Saturday, April 16, 2022

Hindu Nationalist RSS Leadership Criticizes Jobless Growth in India

Akhil Bharatiya Pratinidhi Sabha (ABPS), the top decision-making body of India's RSS (Rashtriya Swayamsevak Sangh), says that “the young generation is suffering from unemployment and the pandemic has made things even grim... We cannot turn a blind eye to unemployment. It is a crisis and it needs to be addressed.” The RSS was apparently reacting to the falling labor participation rate in India relative to Pakistan and the global averages. The RSS leadership wants the government of Prime Minister Narendra Modi to focus on helping small and medium sized enterprises (SMEs) to create jobs.  RSS likes Modi government's ‘Make in India’ initiative “but it needs to be sharpened even more and get more investment.” The resolution is titled, ‘The need to promote work opportunities to make Bharat self-reliant’. The solution offered by ABPS resolution: Take agro-based local initiatives to promote rural areas and create jobs, according to Ram Madhav, a member of the RSS executive committee. 

Falling Employment in India. Source: CMIE

India's labor participation rate (LPR) fell to 39.5% in March 2022, as reported by the Center for Monitoring Indian Economy (CMIE). It dropped below the 39.9% participation rate recorded in February. It is also lower than during the second wave of Covid-19 in April-June 2021. The lowest the labor participation rate had fallen to in the second wave was in June 2021 when it fell to 39.6%. The average LPR during April-June 2021 was 40%. March 2022, with no Covid-19 wave and with much lesser restrictions on mobility, has reported a worse LPR of 39.5%.

Labor Participation Rates in India and Pakistan. Source: ILO/World Bank

In spite of the headline GDP growth figures highlighted by the Indian and world media, the fact is that it has been jobless growth. The labor participation rate (LPR) in India has been falling for more than a decade. The LPR in India has been below Pakistan's for several years, according to the International Labor Organization (ILO). 

Indian Employment Trends By Sector. Source: CMIE Via Business Standard

Construction and manufacturing sectors in India have been shedding jobs while the number of people working in agriculture has been rising, according to CMIE. 

Pakistan Employment By Sectors. Source: PBS via Bilal Gilani

It is important to note that Pakistan’s economy has created 5.5 million jobs during the past three years – 1.84 million jobs a year, significantly higher than yearly average of new jobs created during the 2008-18 decade, according to the findings of Labor Force Survey (LFS) as reported by the Express Tribune paper. The biggest jump in share of employment (1.5%) was in the construction sector, spurred by Naya Pakistan construction incentives offered by the PTI government. 


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27 comments:

Riaz Haq said...

Medium Small and Micro Enterprises (SMEs) have always been the backbone of an economy in general and secondary sector in particular. For a capital scarce developing country like India, SMEs are considered as panacea for several economic woes like unemployment, poverty, income inequalities and regional imbalances.

https://www.mbarendezvous.com/more/msme-indian-economy/

The MSME Development act classifies manufacturing units into medium, small and micro enterprises depending upon the investment made in plant and machinery. Any enterprise with investment in plant and machinery of up to INR 50 million is considered as medium enterprise while those having investment between INR1.0 million to INR2.5 million is a small enterprise and one with less than INR1.0 million is a micro enterprise. In service sector, any enterprise with the investment limit of INR1.0 million, between INR 1.0-20 million and of upto INR 50 million is called as micro, small and medium enterprise respectively.

The MSMEs have played a great role in ensuring the socialistic goals like equality of income and balance regional development as envisaged by the planners soon after the independence. With the meagre investment in comparison to the various large scale private and public enterprises, the MSMEs are found to be more efficient providing more employment opportunities at relatively lower cost. The employment intensity of MSMEs is estimated to be four times greater than that of large enterprises. Currently, around 36 million SMEs are generating 80 million employment opportunities, contributing 8% of the GDP, 45% of total manufacturing output and 40% of the total exports from the country. MSMEs account for more than 80% of the total industrial enterprises in India creating more than 8000 value added products.

The most important contribution of SMEs in India is promoting the balanced economic development. The trickle down effects of large enterprises is very limited in contrast to small industries where fruits of percolation of economic growth are more visible. While the large enterprises largely created the islands of prosperity in the ocean of poverty, small enterprises have succeeded in fulfilling the socialistic goals of providing equitable growth. It had also helped in industrialization of rural and backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income.Urban area with around 857,000 enterprises accounted for 54.77% of the total working enterprises in Registered MSME sector whereas in rural areas around 707,000 enterprises (45.23% of the working enterprises) are located. Small industries also help the large in industries by supplying them ancillary products.

Anonymous said...

Unemployment is not an issue - there is enough job in BJP IT cell. Even if lack of clean water and sanitation, there is cheap cell phone plans and youth in India can find solace in lies/hate/propaganda against Muslims

Riaz Haq said...

Bulk of India’s unemployed population is in the middle-income households that earn between Rs 2 lakh and Rs 5 lakh a year despite the fact that they have the highest labour participation rate among non-rich household groups, the Centre for Monitoring Indian Economy said.

https://economictimes.indiatimes.com/jobs/middle-income-households-account-for-largest-chunk-of-indias-unemployed-population-cmie/articleshow/90563660.cms

Citing its Consumer Pyramids Household Survey (CPHS) data, CMIE said the middle class households accounted for half of the total households and also half of the unemployed and the largest number of unemployed people while the average labour participation rate (LPR) of this group was 43% compared to the overall average LPR was 40.8%. Also, it experiences an elevated unemployment rate of over 9%.

“India’s biggest challenge on the employment front is to provide jobs that yield about Rs 2,00,000 a year to about 16 million unemployed in the middle class households,” CMIE said in its weekly labour market analysis.

CMIE has divided households into five income classes. At the bottom of the income pyramid are households that earn less than Rs 100,000 a year. The next group earns between Rs 100,000 and Rs.200,000 a year and is called the lower middle class. The third group of households earns between Rs 200,000 and Rs 500,000 a year and belong to the middle income class. The fourth earns between Rs 500,000 and Rs 1 million a year and could be classified as the upper middle class and the richest group of house earn more than Rs 1 million in a year.

Further, a little over a third of the unemployed reside in the lower middle income households that earn between Rs 1 lakh and Rs 2 lakh. These households accounted for about 45 per cent of all households and the share of this class in the total unemployed increased from 33% during September-December 2019 to 39.5% during May-August 2021 as a significant portion of this income group migrated to lower income groups during 2021-22.

According to CMIE, the poorest households accounted for 9.8% of all the households and only 3.2% of all the unemployed before the pandemic in 2019-20. However, in 2020-21 and the first half of 2021-22 they accounted for 16.6% of all households but still accounted for only 3.5% of all the unemployed.

