UN ESCAP Forecast
By Shivaji Sarkar
India is growing and ought to grow after unplanned devastating lockdown of all economic and social activities. But the growth story for 2021 remains a mystery. The Economic Survey projected it at 11 per cent, RBI 10.5 per cent, International Monetary Fund 11.5 per cent, World Bank in a wide range of 7.5-12.5 per cent, and UN’s ESCAP puts it at 7 per cent over a contraction of 7.7 per cent through 2020.
The Economic and Social Survey of Asia and the Pacific (ESCAP) report 2021 states, India entered the pandemic lockdown with subdued GDP growth and investment. “The pace of recovery further moderated in the fourth quarter 2020-21 with estimated year-on-year growth still close to zero.” Plus, India’s 2021 economic output is expected to remain below the 2019 level or K-shape. This is almost at par with National Statistical Office (NSO) projection at 8 per cent contraction 2020-21, showing the lockdown impact. It estimates that the pandemic has pushed an additional 89 million people in the region into extreme poverty in 2020.
On the other hand, ESCAP praises China for becoming the only major economy worldwide to achieve a positive annual economic growth rate in 2020. But for the rest of the region, including India, the recovery is likely to be K-shaped. The economists use U, V and W to forecast different kinds of financial future. The K-shape is a new symbol and portrays a troubling, divergent economic future, one where the economy rebounds unevenly and where the wealthy benefit while everyone else gets left behind.
This also bares the reality that the pandemic or not lockdown devastated economies like that of India, which were trying to improve their conditions pre-pandemic. The repeated fear psychosis and threatening of partial or complete lockdown again is likely to create more business uncertainties and delayed recovery.
Coupled with high policy quandary, officially-sponsored price rises through heavy taxes on petroleum, other fuels, increasing toll-taxes on roads and consequent rise in fare, freight and rail costs, caused 5.03 per cent inflation in February, 2021, meaning despite wage contraction an individual’s expenses increased by over 5 per cent. It may show a ‘better’ GDP in monetary terms but in reality it will be a regression, where people’s purchasing power reduces. This leads to shrinkage in production as is indicated by fall in February core sector output by 4.6 per cent. It is exacerbated by lowering of deposit interest rates, taxes on provident fund and other accumulations, spree on privatisation, including that of giant public sector banks to private swindlers. These add to the market uncertainties and further possible regression.
The flip-flop policy on normalising relations with Pakistan, as the US Defence Secretary visits India and consequent refusal of Islamabad to walk the talk adds to further uncertainties. So does certain Indian companies’ truck with Myanmar’s military-controlled firms, slapped with UN sanctions.
The recent accidental blockage of the Suez Canal route could add to further inflationary pressures as India’s 5 lakh barrels a day of crude import is to become expensive with tanker rates rising at least in the short run.
The disinvestment drive too has not succeeded during the past three years. Even now the policy, though being steamrolled, is raking up issues of how India would manage its future through an oppressive private sector for which all labour and financial policies, including interest rates are being compromised. Had India not accumulated such productive public sector organisations and nurtured banks, how could it have taken to the sales of family diamonds?
It has also raised questions of disposing off assets worth Rs 2.10 lakh crore without a public discussion and at the whims of some people at the helms of a few institutions. The powers of money bill and whether this should be put in check or not is being continuously debated. Nobody has answered whether such sales would help the country or pauperise it.
There is no answer either to how the government promising two crore jobs would be able to provide employment to jobless. The unemployment rate in the country declined to 6.52 per cent in March from 6.90 per cent in February, as per think-tank Centre for Monitoring Indian Economy (CMIE). This conceals the real numbers, of job losses during 2020 lockdown and does not included millions of under-employed or semi-employed. The rural sector is in twin-crisis of poor cash flow and glut of agricultural produce. This is giving rise to discrimination, puts brake on industrial and manufacturing recovery and restoration of economic health.
It is about a world, including India, where a miniscule rich own most of the wealth while the rest are at the bottom, owning a measly one or two per cent as in the US. The Oxfam reports that the top 10 per cent of the Indian population hold 77 per cent of the total national wealth, 73 per cent of the wealth generated in 2017 went to the rich 1 per cent, while 67 million Indians, the poorest half of the population, saw only a 1 per cent increase in their wealth. The number of billionaires in India rose from only nine in 2000 to 101 in 2017 and 119 in the last four years.
The rising forex reserves to $582 billion in March are not a very positive sign either. It speaks of contracting imports by 46 plus per cent and notional value increase (of about 21.7 per cent) in gold prices held by RBI since March 27, 2000.
India’s taxation system has also drawn ire of the US on retrospective tax and digital service tax, as per a policy restricting imports in tune with Atmanirbhar Bharat. Various income-tax rules, TDS oppression and many other such set of laws like opening up of ten-year old cases is causing havoc of uncertainties.
The uncertain Indian growth story, distress of the people due to complicated tax policies or little boost to production tells of a peculiar lack of thought process. The planning process needs to be reactivated for turning the economy to a fast track. The Narendra Modi government has to be proactive in reviewing the policies to regenerate the economic process, even thawing its bid for privatisation. India needs to consolidate; the economic growth would be a corollary. —INFA