The mid-year review of the economy by the National Council of Applied Economic Research (NCAER) released here on Saturday paints a sobering picture with the outlook for 2014-15 worsening from the beginning of the financial year.
After growing at 5.7 per cent in the first quarter the NCAER estimates the gross domestic product will grow at 5 per cent in 2014-15 down from the 5.7 per cent forecast in July implying a significant deceleration in the coming quarters.
But with the quarterly model forecasting growth of 6.1 per cent for the current fiscal year) it also underlines uncertainty in the economy.
The Baseline and Professional Forecasters’ Median Projections of the Reserve Bank of India estimates GDP growth for 2014-15 will be 5.5 per cent while the World Bank and the IMF are predicting 5.6 per cent.
Expectations of a slowdown are largely on account of agriculture and industry. Rainfall this year has not only been deficient at 17.1 per cent on a year-on-year basis but has also been unevenly distributed. According to the ministry of agriculture’s estimates the output of kharif grain in 2014-15 is likely to be 120 million tonnes 7 per cent lower than the previous year’s 129 million tonnes. The NCAER expects agricultural growth to slow down to 2 per cent for the entire year from 4 per cent in 2013-14.
Industry is expected to grow at 2.3 per cent. What is puzzling is that the improvement in business sentiment does not seem to be translating into growth. Bank credit to the commercial sector continues to remain low with the gap between deposits and credit offtake widening.
While bank profits have been rising this is driven partly by retail loans which suggests a rise in household demand for consumer durables. But this has not translated to investments probably because given how low capacity utilisation rates are companies can meet the demand without having to invest.
A troubling aspect of the past few years is the rise in the incremental capital-output ratio (ICOR). With gross fixed capital formation at roughly 30 per cent an ICOR of four should translate to GDP growth of 7-7.5 per cent. That growth has plunged to 5-odd per cent suggests either productivity has fallen or other factors are at play.
The services sector which accounts for over 60 per cent of the GDP is expected to grow at 6.9 per cent. Pick-up is being seen in tourism cargo handled at major ports and telephone subscribers.
For the current fiscal year the NCAER’s forecasts for current account deficit fiscal deficit and inflation (Wholesale Price Index) are 2.6 per cent 4.3 per cent and 4.5 per cent respectively.
This paper by NCAER project team led by Dr Rajesh Chadha, Senior Research Counsellor, been produced under the International Centre for Trade and Sustainable Development (ICTSD) Programme on Competitiveness and Development. The objective of this study is to analyse the likely impacts of the trade preference scheme on India and the AFLDCs. The study is premised on the view that an enhanced engagement of India with AFLDCs will allow India to deepen South-South trade cooperation.
The “tapering talk” starting on May 22, 2013, when Federal Reserve Chairman Ben Bernanke first spoke of the possibility of the U.S. central bank reducing its security purchases, had a sharp negative impact on emerging markets. India was among those hardest hit. The rupee depreciated by 18 percent at one point, causing concerns that the country was heading toward a financial crisis. This paper contends that India was adversely impacted because it had received large capital flows in prior years and had large and liquid financial markets that were a convenient target for investors seeking to rebalance away from emerging markets. In addition, India’s macroeconomic conditions had weakened in prior years, which rendered the economy vulnerable to capital outflows and limited the policy room for maneuver. The paper finds that the measures adopted to handle the impact of the tapering talk were not effective in stabilizing the financial markets and restoring confidence, implying that there may not be any easy choices when a country is caught in the midst of rebalancing of global portfolios. The authors suggest putting in place a medium-term policy framework that limits vulnerabilities in advance, while maximizing the policy space for responding to shocks. Elements of such a framework include a sound fiscal balance, sustainable current account deficit, and environment conducive to investment. In addition, India should continue to encourage relatively stable longer-term flows and discourage volatile short-term flows, hold a larger stock of reserves, avoid excessive appreciation of the exchange rate through interventions with the use of reserves and macroprudential policy, and prepare the banks and firms to handle greater exchange rate volatility.
This is the first in a series of reports that NCAER has prepared on detailed tourism satellite accounts for the states and Union Territories of India. This study was commissioned by the Ministry of Tourism in the Government of India in 2013 to compile Regional Tourism Satellite Account for all states and UTs of India for the base year 2009-10 in order to facilitate a complete understanding of the tourism sector. The first report covers the states of Andhra Pradesh, Bihar, Gujarat, Jammu & Kashmir, Punjab, Rajasthan, Sikkim, Tripura, Tamil Nadu, and West Bengal.
2009|10, Phase I, Reports
Reports on Regional Tourism Satellite Account, 2009-10: Phase II
Reports on Regional Tourism Satellite Account, 2015-16: Phase III
India may finally be on the verge of making progress on eradicating one of its most intractable problems: open defecation because of a lack of toilets. Prime Minister Narendra Modi deserves credit for focusing on the scourge. But it will take more than words to solve a problem the nation’s leaders have been promising to solve for decades.
The World Health Organization estimates that more than 600 million Indians lack access to a toilet. Open defecation is a cause of diarrheal disease that sickens and kills thousands of children in India every year and the lack of toilets often puts women at risk of attack.
In 2012 the minister of drinking water and sanitation at the time Jairam Ramesh redoubled the government’s efforts starting the Clean India Campaign. But it barely got off the ground before national election campaigning began in 2013 and Mr. Ramesh’s party was voted out of office in May.
That month just after Mr. Modi became prime minister two teenage girls were murdered and their bodies were found hanging from a tree near their village after they had ventured out at night to relieve themselves. Mr. Modi astutely used public anger to focus attention on the problem. He announced an ambitious national cleanliness campaign to begin on Gandhi’s birthday on Oct. 2 pledging that every school will have separate toilets for boys and girls by October 2015 and that by 2019 all Indians will have access to a toilet.
This will not be easy. Some Indians are repulsed by the idea of having a toilet which they associate with uncleanliness and the caste now known as Dalits in their home. Others according to research by the National Council of Applied Economic Research are wary of the hygiene and odor of seepage-pit toilets typically installed under government programs.
Changing entrenched attitudes and building the 12.5 million toilets that the Ministry of Drinking Water and Sanitation hopes to have in place by 2019 will be a colossal challenge. Mr. Modi’s continued leadership is needed as is the participation of the private sector and nonprofit groups.
The findings of NCAER’s India Human Development Survey has been quoted in the above editorial
