The issue of GST, the misuse of the central machinery, the conflict between the Center and the states, the governors are focusing on.
The Office for National Statistics released its quarterly estimates of GDP and provisional estimates of national income on May 31, 2022. The chief financial adviser, who spoke to the media, appeared a bit overwhelmed. Seemed to be expressing his optimism very carefully. Like other economists, they know that the Indian economy is still in a state of flux.
Not bad, but worse
As on March 31, 2000, the economy stood at Rs 145.16 lakh crore at constant prices. Worst of all, it was almost the same as on March 31, 2022 (Rs 147.36 lakh crore). I mean, your hardships, your running all stop in one place. That is, we are walking, but not moving forward, but standing in one place. At the same time, per capita income fell from Rs 1,08,247 to Rs 1,07,760 in two years, making Indian citizens poorer on a personal level.
The next bad news is that GDP growth in 2021-22 is not a quarterly graph growth, it is a decline. GDP growth rates for the four quarters were 20.1 per cent, 8.4 per cent, 5.4 per cent and 4.1 per cent, respectively. No significant increase in production (value added). In the fourth year of 2019-20, the gross domestic product (GDP) was Rs. 38,21,081 crores. We surpassed this number in the fourth quarter of 2021-22. Gross domestic product (GDP) during the period stood at Rs 40,78,025 crore.
It does not make sense to boast that India is the fastest growing economy with 8.7 per cent. How can we be proud of inflation, unemployment, rising numbers of people living below the poverty line, rising hunger, declining health and education? Our growth rate is 8.7 per cent, which is very attractive to hear, but it has to be looked at from a study perspective. First of all, the growth rate is a reflection of the negative growth of 6.6 per cent in the previous year. Second, when China’s growth rate increased to 8.1 percent in 2021, its gross domestic product (at current prices) increased to US $ 2.6 trillion in those 12 months. In the last 12 months, our country has added only US $ 500 billion to its gross domestic product (at current prices) with a growth rate of 8.7 percent in 2021-22.
The outside world
Let’s see what happens in 2022-23 and beyond. We are so immersed in ourselves that we forget that there is a world outside our country. We do not live on an island. We want a global market, we want products there. We need capital, we need technology, we need innovation. As well as everything we want in the outside world. Various economies around the world are currently under pressure. In the US, demand is declining and inflation and interest rates are rising. Ongoing layoffs are likely to put pressure on China’s GDP growth. Rising fuel prices have dampened the purchasing power of Europeans.
According to data released by the Reserve Bank Credit Policy Committee (May 4, 2022), the International Monetary Fund (IMF) has forecast that the global growth rate will slow to 3.6 percent in 2022 from 4.4 percent. According to the World Trade Organization, global trade growth slowed to 3.0 percent from 4.7 percent. The International Monetary Fund (IMF) estimates that inflation will rise to 5.7 percent in developed economies and 8.7 percent in developing economies. The Credit Policy Committee warns that a deteriorating environment, rising commodity prices, persistent supply disruptions and continuing rising volatility in developed economies are dangerous. But my suspicion is that anyone in government can notice this.
The diagnosis is good, but there is no treatment.
- Private investment
- Huge increase in government capital expenditure
- Excellent infrastructure
- Low and stable inflation
- Comprehensive financial stability
Of these five elements, only the government controls the ‘government capital expenditure’. The government is investing heavily in various projects. However, various grants in the budget, welfare announcements and cuts in fuel taxes are likely to reduce the government’s investment in capital works this year. Taking the rest into account, private investment is not happening at the expected pace due to limitations and unused capacity in the supply process. Some investors like Kern, Hutchison, Harley-Davidson, General Motors, Ford, Holcim, Citibank, Barclays, RBS, Metro Cash & Carry are leaving India and others are taking over. It is clear that new foreign investors will take this issue into consideration. Radical changes are required in the processes of tendering, costing, execution and accountability. It was lacking today. We are thinking of how to increase the number of infrastructure, but also do not think about quality in our village. And from past experience with the Modi government, we know that it is ignorant about inflation and overall economic stability.
Let’s put all this aside for a moment. The ship’s captain and his crew have team spirit, they all work together, they know what you want to do and why you want to do it, and they are able to sail their ship even in rough seas. But today there is no consensus between the Center and the states on many important issues. The GST issue has eroded trust between the central and state governments. Some governors have exacerbated the controversy. Moreover, the central machinery is being openly abused against every opposition party. (See examples of state ministers being arrested by central authorities. This has never happened before.)
There is another big question. No country can become an economic superpower unless 40% of the country’s labor force is involved in the production process. But a very large working age population in our country is not working or looking for work. It is true that girls’ education has increased, but their share in the labor force is only 9.4. In addition, the current unemployment rate is 7.1 percent.
Our economy is sick. She was diagnosed with the disease. That is true. Medications are also available at drug stores to treat her. But the doctors who handed over the responsibility of her health did not know anything about it and did not care if the patients’ sufferings were slowly dying out.