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NCAER presented its Quarterly Review of the Economy, covering the performance of the Indian Economy in the third quarter of 2017-18 and forecast for the year ahead at this seminar held at NCAER. Organised as an integral part of the Quarterly Review, this seminars brought together policymakers, industry leaders and researchers for a discussion.

Key Highlights of NCAER’S Quarterly Review of the Economy

NCAER forecasts growth based on both quarterly and annual models. Based on the annual model, NCAER forecasts a growth of 6.3 per cent for 2017–18 for GVA (Gross Value Added) at basic prices, and of 6.7 per cent for the Gross Domestic Product (GDP) at market prices. These forecasts are at constant (2011–12) prices. For 2018–19, NCAER forecasts a growth of 7.5 per cent for GDP at market prices and 7.2 per cent for GVA at basic prices.

In 2017–18, the real agriculture GVA is envisaged to grow at 1.0 per cent, real industry GVA at 5.2 per cent, and real services GVA at 8.0 per cent. The Wholesale Price Index (WPI) inflation is projected at 6.4 per cent for 2017–18. The growth rates in exports and imports, in dollar terms, are estimated at 12.8 per cent and 24.8 per cent, respectively, in 2017–18. The current account balance and central fiscal deficit, as percentages of GDP, are projected at –2.0 per cent and 3.5 per cent, respectively, for 2017–18. These estimates have been revised upwards since November 2017 based on the positive outlook emanating from the leading indicators in 2017–18:Q3.

The NCAER quarterly model forecasts that Gross Value Added at Basic Prices (2011–12) will grow at 6.5 per cent in 2017–18 and at 7.2 per cent for 2018–19 on a y-o-y basis.

In the agriculture sector, despite the rainfall being below normal both during and after the monsoon, the estimated output of major crops computed by NCAER, based on area and output equations, suggests that the output of kharif foodgrains is expected to be 139.8 million tonnes to 141.2 million tonnes, signifying an increase of 1–2 per cent over last year’s output of 138.5 million tonnes. The output of rabi foodgrains is also expected to remain close to last year’s output of 137 million tonnes. The output of oilseeds in both the kharif as well as the rabi seasons is also expected to be close to last year’s output, and the situation is likely to be similar in the case of both cotton and sugarcane.

The Index of Industrial Production (IIP), a measure of industrial performance, noted a year-on-year (y-o-y) growth of 3.7 per cent during the period April–December 2017–18, versus 5.1 per cent recorded during the corresponding period in 2016–17.  However, the aggregate figure masks the recovery achieved in November and December, 2017, driven by growth in manufacturing. The outlook is, however, uncertain with both the Nikkei PMI Index and the SBI Composite Index showing relatively slower economic growth in January 2018 as compared to the two preceding months. The capital goods sector has specifically experienced steady growth since August 2017 and double-digit growth in October and November 2017, pointing to a positive sign of investment spending. The consumer non-durables sector also showed double-digit growth of 10.4 per cent in April–December 2017 versus 7.5 per cent during the corresponding period of the previous fiscal. Cumulatively the core infrastructure industries registered a growth of 4 per cent during the period April–December, 2017–18, as compared to 5.3 per cent recorded during the corresponding period the previous year.

The lead indicators from the service sectors in the third quarter suggest a positive outlook for the aviation sector, tourist arrivals, cargo traffic production of commercial vehicles, and banking credit to the commercial sector. The exports of software services showed positive growth in the first two quarters of the current fiscal. The growth in the Nikkei PMI services confirms the positive outlook.

The exports of goods, in dollar terms, show a year-on-year (y-o-y) growth of 11.8 per cent between April and January 2017–18. The y-o-y growth in January 2018 moderated to 9.1 per cent after growing at 30.1 per cent and 12.4 per cent in November and December 2017, respectively. The imports of goods in dollar terms showed a 22.2 per cent y-o-y increase during the period April–January 2017–18. Merchandise imports grew at 26.1 per cent in January 2018 on a y-o-y basis. Merchandise imports continued their growth momentum from the previous two months of November and December 2017. The merchandise trade deficit of US$88,337 million increased to US$ 131,155.5 million over the period April–January 2016–17.  Service exports showed a moderate growth of 0.2 per cent in 2017–18:Q3 while imports declined.   The Indian rupee appreciated against the dollar throughout 2017, recording an overall appreciation of 5.9 per cent between January and December 2017.

