Key Highlights
NCAER’s annual model predicts that GDP growth rate (GDP market prices at 2011–12 prices) will grow at 7.5 per cent for 2015–16
- In the agricultural sector performance of monsoon rainfall has been extremely satisfactory in the month of June however during the month of July there was a slowdown in rainfall activity. Notwithstanding this the deviation from actual rainfall from the normal during the first half of the monsoon season is barely 3.1% (deviation based on rainfall indices computed on the basis of un-irrigated area under foodgrains as weights). As a result the sown area under all Kharif crops is up by 5% as compared to the corresponding period of last year led by an increase in area under cereals pulses and oilseeds. The outlook for the second phase of monsoon season however remains mixed due to differences in forecasts made by the official and private forecasting agencies and much will depend on how monsoon rainfall progresses going forward.
- Index of Industrial Production (IIP) registered 3.2% year-on-year growth in the first quarter of 2015–16 maintaining its growth momentum from the fourth quarter of the last fiscal at 3.3%. It was lower than the 4.5% growth in 2014-15:Q1. However looking at deseasonalised quarterly data IIP registered 2.1% quarter-on-quarter growth in 2014-15:Q1. It grew negatively in the next two quarters before reviving growth in the fourth quarter at 2.0%. It continued to grow at 2.0% in the first quarter of the current fiscal. These indicate that India is growing but not at higher rates than last year.
- The lead indicators of the services sector also indicate trends similar to the last quarter of the previous fiscal year whether it is tourist arrivals revenue earning goods traffic by railways cargo handled at major ports new telephone connections and growth in aggregate deposits. Though domestic air passenger traffic shows double digit year-on-year growth (19.5%) in 2015–16:Q1.
- Merchandise exports and imports have continued to fall in double digits although the degree may be tapering marginally. Services trade also demonstrates relatively slower growth. Software service exports is the only bright spot. Even the FII flows which showed vigorous growth in 2014–15 have considerably slowed down in 2015–16:Q1.
- Inflation rates show a distinctive downward trend driven by fall in global commodity prices and weak demand. Satisfactory rainfall in the first half of the monsoon season has also kept food prices low except for pulses. However as reported the RBI Inflationary expectations have edged towards double digits in June 2015. Further there is an upward movement in the change in the rate of inflation in the first quarter which if not addressed can potentially affect inflation through higher expectations.
- Thus key policy rates were left unchanged amidst higher household inflationary expectations slower pace of domestic economic recovery and uncertainties in the global markets.
- On the fiscal sector revenue receipts have increased in the first quarter of the current fiscal buoyed by increases in indirect taxation. Capital account plan expenditure has risen in the first quarter of the current fiscal signalling that the government is on track in tackling the infrastructure deficit in the country. Fiscal deficit as a percent of GDP has already reached approximately 50 per cent of its budget estimates similar to last fiscal.
In sum satisfactory rainfall in the first half of the south-west monsoon season if sustained may help revive rural demand. Lower inflation due to lower commodity prices and lower food inflation may spur demand. The indicators from the first quarter suggest that agriculture industry and services are continuing to grow at same or almost similar rates as was the case in the fourth quarter of the previous fiscal. The turbulences in the world economy though add elements uncertainty to the growth path of the Indian economy. Overall India is predicted to achieve a marginally higher rate of growth of 7.5% than last year (7.3%).
About NCAER
NCAER the National Council of Applied Economic Research is India’s oldest and largest independent economic think-tank set up in 1956 at the behest of Prime Minister Jawaharlal Nehru to inform policy choices for both the public and private sectors. Over nearly six decades NCAER has served the nation well with its rich offering of applied policy research unique data sets evaluations and policy inputs to central and state governments corporate India the media and informed citizens. It is one of a few independent think-tanks world-wide that combines rigorous economic analysis and policy outreach with data collection capabilities particularly for large-scale household surveys. NCAER is currently led by its Director-General Dr Shekhar Shah and governed by an independent Governing Body chaired by Mr Nandan M. Nilekani.
NEW DELHI: Economic think-tank NCAER has projected the country’s economic growth at 7.5 per cent in the current fiscal.
“NCAER’s annual model predicts that GDP growth rate (GDP market prices at 2011-12 prices) will grow at 7.5 per cent for 2015-16” it said in a release today.
It said satisfactory rainfall in the first half of the south-west monsoon season may help revive rural demand.
“Lower inflation because of lower commodity prices and lower food inflation may spur demand.
“The indicators from the first quarter indicates that agriculture industry and services are continuing to grow at same or similar rates as last quarter” National Council of Applied Economic Research (NCAER) said.
It said the turbulences in the world economy adds uncertainty to the Indian economy.
“Overall India is predicted to achieve a marginally higher rate of growth of 7.5 per cent than last year at 7.3 per cent” the think tank said.
The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) reduced poverty by up to a third and gave a large number of women their first opportunity to earn cash income a new research has found.
Officials from the Ministry of Rural Development (MoRD) and the National Council of Applied Economic Research (NCAER) released a new report Wednesday evening which used data from two rounds of the India Human Development Survey (IHDS) – 2004-5 and 2011-12. The survey was conducted by the NCAER and University of Maryland involving over 26000 rural households across the country.
Comparisons between the two survey rounds found that the programme reduced poverty overall by up to 32 per cent and prevented 14 million people from falling into poverty. “Economic growth contributed to overall poverty reduction during this period but we found that the MGNREGS also played a significant role” Sonalde Desai principal author of the study said.
