpura town in Punjab state to meet with consultants who promised him a work visa for Canada. He brought along his neighbour who also wants a Canadian visa because his commerce degree has not helped him get a job.

"There are not enough jobs for us here, and whenever government vacancies come up, we hear of cheating, leaking of test papers," Upadhyay said, waiting in the lounge of Blue Line consultants. "I am sure we will get a job in Canada, whatever it is initially."

India's unemployment is estimated to have exceeded the global rate in five of the last six years, data from Mumbai-based the Centre for Monitoring Indian Economy (CMIE) and International Labour Organization show, due to an economic slowdown that was exacerbated by the pandemic.

Having peaked at 23.5% in April 2020, India's joblessness rate dropped to 7.9% last month, according to CMIE.

The rate in Canada fell to a multi-month-low of 5.9% in December, while the OECD group of mostly rich countries reported a sixth straight month of decline in October, with countries including the United States suffering labour shortages as economic activity picks up.

Graphic: Unemployment Rate- https://graphics.reuters.com/INDIA-UNEMPLOYMENT/INDIA/zjvqknbzxvx/chart.png

What's worse for India, its economic growth is producing fewer jobs than it used to, and as disheartened jobseekers instead take menial roles or look to move overseas, the country's already low rate of workforce participation - those aged 15 and above in work or looking for it - is falling.

"The situation is worse than what the unemployment rate shows," CMIE Managing Director Mahesh Vyas told Reuters. "The unemployment rate only measures the proportion who do not find jobs of those who are actively seeking jobs. The problem is the proportion seeking jobs itself is shrinking."

Graphic: Labour participation rate (LPR)- https://graphics.reuters.com/INDIA-UNEMPLOYMENT/INDIA-UNEMPLOYMENT/jnvwejnnlvw/chart.png


Critics say such hopelessness among India's youth is one of the biggest failures of Prime Minister Narendra Modi, who first came to power in 2014 with his as yet unfulfilled promise of creating millions of jobs.

It also risks India wasting its demographic advantage of having more than two-thirds of its 1.35 billion people of working age https://data.oecd.org/pop/working-age-population.htm.

The ministries of labour and finance did not respond to requests for comment. The labour ministry's career website had more than 13 million active jobseekers as of last month, with only 220,000 vacancies.

The ministry told parliament in December that "employment generation coupled with improving employability is the priority of the government", highlighting its focus on small businesses.

Modi's rivals are now trying to tap into the crisis ahead of elections in five states, including Punjab and most populous Uttar Pradesh, in February and March.

"Because of a lack of employment opportunities here, every kid looks at Canada. Parents hope to somehow send their kids to Canada," Delhi Chief Minister Arvind Kejriwal, whose Aam Admi Party is a front-runner in Punjab elections, told a recent public function there.

Riaz Haq said...

Chitra Ramkrishna, #India's $4 trillion #StockMarket #NSE CEO, let a faceless #Hindu conman ‘yogi’ make all key decisions. For all this, SEBI’s punishment to Ramkrishna is paltry. She has now been barred from capital markets for three years. #Modi #BJP https://www.thehindubusinessline.com/markets/stock-markets/inside-the-mind-of-chitra-ramkrishna-she-took-guidance-from-an-unknown-himalayan-yogi-to-run-nse/article65037214.ece

Ramkrishna referred to the unknown yogi as “Sironmani” [the exalted one] and shared with him information such as NSE’s five year projections, financial data, dividend ratio, business plans, agenda of board meeting, and even consulted him on employee performance appraisals.

Ramkrishna was ousted from NSE in 2016 for her role in the co-location and algo trading scam and abuse of power in the appointment of Subramanian. The probe found that Ramkrishna ran NSE with impunity. No one from the senior management, board, or the promoters — which include big government institutions and banks — ever objected to her ways. Instead, Ramkrishna was given ₹44 crore as pending dues and salary when she left NSE.