The richer households, however, suffer the least pain of unemployment. They account for about 0.5% of all households and contain a similar proportion of all unemployed. Their average LPR at 46.3% is the highest among all income groups.

As per CMIE, their unemployment rate had shot up the most among all income groups but has since declined. It was over 15% during the first wave of the pandemic. But, in 2021, the rate averaged at 5.2%. The employment rate has been mostly over 40% but shot up to 45% during September-December 2021.

“However, even India’s best case employment rate at 45% is much worse than the world average of 54%,” it concluded.

Riaz Haq said...

Subramanian Swamy slams Modi for failing to achieve economic growth

https://telanganatoday.com/subramanian-swamy-slams-modi-for-failing-to-achieve-economic-growth


Hyderabad: BJP Rajya Sabha MP Subramanian Swamy on Tuesday lashed out at Prime Minister Narendra Modi for the latter’s failure to achieve targets of economic growth. Terming Modi ‘clueless’ about China, he felt that the national security has also weakened hugely.

“In 8 years in office we see that Modi has failed to achieve targets of economic growth. On the contrary, growth rate has declined annually since 2016. National security has weakened hugely. Modi inexplicably is clueless about China. There is scope to recover but does he know how? (sic)” he tweeted.

Subramanian Swamy’s latest attack on Modi came amidst mew report on the soaring inflation. India’s annual wholesale price-based inflation increased to a record 14.55% in March from 13.11% in February. He also criticised Modi even on China policy. He vehemently disagreed with the Prime Minister for the latter’s claims that China did not occupy Indian territory on eastern Ladakh in the Galwan valley.

When a netizen asked him why he was not advising the Prime Minister, Swamy replied, “Ancient rishis have advised that knowledge should be parted to those who have shradhha to receive it. (sic)”

The BJP Parliamentarian who is known for ‘calling a spade a spade’ as well as his wit, also differed with one of the Modi supporters who said that there was no better alternative to the current Prime Minister. Responding to him, Swamy said, “That is what the British Imperialist said: India will fall apart if British left.”


Riaz Haq said...

Eight-Hour #Power #Blackouts Hit #India After Hottest March on Record. #Coal shortage threatens to exacerbate #energy, #food #inflation. Nomura warns of ‘stagflationary shock,’ drop in factory output. #Modi #BJP #Hindutva #economy #Loadshedding https://www.bloomberg.com/news/articles/2022-04-21/eight-hour-blackouts-hit-india-after-hottest-march-since-1901

Riaz Haq said...

"Anti-Minority" Image Will Hurt #Indian Companies, Warns Ex RBI Gov Raghu Rajan the day after #bulldozers tore down #Muslim homes & businesses close to a #mosque in #Delhi's Jahangirpuri area. #Modi #BJP #Islamophobia #Hindutva #genocide https://www.ndtv.com/india-news/anti-minority-image-will-hurt-indian-companies-warns-raghuram-rajan-2908962 via @ndtv

Amid concerns over minorities being targeted in India, former Reserve Bank governor Raghuram Rajan on Thursday cautioned that an 'anti-minority' image for the country can lead to loss of market for Indian products and may also result in foreign governments perceiving the nation as an unreliable partner.
India enters the perception battle from a position of strength, the professor at Chicago's Booth School of Business said, alluding to credentials like democracy and secularism, but warned that this battle is "ours to lose".

The comments came a day after bulldozers tore down several concrete and temporary structures close to a mosque in Jahangirpuri as part of an anti-encroachment drive, days after the northwest Delhi neighbourhood was rocked by communal violence.

Speaking at the Times Network India Economic Conclave, Rajan said, "If we are seen as a democracy treating all our citizens respectfully, and, you know, relatively poor country, we become much more sympathetic. (Consumers say) 'I am buying this stuff from this country which is trying to do the right thing', and therefore, our markets grow."

He added that it is not just consumers who make such choices over whom to patronise, but warmth in international relations too is decided by such perceptions, as governments take a call on whether a country is a "reliable partner" or not, based on how it handles its minorities.

The outspoken academic added that China has been suffering from such image problems because of its treatment of Uighurs and to an extent the Tibetans as well, while Ukraine has seen huge support because President Volodymyr Zelenskyy is seen as someone standing up to defend ideas that a democratic world believes in.

The services sector export presents a large opportunity for Indians and the country will have to seize it, Rajan said, adding that we need to be very conscious of the West's sensitivities on privacy.

One of the opportunities which can be leveraged is in the medical sector, Rajan said, warning that being perceived as a country which does not satisfy data security and privacy concerns can make it difficult to succeed.

He also said undermining the constitutional authorities like the Election Commission, Enforcement Directorate or the Central Bureau of Investigation (CBI) erodes the democratic character of our country.

In other comments on domestic affairs, Rajan said the Indian administration will have to grapple with the challenges of governance by discussing changes with key stakeholders to avoid instances like the three farm laws. The three legislations were repealed last year after protests by farmers.

Meanwhile, Union Minister of State for Information Technology, Rajeev Chandrasekhar, who also spoke at the event, blamed IT companies for poor planning, saying this lack of foresight has led to wage inflation in the over USD 230 billion sector.

He also said getting high-quality connectivity to every corner through both wired and wireless connectivity is a policy priority and the ministry is working towards the same.

Riaz Haq said...

#Indian lawmaker arrested after tweet criticizing Narendra #Modi. Jignesh Mevani accused prime minister of idolizing Nathuram Godse, killer of Mahatma #Gandhi. #Hindutva #BJP #Islamophobia #India #RSS https://www.theguardian.com/world/2022/apr/22/indian-lawmaker-arrested-after-tweet-criticising-narendra-modi?CMP=share_btn_tw

A state lawmaker in India was arrested for criticising the prime minister, Narendra Modi, in a tweet, officials have said, raising concerns over freedom of speech in the world’s largest democracy.

His arrest coincided with the arrival of the British prime minister, Boris Johnson, in the country.

Jignesh Mevani, a prominent campaigner for India’s marginalised low-caste Dalit community, accused the Hindu nationalist leader of idolising Nathuram Godse, the assassin of India’s independence icon Mahatma Gandhi.

Some fringes of the Indian rightwing revere Godse as a hero for killing the man they blame for the partition of India and Pakistan – comments that Modi has criticised in the past.

But Mevani tweeted this week that Modi “worships and considers Godse as God”, accusing the prime minister of fomenting religious division.

He also demanded that Modi apologise for communal violence in Gujarat, where Mevani is a member of the state legislature.

He was arrested on Thursday on accusations of attempting to disturb “public tranquillity and peace”, the police said.

He was taken across the country to Assam in India’s north-east, where the complaint had been filed, and a court in Kokrajhar denied him bail, ordering him to be held in custody for three days.