The numbers show that the MGNREGS is likely to have had a much smaller impact on the rural job market and on rural wages than is commonly believed. At an all-India level the average days worked under the MGNREGS is less than four pointing to the relatively small impact of the scheme to the overall rural job market. “On the surface MGNREGS has virtually no impact on rural employment patterns since it fails to add to the number of days that individuals work. But it seems to attract individuals who were previously employed in less productive work thereby raising their incomes” the report notes. Overall while the period of 2004-5 to 2011-12 saw a sharp rise in rural wages MGNREGS plays only a modest role in wage increases the report notes. The United Nations Development Programme on Wednesday also released a review of recent research studies on the MGNREGS which found similarly and found that the scheme’s uptake is far greater in the lean season that in the peak agricultural season.
The part of the rural job market that the MGNREGS did seem to have a more significant impact on was for female work. About 45% of female MGNREGS workers were either not working or worked only on a family farm in 2004–05 indicating that the MGNREGS “may well be the first opportunity many women have to earn cash income”. As a result there was a substantial increase in women’s control over resources — including cash in hand and the likelihood of having a bank account — and improvement in women’s ability to make independent decisions about their health the report found.
Children from MGNREGS households were likely to obtain higher levels of educational attainment than their non-MGNREGS peers the report found and were less likely to be working.
While financial inclusion rose in general during this period and reliance of moneylenders declined the effect was much greater for MGNREGS households as was the decrease in the overall interest paid by the household. Simultaneously accessing of formal credit grew.
What holds the MGNREGS back is “work rationing” — the inability of all interested households to get 100 days of work — as a result of mismanagement or pressures and affects the poorest the most the report finds.
“These findings clearly show that there is a large unmet demand for MGNREGS work” Jugal Kishore Mohapatra secretary Ministry of Rural Development said adding that a paucity of funds at the level of implementations and erratic fund flows particularly in 2014-15 had affected both demand and supply. “For the last four months our job has been convincing everyone that the scheme is not going away and rebooting demand” Mr. Mohapatra said.
The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) helped lower poverty by 32 per cent between 2004-05 and 2011-12 lifting almost 14 million in this regard says a recent survey by the National Council for Applied Economic Research and the University of Maryland.
The study involved 26000 households and used data from the two rounds of the India Human Development Survey 2004-5 and 2011-12.
In this period though overall economic growth contributed in lowering poverty so did the scheme said Sonalde Desai principal author of the study.
About 53 per cent of the workers employed were women and it contributed immensely in empowering them the study showed. In 2004–05 rural women earned only 53p for each rupee earned by men. But with implementation of the scheme in 2006 there was at least one job where men and women were paid equally.
“Is it any surprise that women’s participation has risen sharply and their share of work is nearly 53 per cent?” it said.
However the numbers also show that the scheme is likely to have had a much smaller impact on the rural job market and on rural wages than commonly believed. At an all-India level average days worked under the scheme was less than four. Overall while the period saw a sharp rise in rural wages MGNREGS played only a modest role says the report.
It also says the positive effect is limited by very low access to work in some of the poorest states such as Bihar and Odisha.
Only 24.4 per cent of rural households participate in the scheme nationwide and nearly 70 per cent of interested households cannot participate due to lack of work. Most important about 70 per cent of households below the poverty line do not participate.
In states with strong programmes such as Chhattisgarh nearly 60 per cent of the poor participate in MGNREGS infrastructure projects. By contrast in states with weak programmes such as Bihar barely 11 per cent of poor households participate the study showed.
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) the world’s largest anti-poverty programme reduced poverty and empowered women but its success has been limited due to lack of work in some of the poorest states according to a recent report.
Comparing two states Chhattisgarh (strong programme implementation) and Bihar (weak) a study by the National Council of Applied Economic Research and the University of Maryland found that nearly 60% of the poor participate in MGNREGA infrastructure projects in Chhattisgarh while barely 11% of poor households participate in Bihar due to lower capacity of local administration.
According to the report only 24.4% of rural households participate in the rural employment scheme in the country while nearly 70% of the interested households could not participate due to lack of work.
The report on the rural job scheme was based on interviews with over 28000 households spread across rural India. The interviews were conducted in 2004-05 before the initiation of MGNREGA and again in 2011-12 after the programme was implemented.
The study found that at least 25% of the decline in poverty since 2004-05 for participating households could be attributed to participation in the rural employment scheme. These households are less likely to borrow from moneylenders and more likely to give higher education to their children according to the analysis.
Outlining the positive impact of MGNREGA the report said that for the first time women are being paid at par with men in a job and that women outnumber men in the job scheme. As many of the women got work for the first time due to the job scheme their household income levels also went up.The MGNREGA has also boosted access to a bank account by women as the wages are transferred electronically to the beneficiary’s account.
“The most striking impact of MGNREGA participation is on women who dominate MGNREGA work” said Sonalde Desai senior fellow at NCAER and one of the author of the report.
The report also found that the success of the job programme was hampered in many states due to lack of work as lengthy local processes for project approvals delayed projects reducing access to work and abandonment of projects before completion.
“Work rationing seems to be pervasive with about 40% of rural households working less than the 100 days they are eligible for in spite of their desire to work” said Prem Vashistha one of the authors of the report.
The report found that there was little correlation between poverty levels of a state and its level of MGNREGA participation.
Developed states did better in giving jobs to the needy due to their better administrative capacity and infrastructure compared to poor states like Bihar. The rural job guarantee law mandates that work should be made available whenever households ask for it.