SEBI’s probe revealed that Ramkrishna communicated with the yogi, whom she had never met, over email, for almost 20 years and he guided her to appoint Subramanian as the second in command at NSE. “Their spiritual powers do not require them to have any such physical coordinates and would manifest at will,” Ramkrishna told SEBI. The contents of the email were not denied by her.

On January 18, 2013, Subramanian was offered the role of Chief Strategic Advisor at NSE for an annual compensation of ₹1.68 crore against his last drawn salary (as per his claim) of ₹15 lakh at Balmer Lawrie. In March 2014, Ramkrishna approved a 20 per cent increment to Subramanian and his salary was revised to ₹2.01 crore. Five weeks thereafter, Subramanian’s salary was again revised upwards by 15 per cent to ₹2.31 crore as Ramkrishna dubbed his performance to be A+ (exceptional). By 2015, his cost-to-company had zoomed to ₹5 crore, he was given a cabin next to Ramkrishna and granted first-class international air travel. All this was in accordance with the yogi’s instructions.

An email from the unknown yogi even carried the diktat that Subramanian be exempt from the contractual 5-day work week and instead be asked to come only for three days and allowed to work the rest of the time at will.

Another email on September 5, 2015, from the yogi told Ramkrishna, “SOM, if I had the opportunity to be a person on Earth then Kanchan is the perfect fit. Ashirvadhams.” On December 30, 2015, Ramkrishna told the Yogi in her reply, “SIRONMANI, struggle is I have always seen THEE through G, and challenged myself to on my own realise the difference.” ‘SOM’ refers to Ramkrishna, and ‘Kanchan’ and ‘G’ refer to Subramanian, the SEBI probe revealed.

These findings were confirmed by Dinesh Kanabar, the then Chairman of NSE nomination and remuneration committee. Subramanian had all the powers of the MD and CEO, and was flying first class, but remained a consultant on paper. SEBI had observed that there was a glaring conspiracy of a money making scheme involving NSE’s boss with the unknown person.

An email dated February 18, 2015, from Ramkrishna to the unknown yogi, reads, “The role and designation of Group Chief Coordination Officer is fine and we could take that forward. I have a small submission, can we make this as Group President and Chief Coordination Officer? And over a time frame as you direct we can move the entire operations of the exchange under G and redesignate him as Chief Operating Officer? Seek Your guidance on the path forward on this Swami If this meets with your Highness’ approval, then parallelly could we coin JR (Ravi) as Group President Finance and stakeholder relations and Corporate General Counsel?”

Riaz Haq said...

Why 7% growth is miracle and 5% reality for India's economy - Times of India

https://timesofindia.indiatimes.com/business/india-business/for-india-the-reality-of-5/articleshow/89706607.cms


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5% growth amid de-globalisation to be significant achievement for India, says Ruchir Sharma

https://www.cnbctv18.com/economy/oil-breaches-100-for-first-time-since-2014-on-ukraine-attacks-12608582.htm

Morgan Stanley Chief Global Strategist Ruchir Sharma on Saturday said if the Indian economy grows at 5 percent in the era of deglobalization, then it will be a significant achievement.

Addressing the FICCI Annual Convention, Sharma further said India hastily passed agriculture and labour reforms during the COVID-19 pandemic.
"Our expectations have to be realistic...if we can grow at more than 5 percent in a year, that is a significant achievement," he said.
Sharma also noted that it is no longer feasible in the world of deglobalisation to grow at 7 percent as exports cannot grow at 20 percent or 30 percent in a year, which was good in an era of globalisation.
"So, for an economy like India's, the growth rate of 5 percent will be pretty credible even in this era where I think emerging economies, in general, will make some sort of a comeback," he added.
Sharma pointed out that there were about 100 economies that were growing at 7 percent or more in 2007.
"That has never happened in the history of the global economy. In the last decade, only 10 economies in the world have grown 7 percent or more in any year," he said.
Sharma also argued that if the population growth of a country is slowing, then that country can't grow at the same pace as it did in the past.
According to the RBI, the Indian economy is likely to contract by 7.5 percent, in 2020-21.
He also pointed out that intra regional trade is the lowest in South Asia compared to any subregion of the world.
Sharma pointed out that India has seen a slight increase in exports since 2010.
"The last decade was a lost decade for emerging economies. The only economy to have gained in the global share in the last decade was China," he noted.