While the aggregate retail and wholesale inflation rates showed an upward trend during the period October to December 2017, there were significant differences in the month-on-month rates. There is a slight correction in the prices for January 2018 with both the CPI and WPI inflation figures recording a significant reduction from the highs they touched in December 2017. Food prices, particularly the prices of fruits and vegetables continue to be volatile, causing significant variations in inflation.

As regards the monetary space, the Reserve Bank of India maintained the status quo at its sixth bi-monthly meeting in February 2018, with the policy repo rate remaining unchanged at 6.0 per cent for the FY 2017–18. Based on the current and evolving macroeconomic situation of the economy, the RBI is expected to continue with the neutral liquidity stance in the coming months.

In the realm of public finance, the period of 2017–18:Q3 recorded one of the highest y-o-y increases in Fiscal Deficit (FD), at 129.1 per cent, and in Revenue Deficit (RD), at 143.3 per cent, over the previous eight quarters. FD and RD showed y-o-y increase of 129.1 per cent and 143.3 per cent respectively in 2017–18:Q3. A rise in the total expenditure with a lesser aggregate revenue has led to a higher fiscal deficit. The large deterioration in the revenue deficit has been mainly triggered by the 9.3 per cent quarterly increase in revenue expenditure and 7.9 per cent decline in revenue receipts on a quarterly basis.

NCAER’s quarterly report is designed to meet the needs of policy makers, corporates and others interested in tracking the latest developments in the Indian economy.

It provides an analysis of current policies and tracks developments in both the domestic as well as the global economies. The growth forecasts of NCAER are objective and are widely quoted and referred to in both the Indian as well as international media.

This joint seminar brought together the Executive Directors of five institutions, namely, the Centre for Policy Research (CPR), Indian Council for Research on International Economic Relations (ICRIER), India Development Foundation (IDF), National Council of Applied Economic Research (NCAER), and National Institute of Public Finance and Policy (NIPFP to present their more reflective assessment of the Union Budget 2018-19.

The 2018-19 Budget has already generated considerable interest, perhaps more than most recent budgets. Of particular concern is how the impact of recent structural measures on macroeconomic and fiscal policy and the Government’s commitment to future fiscal reforms and prudence will be reflected in this budget. Against this backdrop, the heads of the five institutes shared their views of the Union Budget and its longer-term implications for the Indian economy under the leadership of the NDA Government. NCAER was represented by its Director-General, Dr Shekhar Shah. Mr. Shyamal Majumdar, the editor of the Business Standard, moderated the discussion and the Q&A with the audience.

The Union Budget in India remains the bellwether of where the government is headed with its economic policies. But much of the immediate commentary and excited dialogue on TV and the newspapers takes a narrow, short-term view. As a counter, the executive directors of five of India’s leading economic policy research institutes came together in March 2007 for the first time to present their assessment of the longer term reform and development implications of the Budget. This joint event runs into its 12th year in 2018.

On Friday, January 19, 2018, NCAER invited Aradhna Aggarwal, Chair Professor, Indian Studies, Department of International Economics and Management, Copenhagen Business School and held a lecture, “Impact of SEZs on Poverty and Human Well-being in Undivided Andhra Pradesh”. Nilotpal Goswami, Director General, CAG was the discussant for the seminar.

Professor Aggarwal’s joint paper with Ari Kokko, on SEZs, reveals that the passage of the Special Economic Zone (SEZ) Act in 2005 marked a significant development in the Indian economy, as it helped mobilise private investment for industrialisation for the first time in India’s post-Independence economic history. However, the subsequent proliferation of SEZs sparked off a fierce debate in both academic and policy circles over the usefulness of such zones. There were serious concerns about the displacement of farmers necessitated by land acquisition for SEZs, loss of fertile agricultural land, huge revenue loss to the exchequer and the adverse consequences of uneven growth. Despite the persistent controversy and voluminous literature on the subject over the past decade, there is little empirical evaluation of the social impacts of SEZs. In this backdrop, this study evaluates the impact of SEZs on poverty with special reference to undivided Andhra Pradesh, the state with the largest number of SEZs, especially in the manufacturing sector. The authors examine how the presence of SEZs affects human well-being in the wider economy, and estimate the average and distributional effects of SEZs. Their findings point to a positive average treatment effect on the levels of real per capita expenditure in SEZ districts, and to suggestive evidence that people living in urban areas are the major beneficiaries. The preliminary findings of the paper thus do not seem to support the views that Indian SEZs are no better than the status quo or that the country would have been better off in the absence of these zones.

