Boosting the State of Indian Economy

GDP trend indicates the health of any economy. The economic slowdown is often cyclic and a fact of life. However, the economic woes are all-pervasive and understanding the root causes help in providing insight on how best to fix. Individual countries have different problems, comprising different patterns. Thus the root causes can be broadly categorized into a pattern and individual factors specific for the country and its economy. Often, there is a shared thread between the integrated global market place. Identifying the patterns and the specific individual factors will help in putting up a strategy for revival.

This article articulates the need for a solution within broader problem space for India, which has fluctuated economically from ‘at risk’ (2013), ‘expansion’ (2016) and now again ‘at risk’ (2019). This blog is not exhaustive and does not go into a detailed root cause analysis or detailed solution building exercise. In this article, the author has provided a select set of solutions that would boost the economy, provide opportunities across multiple sectors and ameliorate the problem of the continuing slowdown.

Word Count 2294; reading time 8 – 11 min.

Economic slow down is often cyclic and a fact of life. Slowing down or crash landing of the Indian Economy is an increasing chatter on the internet. However, a closer look will reveal that the recessionary phenomenon encompasses most major economies including the US, China, Japan, Germany, the UK, France, Russia, South East Asia (the so-called ‘Tiger Economies’ of the 2000s), Brazil, Turkey, and oil-rich Gulf Nations. Latin American countries such as Venezuela, Brazil, and Argentina are acutely going through this recessionary distress with revolts and change of ruling Governments. Venezuela is undergoing severe inflation called stagflation that is spreading the contagion across the borders. Poland and Canada are amongst the only few countries that are showing flying colors despite the adverse global economic headwind.

Nations such as Pakistan, Sri Lanka, and many African countries, especially those who have subscribed to the String of Pearls (SOP), Belt and Road Initiatives (BRI), Regional Comprehensive Economic Partner (RCEP) and the 54 nations of the Africa Continent Free Trade Agreement (AfCFTA) will face a massive financial challenge while servicing the burgeoning Chinese loans. Countries such as Pakistan, are on the precipice of falling into bankruptcy. No wonder India quit the Regional Comprehensive Economic Partnership (RCEP) regional trade consortium. 

The economic woes are all-pervasive and the root cause commonly follows select patterns. Individual countries have different problems. However, there is a common shared thread and select individual factors. Identifying the patterns for a specific country will help in putting up a strategy for revival. I have focused on articulating the need for a solution within broad problem areas. This blog is not exhaustive and does not go into a detailed root cause analysis or detailed solution building exercise.

Ignored Global Comparison:

In India, private debt in 2017 was 54.5 percent of the GDP and the general government debt was 70.4 percent of the GDP, total debt of about 125 of the GDP, according to the latest IMF figures. In comparison, the debt of China was 247 percent of the GDP. As of October 2018, it stands at approximately CN¥ 36 trillion (US$ 5.2 trillion), equivalent to about 47.6% of GDP. A key gauge of China’s debt has topped 300% of gross domestic product, according to the Institute of International Finance (IIF), as Beijing steps up support for the cooling economy while trying to contain financial risks. China’s total corporate, household and government debt rose to 303% of GDP in the first quarter of 2019, from 297% in the same period a year earlier, the IIF said in a report this week which highlighted rising debt levels worldwide.

In the United States, total non-financial private debt is $27 trillion and public debt is $19 trillion. More telling, since 1950, U.S. private debt has almost tripled from 55 percent of GDP to 150 percent of GDP, and most other major economies have shown a similar trend. Cumulative debt stands at 40 trillion dollars. Comparative figures from the US reveal that India is not badly hit, considering the numbers released by the Indian Government are trustworthy and credible.

Let us review select Key Performance Indices (KPI’s) of India’s financial health. Here are a few interesting figures from the State Of Indian Economy –

  • GDP growth is at a 15-year low
  • Unemployment is at a 45-year high
  • Household consumption is at a four-decade low
  • Bad loans in banks are at an all-time high
  • Growth in electricity generation is at a 15-year low

The list of highs and lows is long and distressing. But the state of the economy is worrying not because of these disturbing statistics. These are mere manifestations of a deeper underlying malaise that plagues the nation’s economy today. These figures were published in the Hindu, a very reputed and respected daily. When I share independent data from foreign outlets, those are immediately ridiculed as being ‘biased to damage the growing stature of India’.