Freedom of speech is enshrined in India’s constitution and Mevani’s lawyers called the arrest “illegal” and “unconstitutional”.

The tweet in question has been taken down by Twitter in India after a legal complaint.

The police have previously arrested social media users for “provocative” tweets that were critical of Modi or the rightwing government, sparking fears that the government was crushing dissent.

Mevani is believed to be the first elected politician detained on such grounds.

The activist-politician is a vocal critic of Modi’s right-wing politics and rose to national prominence after launching a protest campaign over the flogging of seven Dalits by cow vigilantes – zealots who target Muslims and Dalits to protect the bovines sacred to many Hindus.

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Sectarian violence and rightwing Hindu vigilantism have increased since Modi came to power in 2014, and critics allege the popular leader’s reluctance to condemn radical elements is emboldening them.


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More than a dozen Indian states have witnessed violent clashes between Hindus and Muslims over the past two weeks, with one person killed in Gujarat.

In the capital, Delhi, bulldozers have demolished the homes of Muslims accused of rioting.

Riaz Haq said...

"India Has Its Own Problems": Joe Biden's Side Note On Dictatorships. #Biden clubbed #India in the sentence, which also mentioned #dictatorships. #Russia #China #Modi #BJP #Hindutva #Islamophobia https://www.ndtv.com/india-news/in-joe-bidens-point-about-autocrats-dictatorships-a-comment-on-india-2912788 via @ndtv

US President Joe Biden spoke about things that "autocrats fear most" at a fundraising event in the United States on Friday. What stood out was the fact that he clubbed India in the sentence, which also mentioned dictatorships.
Joe Biden also spoke about China's Xi Jinping and Russia's Vladimir Putin. On China, he recalled how Xi Jinping once complained to him about the Quad alliance working in the Indo-Pacific in a way that is "against China".

On Putin, Joe Biden said how the Russian leader got "exactly what he didn't want" as "Finland and Sweden too now want to join NATO".

"I indicated to Xi Jinping that I was going to pull together the Quad: Australia, India, Japan, and the United States. He said, 'You're just doing that to affect us.' I said, 'No, it's because we're trying to put together those folks who have an opportunity to work together in the Indo-Pacific'," Biden said during a party fundraiser event at a private residence in Seattle.

"The point being that one of the things that the autocrats fear the most -- and India has its own problems; all those countries have their own problems -- is the notion that somehow we can work together in concert and contrary to what are essentially dictatorships, which a lot of countries have become, particularly not only China but Russia and many other countries...the Philippines," he said.


Joe Biden said when he got elected, Russian president Vladimir Putin thought that he would easily be able to break up NATO. "That's what part of his objective was from the very beginning. And I know I've been saying that for eight years, but it was part of his objective," he said.

"But the irony of all ironies to this...he got exactly what he didn't want. He was looking for the further Finlandisation of Europe. Instead, he got Finland and the President of Finland calling, wanting to see me, wanting to join NATO, and Sweden wanting to join NATO. His action is generating exactly the opposite of what he intended," Biden said.

"I'm not suggesting that that makes things all that easier. But the point is that we have a circumstance where the Ukrainian people are incredibly brave; they're incredibly resolved, not just the military that was trained but the people in the streets," he said.

"They are making a lie of Putin's theory that somehow because they're Slavic in background and many spoke Russian that somehow there would be a welcoming party. The exact opposite has happened," he added.

Riaz Haq said...

India’s auto market at a decade low; 6 red signals, from high fuel prices to chip shortage, stall the road to recovery this year


https://auto.economictimes.indiatimes.com/news/industry/indias-auto-market-at-a-decade-low-6-red-signals-from-high-fuel-prices-to-chip-shortage-stall-the-road-to-recovery-this-year/91061638


HIGHLIGHTS
Over 40% idle capacity in auto industry
Tractor sales down for 7 consecutive months
Motorcycle and entry-level car demand under pressure
Implementation of OBD to increase 2W price by 6%-7%
No major indicator for rural market revival
Commodity prices soar by up to 200%
Fuel prices hover above INR 100/litre
PV exports at a decade low
Increase in booking cancellations
New Delhi: India’s automobile sales in the domestic market nosedived to 17.51 million in 2021-22, lowest since 2012-13 when the total wholesales were at 17.82 million, says the Society of Indian Automobile Manufacturers (SIAM).

Two-wheelers, the worst-hit segment, declined to a decade low in 2021-2022 to 13,466,000 units. It was in 2011-2012 that the two-wheeler sales were close to this number at 13,409,00. In the peak year FY19, the nation's two-wheeler market was at over 21 million units.

The deficit in the ICE two-wheeler is incredibly wide even after adding the electric two-wheelers, including low-speed and high speed, which were at about 3 lakh units. ICE three-wheelers volume also remained at 260,000 units, less than 50% of the peak volumes, while the total installed capacity is over a million units. The electric vehicles are catching up the fastest in this segment with almost 35% penetration.

Riaz Haq said...

Majority of #India’s 900 Million #Workforce Stop Looking for Jobs. #Labor participation rate dropped from 46% to 40% in 5 years. Only 9% of #Indian #women are employed or looking for jobs. #unemployment #BJP #Modi #economy #Hindutva #IslamophobiaInIndia https://www.bloomberg.com/news/articles/2022-04-24/majority-of-india-s-900-million-workforce-stop-looking-for-jobs

By Vrishti Beniwal
April 24, 2022, 4:31 PM PDT

India’s job creation problem is morphing into a greater threat: a growing number of people are no longer even looking for work.

Frustrated at not being able to find the right kind of job, millions of Indians, particularly women, are exiting the labor force entirely, according to new data from the Centre for Monitoring Indian Economy Pvt, a private research firm in Mumbai.

Anonymous said...

Dear Sir

The justifications which Indians give about such unemployment in India is that they have huge population so it is not easy to accommodate every Indian at work . Sir what are your views on this justifications of Indians ?

Ahmed said...

Dear Sir

Indians justify their unemployment by saying that they have huge population so it is not easy to accommodate every Indian at work. What are your views about this justifications of Indians ?

Riaz Haq said...

#India NITI Aayog’s first “SDG India - Index & Dashboard 2019-20” report showed that of 28 states/UTs it mapped, #poverty went up in 22, #hunger in 24 and #income #inequality in 25 of those states/UTs. #unemployment #economy #COVID19 #BJP #Modi #Hindutva https://www.fortuneindia.com/opinion/how-many-are-poor-in-india/107883

First, the IMF’s estimation.

The IMF used (i) the HCES of 2011-12 (the fiscal year 2011 for the IMF) as the base and estimated consumption distribution for all the years until 2020-21 (IMF’s 2020) “via the use of estimates based on average per capita nominal PFCE growth” and (ii) also took into consideration “the average rupee food subsidy transfer to each individual” for the years of 2004-05 to 2020-21.