Aradhna Aggarwal, former Senior Fellow at NCAER, is currently Chair Professor, Indian Studies, Department of International Economics and Management, Copenhagen Business School, Denmark, and Advisory Professor, Yunnan University, Kunming Province, China. Aradhna is keenly interested in industry, technology, international trade and investment related issues and has published extensively on these issues. She taught Economics at the University of Delhi from August 1982 to January 2014. During this period, she also had an opportunity to serve at NCAER, Institute of Economic Growth, and Indian Council for Research on International Economic Relations. She worked as an external consultant to international agencies like UNESCAP, ADB, UNDP and the World Bank; the Ministries of External Affairs, Commerce and Information Technology, Government of India; and RIS, among others. She is the principal author of the Kerala Perspective Plan 2030 prepared by NCAER for the Kerala Government. Aradhna received her MA in Economics from Delhi University, and PhD in Industrial Economics from the Delhi School of Economics.

Aradhna’s co-author for the paper is Ari Kokko, Professor and Director of Asia Research Centre in the Department of International Economics and Management, Copenhagen Business School, where he focuses on the role of trade and foreign direct investment in the development process. He has been an advisor and consultant to a number of national governments and international organisations in the Nordic region. He received his BSc in Economics and Economic History from Lund University, Sweden, and his PhD in Economics from the Stockholm School of Economics. He was also awarded an honorary doctorate in Economic Sciences by Tartu University, Estonia.

Malcolm Childress
Co-Founder and Executive Director, Land Alliance

&

David Spievack
Lead Research Architect for PRIndex, Land Alliance

NCAER is organizing first of its 2018 seminars on “PRIndex”, a global indicator of citizens’ perceptions of the security of property rights, with Malcolm Childress, Co-Founder and Executive Director of Land Alliance, Inc., and David Spievack, Lead Research Architect for PRIndex, also at Land Alliance.  PRIndex aims to fill the information gap about individual perceptions of property rights by creating a baseline global dataset to support the achievement of secure property rights around the world.

Property rights are a cornerstone of both economic development and social justice. However, there is no well-established methodology to-date to measure and reasonably compare property rights as perceived by citizens over time and across countries. Building on initial pilot data collected from nine countries including Brazil, Colombia, Egypt, Greece, India, Indonesia, Nigeria, Peru and Tanzania in 2016 and 2017, PRIndex plans to collect data from an additional 36 countries across the world in 2018, creating the world’s first comprehensive account of people’s perceptions and opinions of property rights. The presentation will recapitulate the history of PRIndex, discuss results from its most recent round of testing in India, Tanzania, and Colombia, and share current plans and timelines for 2018.

PRIndex is an initiative supported by the Omidyar Network and DFID, the UK Department for International Development, and implemented by Land Alliance in association with Gallup, Inc.  Land Alliance is a think-and-do tank that tests new approaches to defining and managing rights, shares expertise and best practices globally, and supports groups working to scale the solution of land issues. It works to find solutions to the complex development challenges of cities, rural landscapes and forests by aligning local, national and international resources.

Malcolm Childress is an economist and land administration specialist with 30 years of experience working with land tenure and property rights systems. He is a co-founder and Executive Director of Land Alliance and co-director of the Global Property Rights Index initiative with the Open Data Institute. He was Senior Land Administration and Policy Specialist in the World Bank from 2003-2014, and previously a senior scientist at the University of Wisconsin-Madison Land Tenure Center.  He has a PhD from the University of Wisconsin-Madison.

David Spievack is Lead Research Architect, PRIndex. He has 25 years of market research experience in Japan and the United States, leading market research and analytics and a number of multinational research initiatives at both PayPal and VISA. Since leaving VISA in 2015, David has been a research and strategy consultant for a number of for-profit, non-profit, and impact investing firms. In addition to supporting the property rights team at Omidyar Network, David has written on multiple subjects, including the preconditions and drivers of empowerment, privacy and informed consent, resilience theory, systems thinking, and anti-establishment politics in the United States. He received his BA, MA and MPhil in History from Columbia University.