Archives: Event

In recent years, China has moved to “rebalancing” its economy away from a dependence on exports and investment to increasing domestic consumption. What will a rebalanced China look like? What will the rest of the world, and Asia with a rebalanced China in it, look like? This seminar organised by NCAER addressed these issues with Dr Paul Gruenwald of S&P Global Ratings based out of Singapore. Dr Ramgopal Agarwala (former World Bank) and Dr Soumya Bhadury (NCAER) joined as discussants. Dr Shunli Yao (former NCAER) also joined the discussions via video conferencing.

China’s rebalancing story has two sides: (i) changes in the composition and sources of Chinese GDP growth, and (ii) how the rest of Asia (and the world) would adjust to those changes. China is not the textbook “small open economy,” and changes in China are already having measurable impacts on all its trading partners. A major challenge for analysts is to figure out the impact of these developments for the rest of the Asia-Pacific region. Does the region gain or lose from China’s rebalancing towards more consumption and service-led growth? How will individual economies in Asia fare? And what would be the implications for individual sectors that are important for Asia? Taken together, which factors and policies will be most important in determining the countries that will themselves successfully “rebalance” around China? The talk by Dr Gruenwald and following discussions with a host of participants concentrated on these issues.

Paul Grunewald is the Chief Economist for Asia-Pacific at S&P Global Ratings based in Singapore. Grunewald previously worked with the ANZ Banking Group and was also its Chief Economist for Asia-Pacific. He was earlier with the IMF for nearly 16 years, leading the team producing the IMF’s Asian Regional Outlook Reports. Paul has a PhD in economics from Columbia University and a bachelor’s degree in economics and mathematics from the University of Texas.

Ramgopal Agarwala is presently Honorary Senior Fellow at NCAER. In addition, he is the Chairman of Pahle India Foundation and was until recently, Distinguished Fellow, RIS. He has worked in various senior positions in the World Bank for 25 years with his last posting to Beijing being as the Chief Economist of the World Bank in China. Ram has a PhD in econometrics from Manchester University and an MA in economics from Presidency College, Kolkata.

Shunli Yao is Director of the Institute for Applied International Trade, a Beijing-based independent think tank. He specialises in international economics, with a particular interest in Chinese foreign trade. He is a founding member of the Asia Pacific Research and Training Network on Trade (ARTNeT). In March 2014, he was a visiting fellow at NCAER. He has taught at universities in Australia, Hong Kong and mainland China. Shunli holds a PhD in economics from the University of California at Davis.

Soumya Bhadury has recently joined NCAER as an Associate Fellow. Prior to joining NCAER, Bhadury taught at the University of Kansas while working on his PhD there on bringing money back into monetary models of exchange rate determination. Bhadury’s interests broadly lie in macro and international economics with a special focus on the exchange rate, and monetary theory and policy.

In the week that will see a major change of guard at the Reserve Bank of India, and against the backdrop of a new monetary policy framework for India that is rapidly being put in place, NCAER organised a discussion with Dr Frederico Gil Sander (World Bank, New Delhi) based around the World Bank’s June 2016 India Development Update: Financing Double-digit Growth. Dr Ila Patnaik (NIPFP) and Dr Pallavi Choudhuri (NCAER) joined as discussants.

Indian GDP grew at 7.6 percent in 2015-16, up from 7.2 percent a year ago, making it the world’s fastest growing major economy.  But India’s ambition is to accelerate GDP growth to double digits.  Does India have a financial sector that can finance and sustain such spectacular growth?

Financing such growth requires a strong financial sector to grow savings, allocate them to more productive investment opportunities, boost productivity growth, and guard against volatility.  India’s financial sector has performed well in several respects, evolving from largely state-control to greater competition from private banks, bank capital in excess of regulatory requirements, stronger regulations, and overall resilient real credit growth. But there are now deep concerns about the growing volume of non-performing assets (NPAs) and declining credit growth in the public sector banks (PSBs), as well as the muted transmission of monetary policy to the real economy, with lending rates sticky and interest rate spreads growing. The Update suggests two key reforms. First, accelerating structural transformation towards more market-orientation and competition by providing a roadmap for easing government mandates on banks. Second, addressing the NPA challenge, both by recapitalization of PSBs and providing tools for banks to manage stressed assets, and through stronger governance of both commercial banks as well as the corporate sectors that have generated the largest share of NPAs. The seminar provided a platform for lively discussion on the topic.

Frederico Gil Sander is the World Bank’s Senior Country Economist based in New Delhi. He was most recently the Bank’s Senior Country Economist for Malaysia and has worked on macro and debt management for Thailand, Laos, Cambodia, and Myanmar, and on debt relief for low-income countries. Before joining the Bank he worked on emerging market debt and capital markets at the New York firm of Bear Stearns.  Sander has a PhD in Political Economy from Princeton’s Woodrow Wilson School.