Riaz Haq said...

#WorldHappinessReport: #India among unhappiest nations, languishes at 136th spot. In #SouthAsia, only Taliban-ruled Afghanistan fared worse than India. #Afghanistan was named the most unhappy country in the world, ranking last on the index of 146 countries

https://indianexpress.com/article/india/world-happiness-report-india-jumps-three-spots-now-136-7827057/


India continued to fare poorly in the world happiness index, with its position marginally improving to 136 as against last year’s 139.

Among the South Asian nations, only Taliban-ruled Afghanistan fared worse than India. Afghanistan was named the most unhappy country in the world, ranking last on the index of 146 countries. Nepal (84), Bangladesh (94), Pakistan (121) and Sri Lanka (127) managed to get better ranks in the list.

Finland topped the list for the fifth time in a row, according to the 10th edition of the World Happiness Report.


Finland was followed by Denmark, Iceland, Switzerland, and the Netherlands. Among other western countries, while the United States managed to bag the 16th position, Britain was ranked 17th and France 20th.

The Happiness report also stated that India was one among the countries that witnessed, over the past 10 years, a fall in life evaluations by more than a full point on the 0 to 10 scale.

Riaz Haq said...

#India's 2022 #GDP Growth Cut to 4.6% Due to #Ukraine War. India will face restraints on several fronts: #energy access & prices, primary commodity bottlenecks, reflexes from #trade sanctions, #food #inflation, tightening policies & financial instability.
https://thewire.in/economy/indias-2022-gdp-growth-downgraded-to-4-6-due-to-ukraine-war-un-report


United Nations: India’s projected economic growth for 2022 has been downgraded by over 2% to 4.6% by the United Nations, a decrease attributed to the ongoing war in Ukraine, with New Delhi expected to face restraints on energy access and prices, reflexes from trade sanctions, food inflation, tightening policies and financial instability, according to a UN report released on Thursday.

The UN Conference on Trade and Development (UNCTAD) report downgraded its global economic growth projection for 2022 to 2.6% from 3.6% due to shocks from the Ukraine war and changes in macroeconomic policies that put developing countries particularly at risk.

The report said while Russia will experience a deep recession this year, significant slowdowns in growth are expected in parts of Western Europe and Central, South and South-East Asia.

India was forecast to grow at 6.7% in 2022 and this projection has been downgraded to 4.6% by UNCTAD.

The report said as some of the other economies in South and Western Asia may gain some benefits from fast growth of demand and prices of energy, they will be hampered by the adversities in primary commodity markets, especially food inflation, and will be further hit by inherent financial instabilities.



India in particular will face restraints on several fronts: energy access and prices, primary commodity bottlenecks, reflexes from trade sanctions, food inflation, tightening policies and financial instability, it said.

The report has downgraded the GDP growth of the US from 3% to 2.4%. China will also see growth decrease to 4.8% from 5.7%. The report projects a deep recession for Russia, with growth decelerating from 2.3% to -7.3%.

The report said the Russian economy faces stringent external constraints imposed by the sanctions.

While Russia is still exporting oil and gas, and will therefore see compensating increases of revenue due to high prices, sanctions severely limit the use of foreign exchange earnings for the purchase of imports or debt servicing.

Russia will experience severe shortages of a wide range of imported goods, high inflation and a substantially devalued currency. While the state will likely act to cushion the shock and limit unemployment and the fall of household incomes, its capacity is limited.

Trade with China and some other partners will continue, but they will not be able to provide substitutes for the wide range of imported goods that the Russian Federation currently cannot access. Assuming the sanctions remain in place through 2022, even if the fighting in Ukraine ends, Russia will experience a severe recession, it said.