The second factor – taking the money value of subsidised and free ration for 2020-21 – was considered because it said without this any exercise of poverty estimation “solely on the basis of reported consumption expenditures will lead to an overestimation of poverty levels”.

Several questions arise out of this methodology. The first is its extensive use of HCES of 2011-12 while being dismissive of the HCES of 2017-18 (which showed poverty growing). The second is, PFCE maps the consumption expenditure of all Indians, rich or poor, except government consumption (GFCE), and doesn’t tell which segment (income level) of society spends how much – making it impossible to know the status of households, which can be considered for poverty estimation.

The third is about the IMF’s assumption that the subsidised and free ration (which started during the pandemic under the PMGKY) reached two-thirds of the population and that the free ration will continue forever (eliminating extreme poverty). The IMF report cheers the Aadhaar-linked ration cards. None of these assumptions can be taken at face value.

The CAG report tabled in Parliament earlier this month highlighted several flaws in the Aadhaar’s functioning, including 73% of faulty biometrics that people paid to correct, duplications and verification failures. Besides, one year after the mass exodus began in 2020, migrant workers had not received subsidised ration, forcing the Supreme Court to lambast the central government (for its failure to operationalise the App being developed for the purpose and work-in-progress “one-nation-one-ration card” system) and direct state governments to ensure ration to migrants.

And what happens when the free ration is discontinued after September 2022? The decline in extreme poverty would return, wouldn’t it? So, does the IMF believe this amounts to poverty elimination?

On the other hand, the WB report seeks to marry the NSSO’s 2011-12 HCES to private sector data, the CMIE’s Consumer Pyramid Household Survey (CPHS), to inform its poverty estimation.

This is when the WB report admits that (i) the CMIE’s CPHS data is not comparable with the NSSO’s and that (ii) it “reweighed CPHS to construct NSSO-compatible measures of poverty and inequality for the years 2015 to 2019”. It said the CPHS data needed to be transformed into “a nationally representative dataset”.

As for the CPHS data, an elaborate debate about its ability to capture poverty took place last year. Several economists, including Jean Dreze, pointed out “a troubling pattern of poverty underestimation in CPHS, vis-à-vis other national surveys”. Several others accused the CPHS of a pronounced bias in favour of the “well-off”, which the CMIE admitted and promised to look into.

Another question arises from the use of the CPHS.

If a private firm like the CMIE can carry out household surveys every month or every quarter (for example, its employment-unemployment data is monthly) why can’t the government with decades of institutional knowledge and experience and huge human and financial resources?

Riaz Haq said...

Latest CMIE data: Indian labor force participation has dropped from 46% in 2017 to 40%. This "discouraged worker effect" shows people are giving up looking for work. India is growing. Job creation must be core policy to ensure all growth is not at the top.


https://www.business-standard.com/article/economy-policy/india-s-job-market-going-into-greater-threat-people-no-more-look-for-work-122042500124_1.html

India’s job creation problem is morphing into a greater threat: a growing number of people are no longer even looking for work.
Frustrated at not being able to find the right kind of job, millions of Indians, particularly women, are exiting the labor force entirely, according to new data from the Centre for Monitoring Indian Economy Pvt, a private research firm in Mumbai.

With India betting on young workers to drive growth in one of the world’s fastest-expanding economies, the latest numbers are an ominous harbinger. Between 2017 and 2022, the overall labor participation rate dropped from 46% to 40%. Among women, the data is even starker. About 21 million disappeared from the workforce, leaving only 9% of the eligible population employed or looking for positions.

Now, more than half of the 900 million Indians of legal working age -- roughly the population of the U.S. and Russia combined -- don’t want a job, according to the CMIE.

“The large share of discouraged workers suggests that India is unlikely to reap the dividend that its young population has to offer,” said Kunal Kundu, an economist with Societe Generale GSC Pvt in Bengaluru. “India will likely remain in a middle-income trap, with the K-shaped growth path further fueling inequality.”

India’s challenges around job creation are well-documented. With about two-thirds of the population between the ages of 15 and 64, competition for anything beyond menial labor is fierce. Stable positions in the government routinely draw millions of applications and entrance to top engineering schools is practically a crapshoot.

Though Prime Minister Narendra Modi has prioritized jobs, pressing India to strive for “amrit kaal,” or a golden era of growth, his administration has made limited progress in solving impossible demographic math. To keep pace with a youth bulge, India needs to create at least 90 million new non-farm jobs by 2030, according to a 2020 report by McKinsey Global Institute. That would require an annual GDP growth of 8% to 8.5%.

“I’m dependent on others for every penny,” said Shivani Thakur, 25, who recently left a hotel job because the hours were so irregular.


Failing to put young people to work could push India off the road to developed-country status.

Though the nation has made great strides in liberalizing its economy, drawing in the likes of Apple Inc. and Amazon.com Inc, India’s dependency ratio will start rising soon. Economists worry that the country may miss the window to reap a demographic dividend. In other words, Indians may become older, but not richer.

A decline in labor predates the pandemic. In 2016, after the government banned most currency notes in an attempt to stamp out black money, the economy sputtered. The roll-out of a nationwide sales tax around the same time posed another challenge. India has struggled to adapt to the transition from an informal to formal economy.

Explanations for the drop in workforce participation vary. Unemployed Indians are often students or homemakers. Many of them survive on rental income, the pensions of elderly household members or government transfers. In a world of rapid technological change, others are simply falling behind in having marketable skill-sets.

For women, the reasons sometimes relate to safety or time-consuming responsibilities at home. Though they represent 49% of India’s population, women contribute only 18% of its economic output, about half the global average.


Riaz Haq said...

#India’s #Muslims mark #Eid under attacks. #Islamophobia & attacks have surged across the country, including stone throwing during religious processions & subsequent demolitions by authorities of a number of properties belonging mostly to Muslims. #Modi
https://apnews.com/article/covid-health-lifestyle-prayer-eid-al-fitr-56f297b2c587c335f6a1eeb40c25d10c

SRINAGAR, India (AP) — Muslims across India marked Eid al-Fitr on Tuesday by offering prayers outside mosques, with the celebrations this year following a series of attacks against the religious minority during the month of Ramadan.

“We will not have the same kind of festivity” this year, said Mohammad Habeeb ur Rehman, a civil engineer in India’s financial capital, Mumbai. “This is the most painful Eid with the worst memories for Indian Muslims.”

Anti-Muslim sentiment and attacks have surged across the country in the last month, including stone throwing between Hindu and Muslim groups during religious processions and subsequent demolitions by authorities of a number of properties belonging mostly to Muslims.