Ila Patnaik has been a Professor at the National Institute of Public Finance and Policy since 2006. During 2014 to 2016, she was the Principal Economic Advisor in the Ministry of Finance to the Government of India. Prior to joining NIPFP, she worked as the Economics Editor at the Indian Express. Patnaik started her professional career as an economist at NCAER in 1996. She has a PhD from the University of Surrey.

Pallavi Choudhuri is an Associate Fellow at NCAER.  Prior to joining NCAER, Choudhuri taught at Grand Valley State University and the University of Wyoming. Choudhuri has a PhD from the University of Wyoming.

The fifth meeting of the Advisory Panel of the India Human Development Survey (IHDS-II), chaired by Pronab Sen, former Chairman, National Statistical Commission, was held at the NCAER Conference Room on August 11, 2016. The IHDS is the first large panel survey conducted jointly by the NCAER and University of Maryland for the same households at two points in time, viz. 2004-05 and 2011-12, and is led by Sonalde Desai (Senior Fellow, NCAER and Professor, University of Maryland), Amaresh Dubey (Professor, Jawaharlal Nehru University, and Senior Consultant, NCAER) and Reeve Vanneman (Professor, University of Maryland). The goal of this programme is to document changes in the daily lives of Indian households including the way they live, work, educate their children, care for their aged parents, and deal with ill health. IHDS-I data were collected in 2004-05 from 41,554 households. This exercise was repeated in 2011-12 for IHDS-II, when the same households were revisited, with a high re-contact rate of 83 per cent after seven years, including 90 per cent in rural and 70 per cent in urban areas. The panel survey provides a rich empirical database available free of charge to a wide range of researchers in India and abroad. The IHDS data are currently being used by an estimated 7,000 users worldwide.

The Advisory Panel members who attended the meeting, apart from the Chair, Pronab Sen, included Satish Agnihotri, former Secretary, Cabinet Secretariat and currently Professor, IIT, Mumbai; Priyanka Bansal, representing Soumya Swaminathan, Secretary (DHR) and Director-General (Health Systems Research), ICMR; Ashwini Deshpande, Professor, Delhi University; Dipankar Gupta; G.C. Manna, Director-General and CEO, National Sample Survey Organisation (NSSO); Arvind Pandey, Director, National Institute of Medical Statistics, ICMR; Ms Anna Roy, Advisor, NITI Aayog; Sayeed Unisa, Professor, International Institute for Population Sciences (IIPS); and Shekhar Shah, Director General, NCAER. The IHDS project leaders, Sonalde Desai, Amaresh Dubey and Reeve Vanneman (by video conferencing) highlighted the achievements and challenges of carrying out the first large scale national panel survey in India.

While delivering the opening remarks, Shekhar Shah stated that IHDS represents NCAER’s many forays into large-scale data collection since the 1950s and builds on the Human Development Profile of India (HDPI) initiated in the 1990s, which signified its first multipurpose household survey. He also highlighted the immense possibilities of the panel survey, with IHDS-II and IHDS-I being the second and fourth most downloaded data sets, respectively, from among the archives of the Inter-University Consortium of Political and Social Research (ICPSR), University of Michigan.

The chair of the Panel, Pronab Sen said that it was important to decide if the IHDS should continue in its current form or assume a new form, especially since we are now on the cusp of starting IHDS-III. He also said that it is imperative to assess the extent to which IHDS-I and IHDS-II have predominantly been used as panels or as standalone cross-sections because the main purpose of the survey was to generate panel data. He said that developments in academia are also increasingly stressing the use of panel data.

Amaresh Dubey suggested that access to multi-topic surveys like IHDS reshapes academic discourse by allowing researchers to examine linkages between economic and social transformations based on data that capture the day-to-day lives of people in India, and information on their earning patterns, income and consumption, migration decisions, and education levels, among other human development indicators.

A number of presentations were made by IHDS researchers during the meeting to showcase the findings of the research team based on the data generated during the surveys.

A presentation by P. K. Ghosh, Associate Fellow, NCAER, on ‘Attrition in and Validation of IHDS-II Data’, emphasised the intense supervision required to ensure re-contact with the original households and compared the basic characteristics of IHDS with other data sources like the Census and NSS.

Outlining the challenges of public release of data, Sonalde Desai averred that though IHDS was designed as a public resource, it is simultaneously important to respect respondent privacy which prevents making identification below district level available to users. She noted that the high usage of IHDS is not only due to the worldwide interest in India but also because of the stringent quality checks and breadth of topics covered in the data sets. Over 200 papers and theses have been written using IHDS data. Three user conferences and one training session have so far been organised for users.

