Economic Perceptions
By Dhurjati Mukherjee
The trend in the Indian economy speaks more of what it’s set to achieve in coming years—a rosy picture of possible achievements. Cleverly, however, the data does not segregate incomes of the urban and rural segments or organised and unorganised sectors. At same time, volatility in crude oil prices, declining value of the rupee as also escalating food prices, which affect the common man can’t be wished away.
Reacting to IMF putting India’s current per capita income as $2739, Union Finance Minister Sitharaman recently said that took 75 years, but it will take us just five years to add another $2000. However, in calculating the data, there’s no classification of the rich, middle-income sections, low-income groups or the EWS. However, the Minister claims the upcoming decades will see the steepest rise in living standards for the common man, truly making it a period-defining era for an Indian to live in! She further said: India’s young population, strong growth in consumption, the innovation boom and a strong financial system will help India grow faster. And predicted that ‘the next few decades will define a new era for India, improving at the fastest pace in history.’
Expectedly, the claim is rejected by Opposition Congress President Mallikarjun Kharge, who observed that Modinomics has been ‘a curse to the country’s economy.’ Dishing out hard core data, he stated that household liabilities/indebtedness had grown by 241% from 2013-14 to 2022-23 in actual terms. In fact, household debt as a percentage of GDP was at an all-time high of 40%, and household savings were at a 50-year low with consumption of Indian families overtaking their incomes after the Covid pandemic. “The cost of home-cooked vegetable thali increased by 11% in September 2024 compared to last year”, due to price rise and destruction of the unorganised sector.
The above realism is reflected in government’s official data just released which found that retail inflation surged to a 9-month high in September on the back of a surge in food prices, particularly vegetables, edible oils and pulses, and current indications point out that the rate may be higher this month. In fact, food prices index jumped to 9.2%. Retain inflation, as measured by the consumer price index, rose an annual 5.5% in September, higher than 3.7% in August and above 5% recorded in September last year. In this backdrop, prospects of increased private sector investment are bleak as RBI governor pointed out that “rate cut at this stage will be very premature and can be very, very risky when your inflation is five and a half and the next print is also expected to be high”.
Meanwhile, real incomes of the poor and marginalised sections are steadily eroding with inflationary tendencies in the economy. If a sample survey is conducted of say 200 backward sub-divisions of the country, the dwindling of incomes of the people in past 5-6 years will be obvious. Moreover, if the increased expenditure on health is considered, it would clearly manifest the deteriorating condition of this section.
While there are claims of high growth, grass-root development and welfare of masses has been clearly amiss in the economy. There is need for reforms but such that benefit all categories of people, not just business/industrial houses. Latest reports indicate that output in the country’s infrastructure sector contracted for the first time in over three years, led by a decline in six of the eight segments as excess monsoon impacted performance.
On the consumption side, while it is claimed of picking up,there is needto understand the scales viz metro/city population and that of rural India. As regards investment acceleration this has happened mostly in the public sector, however, some economists opine that an increased sales of two-wheelers is an indication of a turnaround of the rural economy. Can those belonging to the EWS and the poor sections, who have to struggle to ensure basic necessities of life, afford to buy two-wheelers?
Agriculture incomes again may have remained steady due to lowered costs of farm inputs, but non-farm incomes have not shown the same trend. Manufacturing growth has been moderating. Durable white goods and electronics, which are consumed by the middle and lower-income sections continue to record brisk growth with strong support extended by banks and non-banking financial institutions.
On the investment front, private sector is lagging despite bumper profits in past three years. There is reasonable uncertainty about stronger private consumption and business demand on the domestic front with a visible slowdown abroad. Overall, the customary outlook does have a few positive aspects. The interest rates may not soften soon as the RBI kept rates unchanged for the 10thconsecutive time in a recent meeting of monetary policy committee as inflation remains upwards. However, the apex bank changed its stance to neutral that opens the possibility of an interest rate cut in December. The consumer demand is expected to be stable while the GDP growth may be around 7% in the first half of the year. But as has been pointed out repeatedly the strength of the economy can’t be judged by just GDP growth rates.
Meanwhile, high unemployment and underemployment rates — not government projections — but the actual situation remain an area of serious concern. Moreover, what is most striking is the decline in wages of professionally skilled manpower as also lack of employment opportunities for skilled personnel. The recent hike in the rates of minimum wages have little value for those working in the unorganised sector and in micro sectors, where wages are much lower, unregulated working hours with food inflation eating into their meagre earnings.
Those economists residing in cities and engaged in research in academic institutions in the metros have no feel of the grass root situation in villages, specially the backward ones or those ravaged by floods and other natural calamities. The sufferings of a major section of population, the marginalised communities together constituting 40% of the total labour force, have not been highlighted and State-sponsored terrorism is out to finish the ultra-Left because they stand out in protest for tribals and economically backward castes.
There is a lot of fanfare about various schemes and the political leadership seeks to show particular concern for tribal population/adivasis. The big question is whether an independent survey by experts would confirm the benefits received by this section of population from central flagship schemes in tribal districts of Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha etc? This as a nagging uncertainty persists whether those in power would go that extra mile to improve living conditions for the weak and marginalised. Strategies may have been evolved but implementation is missing. — INFA