The community, which makes up 14% of India’s 1.4 billion population, is reeling from vilification by hard-line Hindu nationalists who have long espoused an anti-Muslim stance. Some leaders of India’s ruling Hindu nationalist Bharatiya Janata Party have tacitly supported the violence, while Prime Minister Narendra Modi has so far been silent about it.

Eid al-Fitr is typically marked with communal prayers, celebratory gatherings around festive meals, and new clothes, but celebrations in India for the past two years have been marred by COVID-19 restrictions.

In the Indian-controlled portion of disputed Kashmir, the Muslim festival has been subdued for the past three years because of an unprecedented military lockdown after India stripped the region’s semi-autonomy in 2019, followed by the pandemic. The region also saw a rise in violence during Ramadan, with at least 20 militants, two civilians and five police and soldiers killed.

“As we prepare to celebrate Eid, a strong sense of collective loss jars at us,” said Bashir Ahmed, a businessman in Srinagar.

A violent insurgency against Indian rule in the Muslim-majority region and New Delhi’s brutal response have raged for over three decades. Tens of thousands of people have died in the conflict.

In India’s capital, New Delhi, hundreds assembled in the Jama Masjid, one of the country’s largest mosques, to offer Eid prayers there for the first time in over two years due to pandemic restrictions. Families came together early Tuesday morning and many people shared hugs and wishes.

Mohammed Hamid, a software engineer, said he was grateful to be offering prayers at the mosque again.

“It’s a good feeling because there was a lockdown for the past two years. With the grace of God, we are able to offer Eid prayers here with the children and we are thankful,” Hamid said.

Riaz Haq said...

CMIE: #India's #unemployment rate jumped to 7.83% in April from 7.60% in March. #Urban #jobless rate soared to 9.22% from 8.28% in March. #Modi #BJP #economy #Hindutva #Islamophobia https://www.business-standard.com/article/economy-policy/india-s-unemployment-rate-rose-to-7-83-in-april-shows-cmie-data-122050201088_1.html

The unemployment rate in the country grew to 7.83 per cent in April from 7.60 per cent in March, according to the Centre for Monitoring Indian Economy (CMIE) data.

The unemployment rate in urban areas was higher at 9.22 per cent compared to 8.28 per cent in March, the data released on Monday showed.




In the rural area, the unemployment rate was at 7.18 per cent in April compared to 7.29 per cent in the previous month.

Unemployment rate was the highest in Haryana at 34.5 per cent followed by Rajasthan at 28.8 per cent, Bihar 21.1 per cent and Jammu and Kashmir 15.6 per cent, the data showed.


CMIE managing director Mahesh Vyas told PTI that it is important to note that the labour force participation rate and the employment rate also increased in April.

"This is a good development," Vyas said.

The employment rate rose from 36.46 per cent to 37.05 per cent in April, he added.

Riaz Haq said...

“Make in India” has failed, replaced by a government that never admits defeat with a call for “self-reliance.” Now, exactly 30 years after India turned away from central planning and liberated the private sector, the government is again handing out subsidies and licenses while putting up tariff walls


https://www.business-standard.com/article/economy-policy/why-india-s-new-industrial-policy-is-doomed-to-fail-at-the-cost-billions-121071600093_1.html


One of Narendra Modi’s first promises when elected India’s prime minister in 2014 was to revive the country’s manufacturing sector. India had been de-industrializing since the early part of the century and policy makers correctly argued that only mass manufacturing could create enough jobs for a workforce growing by a million young people a month.

In his first major speech as prime minister, Modi invited the world to help: “I want to appeal all the people world over [sic], ‘Come, make in India,’ ‘Come, manufacture in India.’ Sell in any country of the world but manufacture here.”




The “Make in India” slogan quickly developed into a full-fledged government program, complete with a snazzy symbol — a striding lion made out of meshed gears. Government officials spoke at length about increasing foreign direct investment and improving the business climate to attract multinational companies. Careful targeting of the World Bank’s Ease of Doing Business indicators raised the country 79 positions in the five years after Modi took office.


And, after all that, in 2019 the share of manufacturing in India’s GDP stood at a 20-year low. Most foreign investment has poured into service sectors such as retail, software and telecommunications. “Make in India” has failed, replaced by a government that never admits defeat with a call for “self-reliance.”

---------

The government’s defenders point out that its investor-friendly reforms weren’t answered; nobody came to “Make in India.” And, they ask, hasn’t China profited handsomely from subsidizing its own manufacturing sector?

Such arguments miss the point. Modi’s manufacturing push never went much further than gaming the World Bank’s indicators. No investor believes structural reforms, particularly to the legal system, have gone deep enough. India has a large workforce but too few skilled workers. To top it all off, the rupee is overvalued. Rather than work at solving these interconnected and complex problems, politicians in New Delhi have decided to paper over them with taxpayer money.

Perhaps picking winners has worked for China. What Indians know for certain is that it did not work here after decades of trying. Sure, public investment in sectors of vital strategic importance — electricity storage, perhaps, or cutting-edge pharma — is defensible. But when you start throwing money at every sector that you wish had developed on its own, then all you’re announcing to the world is that you’re out of ideas.

India’s haphazard foray into industrial policy is going to fail, just as “Make in India” did. And it’s likely to cost the country billions along the way.

Riaz Haq said...

Cause of concern! Bank credit to manufacturing declines
Bank credit to 10 out of the 15 sectors declined in the last decade, an analysis by MVIRDC World Trade Centre (WTC) Mumbai shows.
By JOE MATHEW,  May 5, 2022 3 min read

https://www.fortuneindia.com/macro/cause-of-concern-bank-credit-to-manufacturing-declines/108032
The share of manufacturing sector in the total non-food bank credit declined from 24% to 13.5% in the last decade (2011-12 to 2020-21) due to banks' shift towards lending to personal loans, infrastructure, weaker sections and services sectors, an analysis by MVIRDC World Trade Centre (WTC) Mumbai shows. The outstanding bank credit to the manufacturing sector as a share of manufacturing GDP also declined from 16% in 2011-12 to 13% by 2020-21, it points out.

The analysis, based on Reserve Bank of India (RBI) data, also shows that bank credit to 10 out of the 15 sectors declined as a share of total bank credit. This includes sectors such as base metals, textiles, chemicals, food processing, engineering, automobiles and gems & jewellery.

Noting that the decline in bank credit exposure to manufacturing sector is also reflected in the slow growth in manufacturing investment in the country, WTC analysis says that gross capital formation (a proxy for investment in the economy) has grown at a tepid pace of 2% CAGR in the manufacturing sector during the last 10 years from 2011-12 to 2020-21, compared to a growth of 6% in overall investment in the economy. "The share of manufacturing in India's gross capital formation also shrunk from 17.2% in 2011-12 to 14.36% in 2020-21. On the other hand, sectors such as transport, storage, communication, trade repair, hotels and other services witnessed growth in their share of total capital formation in the economy," it says.