In his presentation, Debasis Barik, Associate Fellow, NCAER, highlighted economic status and mortality linkages. Since literature has not paid sufficient attention to the role of income in shaping the incidence of non-communicable diseases (NCDs) like diabetes, high blood pressure and cardiac disorders, longitudinal data is needed to address two-way causation.

In her presentation, Ms Sadhika Bagga, Research Associate, NCAER, focused on ‘Demography of Inequality in India’, and claimed that research on inequality and poverty focuses more on countries and households and less on individuals. Thus, incomes grew and poverty declined for everyone during the period between IHDS-I and IHDS-II, but less so for children. The public policy challenge, therefore, is to implement more child-focused policy initiatives.

Studying ‘Poverty Incidence: Static and Dynamic’ in his presentation, Amit Thorat, Assistant Professor at Jawaharlal Nehru University, revealed that between 2004-05 and 2011-12, poverty fell from 37 to 22 per cent, signifying probably the largest reduction over any previous decade. He asserted that while poverty has declined substantially, households continue to fall into poverty largely due to the occurrence of catastrophic life events. Thus, different approaches are needed to deal with the chronically poor and vulnerable groups.

The meeting concluded with a delineation of the challenges of data collection by Sonalde Desai, recommendations for the way forward, and the need for institutionalising responses and the process of knowledge. It was decided that NCAER also has to marry the imperatives of ensuring best practices and high quality data generation with maintenance of the highest standards of confidentiality.

The Way Forward

The way forward entails planning for IHDS-III as more waves allow for better causal modelling. Another wave is needed to study the constant changes taking place in the socio-demographic landscape of India. An important development is the use of technological innovations by switching from Paper and Pencil Interviewing (PAPI) to Computer-assisted Personal Interviewing (CAPI), wherein the data is directly entered into a computer programme instead of using paper questionnaires. Other policy changes pertaining to decentralisation, DBT and financial inclusion, for instance, and the impact of welfare programmes like MGNREGA, JSY and expansions in safety nets over extended periods of time can also be studied through panel data. In addition, data on migration, which is an uncharted frontier, needs to be collected and analysed comprehensively as this social phenomenon has tremendous implications for socio-economic developments in a transitioning society. IHDS-III thus has a significant niche to fill in the research space.

The Third Annual IHDS Data User Conference was held at the Neemrana Fort Palace from 16-18 March 2016.

NCAER’S Quarterly Review of the Economy July 2016

NCAER predicts GDP will grow at 7.6 percent in 2016-17

NCAER Team presented the Quarterly Review of the Economy at a seminar held at its Conference Room. The review covered the performance of the Economy in the first quarter of 2016-17 and forecast for the year head. The seminar also included a presentation by Andreas Bauer, Senior Resident Representative—India, Nepal, Bhutan on ‘’Global Outlook and the Brexit Impact.

 Key Highlights

NCAER’s annual model for GDP market prices at constant (2011–12) prices forecasts a GDP growth rate of 7.6% for 2016-17. The Gross Value Added (GVA) at Basic Prices at constant (2011-12) prices is predicted to grow at 7.2% in 2016-17.  Real Agriculture GVA is forecasted to grow at 4.1%, real Industry GVA at 7.1% and real Services GVA at 7.9% in 2016-17.  Growth in exports and imports, in dollar terms, is projected at 2.5% and (-) 8.0%, respectively, while Wholesale Price Index (WPI) inflation is projected at 2.8% for 2016-17. The current account balance and fiscal deficit as percentage of GDP are projected at (-) 0.7% and 3.1%, respectively, for 2016-17.

In the agriculture sector, a redeeming feature of 2015-16 was that despite deficiency in monsoon rainfall the overall output of food grains did not fall though output of commercial crops did suffer. During 2016-17 the South-west monsoon was deficient in June 2016 but in July 2016 there was a significant recovery though it still continues to remain spatially uneven as a quarter of the 36 sub-districts in India are still suffering from deficiency in rainfall. Though outlook for the second half of the monsoon season remains positive, which probably would dampen the price rise in 2016-17, which otherwise have witnessed a significant jump in the first quarter of this financial year.

On the industrial sector front, the Index of Industrial Production (IIP) numbers show weak growth for the first two months of the current fiscal.  For April-May, 2016-17, it grew at -0.1 per cent on a year-on-year (y-o-y) basis, mainly driven down by slow and uneven growth in manufacturing (-1.5%).  Capital goods suffered double-digit fall in the first two months of the current fiscal indicating weak investment activity in the economy (-18.9%) on a y-0-y basis. Consumer durables growth continues to exhibit strong growth (8.9% on a y-o-y basis).  The index of eight core industries grew by 5.4% in 2016-17:Q1 versus 2.5% in 2015-16:Q1.