The report noted that a number of developing country central banks also engaged in quantitative easing: active purchasing of bonds in the open market.

A small number of developing country central banks engaged in private sector bond purchases, but public bond buying was more widespread: the central banks of India, Thailand, Colombia and South Africa, among others, engaged in public bond purchases.

In the global monetary hierarchy, the place of a national currency today is determined less by the size of its domestic production base than by the size of its domestic financial sector.

The currencies of Brazil, Russia, India and China account for no more than 3.5% of the $6.6 trillion daily turnover in the forex markets, a ratio barely one-tenth of the United States dollar’s 44%, it said.

UNCTAD said the ongoing war in Ukraine is likely to reinforce the monetary tightening trend in advanced countries following similar moves that began in late 2021 in several developing countries due to inflationary pressures, with expenditure cuts also anticipated in upcoming budgets.

Riaz Haq said...

Ritesh Kumar Singh
@RiteshEconomist
We shouldn't get carried away by 13.5% #GDPgrowth in Q1 FY2022/23.
Q1FY2020/21: INR 35.5 trillion
Q1FY2022/23: INR 36.85 trillion
The increase in 3 years: INR 1.35 trillion or 3.9% in 3 years.
#economy #India #IndiaAt75
@EconomicTimes

https://twitter.com/RiteshEconomist/status/1564989770966523905?s=20&t=Xfj8WjDj-wkroo8JTkhBxQ

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Q1 GDP growth misses estimates despite low base; govt spending subdued
13.5% expansion in June QTR despite low base; GVA at basic prices up 12.7%

https://www.business-standard.com/article/economy-policy/q1-gdp-growth-misses-estimates-despite-low-base-govt-spending-subdued-122083101151_1.html

Keeping the two pandemic years of 2020 and 2021 out, Q1 real GDP in 2022-23 is only 3.8 per cent higher than in the equivalent quarter of 2019-20. Gross value added (GVA) at basic prices grew at 12.7 per cent in the June quarter while nominal GDP was up 26.7 per cent, reflecting elevated inflationary pressures in the economy.

Growth in private final consumption expenditure, or private spending, grew at a robust 25.9 per cent with pent-up demand kicking in as consumers felt confident to spend. Government spending, however, grew only 1.3 per cent, signalling that both the Central and state governments kept their expenditure in check during the quarter.

Gross fixed capital formation (GFCF), which represents investment demand in the economy, grew at a robust 20.1 per cent. However, compared to the pre-pandemic period of FY20, GFCF grew only 6.7 per cent.

On the supply side, manufacturing grew by a disappointing 4.8 per cent. Despite 25.7 per cent growth in trade, hotel, transport services, the sector, with the highest contribution to GDP, is still 15.5 per cent below the pre-pandemic level of the equivalent quarter in FY20.

The labour-intensive construction sector grew 16.8 per cent but it is barely above the pre-pandemic level, growing 1.2 per cent.

Madhavi Arora, lead economist, Emkay Global Financial Services, said. “We maintain growth may remain at 7 per cent for the year, albeit with downside risks. Going ahead, even as recovery in domestic economic activity is yet to be broad-based, global drags in the form of still elevated prices, shrinking corporate profitability, demand-curbing monetary policies and diminishing global growth prospects weigh on the growth outlook.”

Nikhil Gupta, chief economist of Motilal Oswal, said assuming no change in projections by the RBI for the rest of the year, the first-quarter data suggested the central bank’s FY23 growth forecast would be revised to 6.7 per cent from 7.2 per cent.

The RBI expected 16.2 per cent growth in Q1, with 6.2, 4.1, and 4 per cent growth in the subsequent quarters.

Aurodeep Nandi, India economist and vice-president at Nomura, said even if one were to discount the low base, this marked a stellar rise in sequential momentum with post-pandemic tailwinds lifting GDP growth in the June quarter.

