oppn parties The Economy is Not Growing Sufficiently

News Snippets

  • Calcutta HC said that an accused in a NDPS case is not entitled to default bail if a charge sheet, even without the chemical report, is filed within time
  • 21 killed in a hooch tragedy in Amritsar. Police arrested 10 persons
  • Incoming CJI Justice B R Gavai said that he will always strive for social and political justice
  • Although US Prez Donald trump once again claimed his administration brokered the ceasefire between India and Pakistan, India clearly refuted the claim and said it was workd out by the DGMO
  • Centre tells the Supreme Court that since women are not in combat roles, there has to be a separate selection board for them
  • India briefs 70 nations on Operation Sindoor
  • PM Modi asks Pakistan to vacate illegally-occupied portions of Kashmir
  • PM Modi tells Pakistan that it faces annihilation if it does not stop supporting terror
  • PM Modi visits Adampur IAF base, poses before the S-400 surface-to-air defence system to destrot Pakistan's claim that it had bombed the base and destroyed the defence system
  • 5 US companies make offers to GAIL for stake in LNG projects
  • Retail inflation dipped to 3.2% in April, the lowest since July 2019
  • Stocks tumble on Tuesday: After the all-time single-day gain on Monday, stocks lost heavily on Tuesday - Sensex went down by 1281 points to 81148 and Nifty lost 346 points to 24578
  • Indian tour to England: A new look Indian team with a new skipper will be announced when the selectors meet later this week in view of the retirement of Virat Kohli, Rohit Sharma and R Ashwin
  • IPL: Most overseas players to return and teams likely to be full strength
  • Sharad Pawar calls for an all-party meet to discuss Operation Sindoor, says such matter cannot be publicly discussed in Parliament as the Congress had earlier demanded
PM Modi warns Pakistan - stop supporting terror or face annihilation /////// Also asks Pakistan to vacate illegally-occupied portion of Kashmir
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The Economy is Not Growing Sufficiently

By Sunil Garodia
First publised on 2016-09-13 08:33:07

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.
Conflicting Data
The latest set of data released by the Central Statistics Office and data from other sources indicates that while inflation is lower and tax collections are robust, industrial output is at its 8-month low and gross fixed capital formation has contracted again. These figures show that the economy is not recovering.

The data shows that:
* Consumer Price Index based inflation is at 5.05 percent, lowest since March.
* Index of Industrial Production (IIP) contracted 2.4 percent year-on-year. Manufacturing was the real culprit, going down by 3.4 percent. The alarming thing was that this reversed the trend in June when the IIP achieved an eight month high of 1.9 percent (revised).
* Tax collection at Rs 5.25 lakh crore, in first five months of this fiscal, was 23 percent higher than in the same period last year. The red flag was lower corporation tax collection, which fell by 1.9 percent.
* Gross fixed capital formation contracted again, the second time in two consecutive quarters, which is an alarming signal that shows no fresh investments.

Where is the expected growth?
The economy is not growing. There will be a chorus of demand for rate cuts by the RBI to generate investment. But the RBI may prefer to wait till December. This is due to several factors. The first is the good to very good monsoon that is expected to ease farm prices leading to still lower inflation. Anything below 4.5 percent will be a huge cushion. The second is the expected upsurge in demand for goods in the ensuing festival season, backed by the rise in salaries (as a result of 7th Pay Commission award) and payment of bonus in both government and private sectors. Pumping in more money in the economy at this juncture could be counter-productive and may lead to inflationary pressures.

Rate cut might not happen before December
The RBI might prefer to wait till December to see what surging demand and lower farm prices does to inflation and the IIP before taking a call on lowering interest rates. To many, that would be too late if India is to achieve an 8 percent growth this fiscal, but given the hawkish stance adopted by the RBI in recent times, that is the most likely scenario.