oppn parties Did We Not Leave The Hindu Rate Of Growth Behind?

News Snippets

  • Delhi chief minister Arvind Kejriwal, referring to a spate of FIRs for putting up posters in Delhi which said "Modi Hatao, Desh Bachao", said that even the British did not act in such manner
  • The 2023-24 Appropriation BIll, which allows the government to spend Rs 45 lakh crore in the fiscal, was passed by Lok Sabha in 9 minutes without any discussion
  • Sources say that Amritpal Singh fled to Haryana and may now be in Uttarakhand
  • Experts say that Rahul Gandhi's disqualification from Parliament will kick in immediately as the conviction has not been stayed
  • Tatas to invest $2bn in super app Tata Neu
  • Chief Economic Advisor V Anantha Nageswaran has said that inflation will drop as commodity and food prices have fallen
  • Government will define quality norms to ensure better 5G service
  • Stocks tumble again on Thursday after two sessions of recovery: Sensex loses 289 points to 57925 and Nifty goes down by 75 points to 17076
  • Amicus curiae and senior advocate K V Vishwanathan has told the Supreme Court that the changes made in law and three extensions given to the present director of Enforcement Directorate are illegal and will imperil the integrity of the agency
  • Supreme Court says it cannot judicially direct the government to acquire land or buildings near the court for advocates' chambers
  • ISSF Cup shooting: Indian pair of Rhythm Sangwan and Varun Tomar win silver in 10m sir rifle mixed team event
  • WPL: UP Warriorz take on Mumbai Indians in the Eliminator today. The winner will play Delhi Capitals in the finals
  • World Boxing: Four Indians - Nikhat Zareen, Nitu Ghanghas, Lovelina Borgohain and Saweety Boora - enter the frinals in their respective category
  • Bombay HC imposes costs and dismisses a petition by a housing society that sought to have a community-wise cap on residents
  • Delhi Police files 159 FIRs for defacement of public property and 49 for posters saying 'Modi Hatao Desh Bachao'
Rahul Gandhi disqualified from Parliament, Wayanad Lok Sabha seat declared vacant
oppn parties
Did We Not Leave The Hindu Rate Of Growth Behind?

By A Special Correspondent
First publised on 2023-03-10 09:58:13

Is the Indian economy headed towards the so-called Hindu rate of growth? Noted economist and former RBI governor Raghuram Rajan has warned that various factors indicate that. He has been severely criticized for putting forward an alarmist view. But the slump in quarterly growth, when taken together with the global slowdown, the rise in commodity prices, the disruption in supply chains due to the Ukraine war and other geo-political situations, does indicate that growth will slow down although it is not prudent yet to predict that it will slow down to the extent of 3.5 to 4% from the level of 5.5 to 6.5% expected in FY23 and FY24.

The Centre for Monitoring Indian Economy (CMIE) has reported that bank credit to large industries has shown a decline (although credit to MSMEs has increased) between November 22 and January 23 after showing robust increase in the preceding four months. It has said that "expectations that the earlier increase in credit offtake by industry was a sign of a revival of the capex cycle in India seem to have been a case of misplaced optimism" (report by Janaki Samant published on March 7). It also said that "decline in outstanding credit implies that repayments of past loans exceeded fresh borrowings" and "that the earlier increase in credit was not a sign of a revival of the capex cycle in India. It was more likely the result of an increase in the working capital requirement of industry because of the sharp increase in commodity prices."

If the revival of capex cycle does not take place, growth will remain subdued. Sources in the State Bank of India (SBI) have claimed a decline in the incremental capital-output ratio which, according to them, means that one additional unit of output will be produced through lower doses of additional capital. Hence, even lower private capital investment would be able to produce more output. But this in turn means that capital cost of production will decline. There is no evidence of that. If we ignore the SBI claim for lack of evidence, lower credit offtake means capex is not reviving and large industries are not expanding or adding new capacity, which is a sign of worry for the economy and which will pull growth down.

The only positive angle that can keep growth on track is the massive investment in infrastructure projects that the government had promised in this year's Budget. The Budget had increased capital investment outlay by 33% to Rs 10 lakh crore. This investment will bring orders for core industries and will help in crowding-in private investment. When the wheels of the economy will start turning fast, it will benefit all industries and is likely to give a huge push to demand. That remains our best bet to avoid slumping down to the Hindu rate of growth.