Riaz Haq said...

India's Economic Situation 'Bleak'; We Know the Issue but Not the Solution: Pronab Sen
In an interview with Karan Thapar, the country's former chief statistician said that India will miss the RBI's target of 7.2% growth for this financial year and that it'll come around 6-6.5%.

https://thewire.in/video/watch-indias-economic-situation-bleak-we-know-the-issue-but-not-the-solution-pronab-sen

In an interview where he paints a bleak and disturbing picture of the state of the economy, India’s former chief statistician professor Pronab Sen has said that we can identify the problems that are retarding growth but we don’t know how to tackle them.

Worse, professor Sen says he is not sure if the government has diagnosed the problems because it has not spoken about them and its silence can be variously interpreted. Consequently, he says that India will miss the RBI’s target of 7.2% growth for this financial year and that it will growth will only come in somewhere around 6-6.5%.

However, he points out, in real terms growth will actually be just 4% which, he adds, is at least 2.5% below the growth India needs to create jobs for its population. This means, professor Sen points out, we can boast of being the fastest growing economy but it’s equally true that we are considerably falling short of the rate of growth we need (6.57%) to create sufficient jobs for our people which, in turn, will boost consumption and spending and create incentives for investment.

In these circumstances, professor Sen said that first quarter growth of FY23 at 13.5% is clearly disappointing.

In a 42-minute interview to Karan Thapar for The Wire, professor Sen, who is currently the country director of the International Growth Centre, identified two critical areas where the Indian economy faces serious problems about which we are not sure what we should do.

The first is the MSME sector which, he added, has undoubtedly shrunk in size over the last two years. The problem is not a question of encouraging and helping existing MSMEs so much as creating the environment for new MSMEs to emerge. The specific problem is that the informal credit line on which they depend has dried up and we don’t know how to revive that credit line. The government does not have a clear way of doing so.

And, the problem afflicting MSMEs, professor Sen says, is the reason why manufacturing has only grown year-on-year by 4.8% and why joblessness and unemployment are an increasing concern. Most jobs are created by MSMEs or the wider unorganised sector and that seems to have stopped or, at least, is not happening in sufficient measure.

The second problem professor Sen identified is the critical services sector of trade, hotel, transport, communication and broadcasting services, which represent 30.5% of employment but is still 15.5% below pre-pandemic levels. Once again, he said we don’t know what we need to do to boost this sector back to pre-pandemic levels. He pointed out that many MSMEs work in this sector and its future is, therefore, directly linked to MSMEs.

Professor Sen also pointed out that the global situation will not be of much help to India. Interest rates are likely to remain high and exports, which have been a support to the economy until recently, will face problems in markets like Europe and America and, therefore, fail to provide the boost to growth they have previously given. However, he believes oil prices could come down.

He believes India is clearly locked into a K-shaped recovery and the arms of the K are moving further and further apart.

Whilst scoffing at commentators and newspapers that have called for broad-based reforms, without identifying what they would be, professor Sen said that the key reform needed would be credit lines that would service MSMEs and provide funds for new MSMEs to start up.

Riaz Haq said...

Kaushik Basu
@kaushikcbasu
Over 2020-22 India's annual GDP growth is 0.43%. This places India in the middle of the world's growth table. What's worrying is that a decade ago India was in the top 3. Also youth unemployment at 28.3% is the highest in decades. So the growth that's happening is all at the top.

https://twitter.com/kaushikcbasu/status/1571866854800461826?s=20&t=P-URklHraQMDwSq2jQguuQ

Riaz Haq said...

Kaushik Basu
@kaushikcbasu
India’s doing very poorly in terms of job creation. I’m not sure why but my conjecture is: An economy’s biggest driver is the investment rate. This has fallen sharply in India from 39.3% in 2009 to 30.7% in 2019 (GOI data). Why are people not investing? That’s the next question.

https://twitter.com/kaushikcbasu/status/1577481003865722881?s=20&t=f13DDu_1zLulaOPKP4qwog

Riaz Haq said...