"The stagnancy in bank credit exposure to these core manufacturing sectors does not bode well for our Make in India and Aatmanirbhar program. It is welcome that the share of personal loans, credit to weaker sections and credit to the services sectors have been growing in the overall bank credit. At the same time, we need to promote bank lending to manufacturing sectors, especially in labour intensive segments such as leather, textile, food processing to prevent a situation of jobless growth," Vijay Kalantri, chairman at MVIRDC WTC Mumbai, says.

The analysis notes that in the last 13 years since 2008, the share of personal loans in total bank credit grew from 23% to 27%, while the corresponding figure for credit to weaker sections has grown from 4.8% to 7.5%. Similarly, the infrastructure sector witnessed higher share in overall non food credit, up from 9.3% to 10.2%. The WTC report says that as the central government establishes a dedicated financing institution for the infrastructure sector and as asset monetisation pipeline is implemented effectively, the burden of infrastructure financing on banks will reduce, which in turn may enable banks to focus more on funding to the manufacturing sector.


Riaz Haq said...

Sidharth Bhatia (India)
@bombaywallah
A banker friend, a strong supporter of the present regime, said last night, we (India) will be worse than Sri Lanka in five years. Not one economic indicator is doing well or is likely to improve, he said. "I'm not an alarmist, I'm just scared."

https://twitter.com/bombaywallah/status/1522820409971949568?s=20&t=hanYQlF0vOmpK0YYUDXofQ

Riaz Haq said...

Problems Facing Indian Economy
25 February 2022 by Tejvan Pettinger

https://www.economicshelp.org/india-2/problems-indian-economy/

Since 1991, the Indian economy has pursued free market liberalisation, greater openness in trade and increase investment in infrastructure. This helped the Indian economy to achieve a rapid rate of economic growth and economic development. However, the economy still faces various problems and challenges, such as corruption, lack of infrastructure, poverty in rural areas and poor tax collection rates.

1. Unemployment

Despite rapid economic growth, unemployment is still an issue in both rural and urban areas. The fast rate of economic growth has left unskilled workers behind, and they have struggled to find work in growing industries. In 2017, the official unemployment rate was just below 5%. However, a report by the OECD found over 30% of people aged 15-29 in India are not in employment, education or training (NEETs). Livemint reported on March 6, 2017. WIth, little if any government welfare support for the unemployed, it leads to dire poverty.

2. Poor educational standards

Although India has benefited from a high % of English speakers, (important for call centre industry) there is still high levels of illiteracy amongst the population. It is worse in rural areas and amongst women. Over 50% of Indian women are illiterate. This limits economic development and a more skilled workforce.

3. Poor Infrastructure

Many Indians lack basic amenities lack access to running water. Indian public services are creaking under the strain of bureaucracy and inefficiency. Over 40% of Indian fruit rots before it reaches the market; this is one example of the supply constraints and inefficiency’s facing the Indian economy.

4. Balance of Payments deterioration.

Although India has built up large amounts of foreign currency reserves, the high rates of economic growth have been at the cost of a persistent current account deficit. In late 2012, the current account reached a peak of 6% of GDP. Since then there has been an improvement in the current account. But, the Indian economy has seen imports growth faster than exports. This means India needs to attract capital flows to finance the deficit. Also, the large deficit caused the depreciation in the Rupee between 2012 and 2014. Whilst the deficit remains, there is always the fear of a further devaluation in the Rupee. There is a need to rebalance the economy and improve the competitiveness of exports.

5. High levels of private debt

Buoyed by a property boom the amount of lending in India has grown by 30% in the past year. However, there are concerns about the risk of such loans. If they are dependent on rising property prices it could be problematic. Furthermore, if inflation increases further it may force the RBI to increase interest rates. If interest rates rise substantially it will leave those indebted facing rising interest payments and potentially reducing consumer spending in the future

6. Inequality has risen rather than decreased.

It is hoped that economic growth would help drag the Indian poor above the poverty line. However, so far economic growth has been highly uneven benefiting the skilled and wealthy disproportionately. Many of India’s rural poor are yet to receive any tangible benefit from India’s economic growth. More than 78 million homes do not have electricity. 33% (268million) of the population live on less than $1 per day. Furthermore with the spread of television in Indian villages the poor are increasingly aware of the disparity between rich and poor. (3)

7. Large Budget Deficit

India has one of the largest budget deficits in the developing world. Excluding subsidies, it amounts to nearly 8% of GDP. Although it is fallen a little in the past year. It still allows little scope for increasing investment in public services like health and education.

Riaz Haq said...

#Indian Rupee dropped 51 paise to an all-time low of 77.41, surpassing the previous low of 76.98 in March. #INR has been staggering since the beginning of the year. Foreign funds have pulled out $17.7 billion from Indian stock market this year already. https://www.businesstoday.in/latest/economy/story/rupee-hits-all-time-low-heres-how-it-may-impact-your-life-332831-2022-05-09

https://twitter.com/haqsmusings/status/1523714595122147329?s=20&t=6rTiyW9ZU8LVQb2TvTAD2Q

Rupee hit an all-time low against the US Dollar on Monday, bringing further bad news for the economy that is already reeling under high inflation. The Rupee dropped 51 paise to an all-time low of 77.41, surpassing the previous low of 76.98 in March.


The Rupee has been staggering since the beginning of the year. Foreign funds have pulled out $17.7 billion from Indian equities this year already.

Sharat Chandra, Vice President of Research and Development, Earth ID, said that taming inflation will be an uphill task in such a scenario. However, Heena Naik- Research Analyst - Currency, Angel One Ltd was more optimistic about the depreciating Rupee.

“This negative trend in Rupee is temporary as markets are expected to be braced by IPO-related inflows which shall provide support to the Indian Rupee,” said Naik.

Chandra, however said, "The depreciating Yuan has led to the fall of many Asian and emerging market currencies, but the Indian rupee hitting new lows is worrisome for the economy because India, one of the biggest importers of crude oil, is more vulnerable to rising crude oil prices. This would also increase the trade deficit resulting in an expected current account deficit of 3 per cent and impacting the balance of payments. RBI's data suggests that India's current account deficit (CAD) increased to US$ 23.0 billion (2.7 per cent of GDP) in Q3:2021-22 from US$ 9.9 billion. In this context, taming inflation is going to be an uphill task for RBI. High-interest rates may force Indian businesses to cut down on capital expenditure."

How it will impact your life

The depreciating Rupee is likely to have a direct impact on your spendings.