The lead indicators of the services sector suggest an uncertain outlook for the first quarter of the current fiscal. Tourist arrivals grew by 7.4% on a y-o-y basis during 2016-17:Q1, versus 3.7% in 2015-16:Q1. Bank Credit to the Commercial Sector stagnated at 8.8% and 8.9% in 2015-16:Q1 and 2016-17:Q1 respectively. However, y-o-y growth of aggregate deposits slowed down to 9.1% in 2016-17:Q1 versus 10.6% in 2015-16:Q1. Other lead indicators also showed mixed y-o-y growth patterns except domestic aviation passenger traffic (20.4%) and production of commercial vehicles (17.3%). Both showed double digit growth in 2016-17:Q1

The performance of the external sector in the first quarter has been relatively weak but it shows signs of improvements.  The first quarter (Q1: April-June) of 2016-17 has posted a decline of 2.1% (y-o-y) in merchandise exports to US$ 65.3 billion. Imports declined by 14.5% (y-o-y) to US$ 84.5 billion. The slowdown in imports was mainly due to reduction in oil imports that reduced by 23.6% (y-o-y) in 2016-17:Q1. Non-oil imports declined by 11.5% (y-o-y) in 2016-17:Q1.  Service exports and imports also showed signs of improvement. After growing negatively on a y-o-y basis from November 2015, exports grew at 13.4% and imports at 25.4% in May 2016.

The BSE Sensex moved up by more than 1500 points in Q1, from 25,343 on March 31, 2016 to 27,000 on June 30, 2016. However, the y-o-y percentage rate of growth continues to be negative in 2016-17:Q1 (-4.1%).

On the prices front, y-o-y WPI inflation further edged upwards, turning positive (1.1%) in 2016-17:Q1. CPI inflation (y-o-y) also turned marginally upwards (5.7%). This is mainly due to the jump in food inflation. WPI Food Articles inflation (y-o-y) increased from 4.8% in 2015-16:Q1 to 6.9% in 2016-17:Q1. Consumer Food Price Index showed y-o-y increase of 7.2% in 2016-17:Q1, from 5.8% in 2015-16:Q4. Food inflation was mainly driven by double-digit inflation of pulses (32.3%) and vegetables (10.9%).  Within vegetables, it was potatoes that was the driving force, rising by 55.5% in 2016-17:Q1 versus -6.7% in 2015-16:Q1.  Core-WPI (y-o-y) inflation rate, however remained at sub-zero level in 2016-17:Q1 but shows increasing trend from September 2015. Core CPI (y-o-y) inflation rate fluctuated around 4.6 between the period April 2015 to June 2016.

On the fiscal front, the deficit touched 61% of the budget estimate in 2016-17:Q1, as against 51.2% in 2015-16:Q1.

About the Quarterly Review of the Economy

The Quarterly Review has been 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 the international media. An integral part of the Quarterly Review is the State of Economy Seminars, organised quarterly at NCAER, which bring together policy makers, industry leaders and researchers at one forum.

At a seminar held at NCAER, Nirvikar Singh, Distinguished Professor of Economics at the University of California, Santa Cruz, reviewed and analyzed the three initiatives of the Government of India, namely, Digital India, Start-up India and Make in India in terms of the needed sectoral economic reforms, including in education and skilling, labor markets, finance, infrastructure, urbanization, taxation, trade and FDI, intellectual property rights and government regulatory approaches. He examined the extent to which these dimensions of reform are needed, individually and in combination with each other, for the success of the three initiatives, which themselves have many overlaps in objectives. Attended by research fellows, staff and other invitees, this session provided an opportunity for a lot interaction and discussions during the Q&A that followed Professor Singh’s presentation. Dr Saurabh Bandyopadhyay and Dr Anusha, Associate Fellows, NCAER, also presented their viewpoints as discussants for this seminar.

Nirvikar Singh is Distinguished Professor of Economics and Sarbjit Singh Aurora Chair of Sikh and Punjabi Studies at the University of California, Santa Cruz, where he also directs the Center for Analytical Finance. He has been a member of the Advisory Group to the Finance Minister of India on G-20 matters, and has served as Consultant to the Chief Economic Adviser, Ministry of Finance, Government of India.  He is a member of NCAER’s India Policy Forum Research Panel. Professor Singh’s current research topics include entrepreneurship, information technology and development, electronic commerce, business strategy, political economy, federalism, economic growth and the Indian economy. He has authored over 100 research papers and co-authored or edited several books. He has also served as an advisor for several start-ups and knowledge services firms in Silicon Valley and in India.  He received his PhD from the University of California, Berkeley.

Professor Nirvikar Singh previously delivered a talk on “Digital India Campaign-Scope and Challenges” at NCAER on July 23, 2015