I was talking with a building contractor friend of mine who has a meaningful business.  When prodded on his state of business, he said, everything is so dry and no new constructions are taking place. This is not my isolated discussion. Every now and then, I do probe these questions to people across the globe and India happens to be on the top. Below is a list of industry verticals that are not just sluggish but in recession (more than 2 quarters of slow down beyond certain percent points).

 

India Economic Slow Down

Industries Impacted: 

  • Manufacturing
  • Farming
  • Auto
  • Construction
  • Airlines
  • Service industry

Impact Equivalence: 

If you factor in the total percent affected, you will notice a major chunk of the population that forms the base of the pyramid, is affected because of the slowdown.

What happens now?

Well, families and business entities are at least losing 34-57% of their revenue. That’s a significant number. Spending goes down and tax collection goes down, tax at the POS (point of sales), tax from earning and tax from the business.

    1. Quantitative Easing
    2. Bad Loans or Risk prone leveraged industry
    3. Global slowdown
    4. China – A special mention
  • Quantitative Easing:

Well, let us borrow now at a cheaper rate from the Govt, or blow up what is saved in RBI (exit RBI Governors), a loan or from outside or print currency.

  • Bad Loans or Risk prone leveraged industry:

We can’t let this to catapult to a state of anarchy. We have to loan where the potential for defaults are high. Banking, Airlines, Telecom ate common examples. These were bankrupt overnight? The most common folks (shareholders) lost the most. Millions of crores of national treasure disappeared in just a fraction of time.

I disagree with “the Hindu” here. Let us understand, corruption was not just prevalent but endemic and all-pervasive. Nothing wrong, if Modi tightened the levers. At least he had guts to do that. No one including the system had shown responsible behavior and if Modi has tightened the noose, nothing wrong about it.

I will elaborate on the reasons where we are going wrong, needless and pointless to blame Modi for all the ills. Devaluation and GST came at a wrong time that confluence along with a Global slowdown, on which Modi had little control.

  • Global slowdown:

India is not alone. China, UK, Germany, Japan, the US, France, Gulf, Russia, Brazil, and many Tiger economies (remember the term for ASEAN economies used in 2000) are significantly slowed down.

  • China deserves a special mention:

China is the worst affected with 100s of ‘Ghost Cities’, flailing international trade pacts (CPEC, ASEAN and The revival of the Silk Road) and the flight of money compounded by the increasing cost of labor. It is gaining a notorious reputation of creating and exploiting poor nation’s solvency, squashing neighbors and selling obsolescence across the globe (recollect how your electrical and other goods specifically made is China have become durable and short-lasting).

India WEF

What should be done?

First and foremost, Modi has to move beyond strongman to strategist. A nation survives on vision and not just statesmanship. I have identified a few areas that will help boost productivity at the individual level, jump start the GDP and improve the health of the economy.

    1. Foundational Infrastructure
    2. Roads and Railways
    3. Satellite Cities and Telecom
    4. Innovation in Farming
    5. Revamp Agricultural Supply Chain
    6. Environment and Pollution
    7. Sewage and Containment
    8. Social Re-Engineering

India Vision and Strategy Continue reading “Boosting the State of Indian Economy”

Demonetization – A Class Divide?

Demonetization – A Class Divide?

Despite being a tool for fighting corruption, demonetization has polarized us as a society. How do we, as a society, think on a matter of vital national interest? Please see the opinion of the common man at the end of this blog. What should be done to make this a national initiative? Please read http://wp.me/p7XEWW-km

Background

The current demonetization drive for stopping corruption has either become a boon or a bane. Demonetization of currency has strongly opinionated Indian. At the core of our values, we all want corruption to be eradicated. We all differ in our perspective towards how this should be executed. Eradicating corruption is a fundamental initiative that has significant impact to our identity, polity and to the country’s Macroeconomy. Across sections of the society, many are doubtful and cynical. What makes us feel so? Why do we see a class divide and a strong polarization of opinion? What can be done to reduce this gap and drive this initiative as a national cause?

Is this stop gap? Or will it really stop?

Nefarious means are unlikely to change unless we see a substantial change in attitude towards way of living and transacting in our daily life. Whenever radical change is initiated, and if it is unaccompanied by fundamental change, the system is bound to go back to status quo. I already see those signs. So demonetisation will either stall or impede the flow of black money, temporarily but it won’t nix this at the bud.