Imports: Importers need to buy Dollars to pay for imported items. With the dip in Rupee, importing items will get more expensive. Oil imports will get costlier, which can directly impact consumers.

Additionally, other imported items as well as components are also likely to get costlier, which will increase the prices for consumers. This means that cars and appliances are likely to get expensive.

Escalating prices might accelerate inflation, which is already high currently.

Loans: There is likely to be an indirect impact on loans. As Rupee depreciates, import prices go up, making items and commodities more expensive. This pushes inflation. Now, with rising inflation, RBI resorts to altering the repo rate – which has already been hiked by 40 bps to 4.40 per cent. High repo rates means banks increase their lending rates, making EMIs costlier. Banks have already increased their loan rates.

Riaz Haq said...

Can #Indian #economy survive a global downturn? #India's currency #INR is at an all-time low, #unemployment is high. #Food, #energy prices are rising. #COVID19 , #UkraineWar and the #Shanghai lockdown could derail the world economic recovery. #inflation https://www.thehindubusinessline.com/opinion/can-the-indian-economy-survive-a-global-downturn/article65401455.ece

Everyone was hoping this would be the year of recovery when the global economy climbed off its Covid-19 sickbed and took the first tentative steps towards normalcy. As we recovered from Omicron, there were faint hopes we might have put the illness behind us. That brief spurt of optimism now seems premature.

The grim truth is the world couldn’t be in a worse shape. For a start, Covid-19 hasn’t gone away. Then, there’s the Russia-Ukraine war, now stretching into its 77th day with no end in sight. If all that isn’t enough, Shanghai, China’s biggest industrial city, is still undergoing a prolonged lockdown and supply disruptions could throw the global economy out of gear.

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Inflation has become a global phenomenon, and the Reserve Bank of India and other central banks are all hiking interest rates with more tightening to come. Throw in the falling rupee and that will push up the prices of all imports starting with oil, coal, steel and cement and other commodities. Inevitably, prices of everyday necessities to luxury goods will rise. The Indonesians have already banned edible oil exports which we need in large quantities and prices of pulses are also rising, driven in part by the Russia-Ukraine war. And as consumers abandon discretionary spending, this lowers tax revenues and leaves the government in a tighter-than-ever squeeze with less to spend on key projects.

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Mercedes Benz’s India CEO has gone on record to say he doesn’t have enough vehicles to meet strong demand. On a different level, companies like Maruti and Hero are saying there’s insufficient demand for their lower-end vehicles, suggesting buyers in those categories are stalling on purchases due to financial worries. Throw in sliding stock markets for the more well-heeled and it’s clear discretionary spending will suffer.

Outsourcing to China where manufacturing was cheaper seemed like a great idea until now when the perils of putting all your production eggs in one basket are becoming clear. Over the last 30 years, China has become the world’s factory and there’s nothing left in the West. Take shipbuilding for instance. The world’s 10 top shipyards are in South Korea and China.

Now, with China in lockdown, it’s disrupting global supply lines and creating shortages globally. It’s unclear when Shanghai will get Xi’s all-clear to open up. We’ve seen from our own experience a two-to-three week lockdown doesn’t stamp out Covid-19 totally and Omicron is especially fast-spreading.

Can India escape the effects of a global slowdown? We emerged relatively unscathed in 1999 and also 2008. But now we’re more interlocked with the world and it’s tough to see us escaping the multiple blows that are striking different corners of the globe.

Riaz Haq said...

The Indian economy is being rewired. The opportunity is immense And so are the stakes

https://www.economist.com/leaders/2022/05/13/the-indian-economy-is-being-rewired-the-opportunity-is-immense

Who deserves the credit? Chance has played a big role: India did not create the Sino-American split or the cloud, but benefits from both. So has the steady accumulation of piecemeal reform over many governments. The digital-identity scheme and new national tax system were dreamed up a decade or more ago.

Mr Modi’s government has also got a lot right. It has backed the tech stack and direct welfare, and persevered with the painful task of shrinking the informal economy. It has found pragmatic fixes. Central-government purchases of solar power have kick-started renewables. Financial reforms have made it easier to float young firms and bankrupt bad ones. Mr Modi’s electoral prowess provides economic continuity. Even the opposition expects him to be in power well after the election in 2024.

The danger is that over the next decade this dominance hardens into autocracy. One risk is the bjp’s abhorrent hostility towards Muslims, which it uses to rally its political base. Companies tend to shrug this off, judging that Mr Modi can keep tensions under control and that capital flight will be limited. Yet violence and deteriorating human rights could lead to stigma that impairs India’s access to Western markets. The bjp’s desire for religious and linguistic conformity in a huge, diverse country could be destabilising. Were the party to impose Hindi as the national language, secessionist pressures would grow in some wealthy states that pay much of the taxes.

The quality of decision-making could also deteriorate. Prickly and vindictive, the government has co-opted the bureaucracy to bully the press and the courts. A botched decision to abolish bank notes in 2016 showed Mr Modi’s impulsive side. A strongman lacking checks and balances can eventually endanger not just demo cracy, but also the economy: think of President Recep Tayyip Erdogan in Turkey, whose bizarre views on inflation have caused a currency crisis. And, given the bjp’s ambivalence towards foreign capital, the campaign for national renewal risks regressing into protectionism. The party loves blank cheques from Silicon Valley but is wary of foreign firms competing in India. Today’s targeted subsidies could degenerate into autarky and cronyism—the tendencies that have long held India back.

Seizing the moment
For India to grow at 7% or 8% for years to come would be momentous. It would lift huge numbers of people out of poverty. It would generate a vast new market and manufacturing base for global business, and it would change the global balance of power by creating a bigger counterweight to China in Asia. Fate, inheritance and pragmatic decisions have created a new opportunity in the next decade. It is India’s and Mr Modi’s to squander. ■

Riaz Haq said...

Rajeev Matta
@RajeevMatta
India’s total debt in March 2014 was 53 lac crores. In March 2023 it will be 153 lac crores. He has added 100 lac crore in 8 years.
India’s debt to GDP ratio was 73.95% in Dec 20.
(1/n)

https://twitter.com/RajeevMatta/status/1525346057122885632?s=20&t=Zyx1zQAQBBPBZOtbnnbWNg

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Rajeev Matta
@RajeevMatta
Foreign reserves are under 600 billion dollars. The trade deficit in March 22 alone was 18.51 billion when we exported the most (an increase of 19.76%); the import too that month increased by 24.21% (they don’t highlight that).
(2/n)

------------
Rajeev Matta
@RajeevMatta
Besides paying for the trade deficit, the foreign reserves need to provide for 256 billion dollars of debt repayment by Sept 22. Imagine, with imports getting costlier where we will be then.
(3/n)

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Rajeev Matta
@RajeevMatta
Indian banks, specially the govt ones are making merry. In FY 21, they wrote off loans worth Rs 2.02 lac crore and since 2014, a whopping 10.7 lac crores. 75% of this is by public sector banks. We all know who all borrowed and scooted or not paying back.
(4/n)

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Rajeev Matta
@RajeevMatta
Finally, the GDP. We were going well at 8.26% in March '16 after which he punctured the tyres of the running car. Remember demonetization? We came down to 6.80 in 17; 6.53 in 18; 4.04 in 19 & -7.96 in 20. Who says pandemic and world economy are responsible for our halt?
(n/n)

Riaz Haq said...