#Indian #rupee marks biggest monthly losing streak since 1985, its slide for this year is nearly 11% against #USD. #India's currency has declined in each of the 10 months this year to notch its biggest losing streak in almost 4 decades. https://finance.yahoo.com/news/indian-rupee-marks-biggest-monthly-105914779.html?soc_src=social-sh&soc_trk=tw&tsrc=twtr via @YahooFinance

The Indian rupee has declined in each of the ten months this year to notch its biggest losing streak in almost four decades as the U.S. Federal Reserve's hawkish stance on monetary policy catapulted the dollar to two-decade highs.

The dollar index is up 16% this year, having scaled 114.8-levels last month to trade near its 2002 peak. Its ascent has pressured currencies globally, especially ones in emerging Asian markets.

The Indian rupee fell 1.8% against the dollar in October, taking its slide for the year to nearly 11%.

Surging oil prices due to the Russia-Ukraine conflict and weakness in the Chinese yuan have only piled on more pressure on the rupee and helped send it to a record low of 83.29 per dollar earlier this month.

The rupee's losses have been deeper in the past two months, with market participants reckoning that the Reserve Bank of India let the currency slide after having helped hold it at the 79-80 levels for a long time.

Almost all traders and economists expect there will be no let-up in the pressure on the rupee for the rest of the year as the Fed stays on its aggressive rate-hike path after making fighting inflation its priority.

"This week, the Fed's upcoming meeting would be crucial for the rupee outlook. It could come under pressure in case Fed indicates aggressive tightening path in the future," HDFC Bank economists wrote in a note.

"Broadly, 81.80 to 82.00 seems a strong support zone for the USD/INR pair. As long as it trades above this convincingly, one can expect a U-turn towards 82.80 to 83.00 levels," said Amit Pabari, managing director at consultancy firm CR Forex Advisors.

Riaz Haq said...

India's growth to slow in 2023 on fading reopening impact-Goldman Sachs

https://www.reuters.com/world/india/indias-growth-slow-2023-fading-reopening-impact-goldman-sachs-2022-11-21/

Goldman Sachs expects India's economic growth to slow to 5.9% next year, from an estimated 6.9% growth in 2022, as the boost from the post-COVID reopening fades and monetary tightening weighs on domestic demand.

"We expect growth to be a tale of two halves in 2023, with a slowdown in the first half (due to dwindling reopening effects)," Santanu Sengupta, India economist at Goldman Sachs, said in a note on Sunday.

India's growth in the seven months since March 2022, which Goldman Sachs considers the post-COVID reopening, was faster than most other emerging markets in the first seven months after they reopened, the U.S. investment bank said.

"In the second half, we expect growth to re-accelerate as global growth recovers, the net export drag declines, and the investment cycle picks up," Sengupta said.

The Reserve Bank of India (RBI), last week, pegged the domestic growth rate at 7% for 2022-23.

Sengupta expects the government to continue its focus on capital spending and sees signs of the nascent investment recovery continuing, with conducive conditions helping the economy pick up in the second half.

Goldman Sachs expects headline inflation to drop to 6.1% in 2023, from 6.8% in 2022, saying government intervention was likely to cap food prices and that core goods inflation had probably peaked.

"But upside risks to services inflation are likely to keep core inflation sticky around 6% year-on-year," Sengupta added.

Goldman expects the RBI to hike the repo rate by 50 basis points (bps) in December 2022 and by 35 bps in February, taking the repo rate to 6.75%. The forecast is more hawkish than the market consensus of 6.50%.

On India's external position, Sengupta reckons the worst is over, with the dollar likely near the peak. He expects the current account deficit to remain wide due to weak exports, but said growth capital may continue to chase India.

Sengupta pegs the USD/INR INR=IN at 84, 83, and 82 over 3-, 6- and 12-month horizons, respectively, compared with 81.88 currently.