Who likes or dislikes demonetization?

Service class and Expatriates for sure are supportive of this initiative. Their earnings are all white transactions. Business, Politician, Illegal (drugs, alcohol, nefarious political-business connections and terrorist), those using hawala, are unlikely to accept or adopt this change. Farming community will be neutral. Poor will be swayed by the noise rather than the voices they hear.

What an irony, we haven’t learnt for centuries

Earlier, the Englishman arrived in sixteenth century. They stayed, understood, conquered, consolidated, ruled and looted and deprived this golden land not just materially but made us defunct morally.

We still haven’t changed. We still think our cause above the country, prefer to be blind sighted to others perspective. Seems like, that is within our genome and our destiny or else, why can’t we listen to each other’s perspective, why should we not have a national inclusive dialog?

No, that inclusive dialog won’t happen because somewhere, we deeply trust that ‘My truth is superior than your truth’ and we go a step further, to engross all the credit for this achievement. Collectively, we have forgotten what is best for this country.

We know corruption is a national menace, it’s like an enemy within.  In the best interest of the nation, we should be unified for this national cause, we should come forward and adopt and accept, and provide constructive recommendations, rise above ourselves to let this happen. To some, this may sound hollow, but nations like Japan and several from European Union, have risen because, their constituent decided to adopt that pathway. It is not a utopian principle, it’s realty with pragmatism.

Should Prime Minister Modi be inclusive?

Yes, if this needs to succeed! Do we need to do more than withdrawing old currency and circulating new notes? Do we need this to be backed up with change in our attitude and fundamental way we think and work in our daily life?

Why Presidents Fail And How They Can Succeed Again

Kamarck, a Sr. Fellow at Brookings Institute Governance Studies, argues that presidents spend too little time investing on Governing. She explains the difficulties of governing in our modern political landscape, and offers examples and recommendations of how our next president can not only recreate faith in leadership but also run a competent, successful administration.’ I believe, we can easily extrapolate this to include our administrators as well.

A Kind request

This is a non-partisan exercise, not supported or aligned with any political group. Neither is this supported by any business or vested interest. To many, it is a matter of national importance and I would appreciate your motivation in spreading this message. By spreading this message, you may get to know the perspective of those within your community.

Please share your opinion when you visit the survey on the link below. As always, polls are anonymous. I have enabled single voting per device. If you have a question, kindly use the comment box to submit.

Note: I have disabled advertisements from this site. Despite if you see any advertisements, kindly report to me with a screenshot or time stamp the event. 


Additional Reading

  1. Demonetization and India’s Macroeconomy – Will Rupee Depreciate? Copy paste this link if the above won’t work http://wp.me/p7XEWW-jt
  2. Surgical Demonetization? What Is Good And What Needs To Be Fixed? Copy paste this link if the above won’t work http://wp.me/p7XEWW-eA
  3. Why Presidents Fail And How They Can Succeed Again

Uniform Civil Code

Religion is a personal and private affair, you have right to practice your religion but within the confines of your defined space (home, place of worship or confined gathering). Societal life (presuming multicultural plural society) should be defined by legal statutory framework. We should not encroach onto the personal space meant for others. Why? It would mean imposing our values and ideals upon them.

Debate on common civil code across nation….my response to this topic..may be lop sided, Nitin Aslam and other rational minds, kindly correct or add.

Here is my simple view – religion is a personal and private affair, you have right to practice your religion but within the confines of your defined space (home, place of worship or confined gathering). Societal life (presuming multicultural plural society) should be defined by legal statutory framework. Yes, we will see overlapping and conflicting gray areas. To address these conflicts, we should not encroach onto the personal space meant for others. Why? It would mean imposing our values and ideals upon them. Should majority view be imposed upon a minority group? Naturally, it happens, conscientiously, we should avoid.
Example – In India, it is a common practice to spank kids (or at least it was), those standards are equated with child abuse in western world. Initially, when Asians were discovered with those so called brutal (western perspective), they took away kids from such households (check for coining and abuse). Now, it is accepted practice to understand such behavior as normal love affection care spectrum.
It has become a norm here to understand cultural sensitivity and respond accordingly. What’s nice about US is not that they don’t err but they change and build nation with inclusivity.