The world has been hit with a double whammy - on one hand there is a recessionary trend with demand falling, at the same time prices are going up. Central banks around the world took inflation too lightly, says Swaminathan Aiyar. Stagflation signs are around. While we (India) may not collapse like Sri Lanka or Pakistan but we are certainly in trouble, he believes.

https://economictimes.indiatimes.com/news/economy/policy/india-wont-collapse-like-sri-lanka-or-pakistan-but-we-are-certainly-in-trouble-swaminathan-aiyar/articleshow/91685298.cms

We are at highest rate of inflation in years. The wholesale price index for April had just come in at 15.05%. The consumer price index 7.8%. These are extraordinarily high rates and there is nothing special about India. In America where the target inflation is 2% their latest inflation rate 8.5%, it came down a little to 8.3%. So there is global inflation.

Prices of commodities, services, manufacturing - have been soaring in the last 12 months. The inflation began in 2021 and the Ukraine war has accelerated it. The world is caught in a huge inflationary trap right now . The physical shortage of a large number of commodities has been building up over time, and over and above that came the shock of war and the sanctions imposed on Russia, which is an important supplier of number of items. The Black Sea, which is one of the greatest supply routes out of Russia and Ukraine, has been blocked by the war.

On top of everything else China has committed a kind of hara-kiri by having a complete lockdown in an attempt to stomp out COVID - so there is a separate supply shock because there is no production going on in China. These different strands have all come together for a gigantic shock.

We are in a situation where on the one hand there is a recessionary trend, recession is coming because demand is falling, at the same time prices are going up. Some people call this stagflation.

In the case of India we have been hit both ways. We were expecting this to be a very good year for growth. The World Bank, IMF had said India would be the fastest growing major country, and perhaps that will still be the case but earlier they were hoping for 9% growth or things like that, now people say maybe 7%, 7.5%, maybe 6%. So, we are in a tough position right now with inflation is rising fast because inflation is rising everywhere else in the world and because of that we cannot escape it alone and the downtrend, the recessionary trend is also coming the world over and we cannot escape that. We are perhaps better positioned to withstand the problem that some other countries. We will not collapse like Sri Lanka or Pakistan but we are certainly in trouble

Riaz Haq said...

We (India) may not collapse like Sri Lanka or Pakistan but we are certainly in trouble, he (Swaminatham Aiyar) believes.

https://economictimes.indiatimes.com/news/economy/policy/india-wont-collapse-like-sri-lanka-or-pakistan-but-we-are-certainly-in-trouble-swaminathan-aiyar/articleshow/91685298.cms

Do you think the situation is under control. Can central banks control inflation just by raising the rates?
Raising interest rates is not going to solve the supply problem. Raising interest rates is a way of-- if there is an overheated economy with too much demand then you can say I want to slow down that demand by raising interest rates and making it difficult for people to buy but that is not the case today. India does not have an overheated economy where there is too much demand, in fact there is not enough. Take a look at the India Inc earnings - the auto sector is not in good shape, demand is low and so production is also being affected.

There is a shortage in areas like metals but even there the prices have come down very sharply. So right now, the problem of inflation cannot easily be solved by tightening the interest rates. It can be tightened in some cases, the government is trying to do it in the case of wheat by putting an export ban. If you look at the world price of wheat it costs about Rs 40 a kilo and if we freely allow the export of wheat and all our surplus buffer stocks we can have a huge export boom but then if the Indian price equates with the world price at Rs 40 a kilo there will be mayhem and there will be riots on the streets so the government has tried to do supply management by saying we will stop all exports of wheat.

This I think was a bad move, I mean it should have been more gradual and they should be allowing some exports but right now that is one thing that they can do. They have put a ban to improve the supply of wheat and this can help to reduce inflation on that front. Beyond that you will have to live with the global trends, you cannot wish away the global trends and just as Indonesia has put this restriction on edible oil, we are a very large importer of edible oil we are going to suffer.

The government up to a point can reduce import or excise duties on commodities like edible oil, crude oil, petrol, diesel - but all this would be limited amount of relief. It is not the case that prices will come down but you can you can limit the extent to which the prices rises beyond that you will have to wait for this war to play out and for this business cycle to play out, those are items beyond your control.

What do you think is the best course of action for the RBI now?
Central banks around the world, including the RBI, were too relaxed about inflation. They kept thinking this is some temporary delaying it will go away. Then they thought that some increase has taken place last year it will go away then they thought no, then when the war came then again people thought that this may be just temporary, there will be a quick solution to the war.

There is no quick solution to the war and it has now become very clear that inflation has gone out of control compared with what you expected it to be.

In America the target is 2% and it went to 3-4% they said you know okay it could come down again instead it has gone to 5%, 6%, 7%, 8%, 8.5% so panic has broken out there and they are tightening and tightening. The RBI cannot afford to be left out and therefore the RBI has been reluctant to raise interest rates but when everybody else is doing it they say we will have to do so because if we do not do so there can be an attack on the rupee.

You cannot have a situation where everybody else just raising the interest rates and India is not, if you do that huge amount of money can flow out of India so because of that the RBI reluctantly is increasing its rates and will continue to raise its rates there is no option and apart from protect any our foreign exchange reserves it will also help tame inflation up to a point.

Riaz Haq said...

Autonomous Hindutva could devour both India and the Bharatiya Janata Party
In a formally secular India, religion indeed seems to have become the opium of the people, a mass distraction from the transformative social agenda that the country needs

Last Updated at May 23, 2022 09:46 IST


Bharat Bhushan

https://www.business-standard.com/article/opinion/autonomous-hindtuva-could-devour-both-india-and-the-bharatiya-janata-party-122052300133_1.html

With the rapid radicalisation of sections of Hindu society, the Hindutva project has become dangerously autonomous. It is no longer possible to see it only as an electoral strategy of the Bharatiya Janata Party (BJP). Today one does not need to even presume the direct hand of the BJP or the Rashtriya Swayamsevak Sangh behind Hindutva’s every move.

Its exponential social growth may have placed it beyond their control. In a formally secular India, religion indeed seems to have become the opium of the people. When Marx described religion as “the sigh of the oppressed ...