The critical world situation, a jerky journey, continuous strengthening of the dollar calls for policy stimulation and rethink on being more swadeshi for maintaining the fast domestic growth amid predictions of UNCTAD, the World Bank (WB) and the IMF of deceleration of world and Indian growth process. The WB says 50 million more Indians slipped below poverty line during the pandemic. Remedies are not easy and need home grown solutions.
The UNCTAD expects India to grow at 5.7 per cent in 2022, WB puts it at 6.5 per cent from earlier 7.5 per cent and slashes 2022-23 growth by 80 basis points to 7.4 per cent and the IMF cuts it to 6.1 per cent for 2023-24. The Reserve Bank of India keeps it at 7 and 7.2 per cent. India’s Chief Economic Advisor Anantha Nageswaran on 20 September 2022, said the Indian economy will grow at over 7 per cent, down from above 8 per cent projections in January.
Indicators point to a contraction at global level as the rupee falls below 81 to a dollar, imports surge and exports fall. The current account deficit is increasing and chances of exports growing looks not easy. The UNCTAD in its Trade and Development Report predicted world growth at 0.9 per cent less than the projections now at 2.6 per cent. It observes 90 developing country currencies weakening against the dollar this year – over a third of them by more than 10 per cent. It makes trade difficult.
Former Niti Aayog Vice Chairman Arvind Panagariya agreeing with Nageswaran says that India needs to grow around 7 per cent, check fall in rupee value and devise how trade grows. The CEA remains optimistic that it will become the world’s third largest economy ahead of the UK. His confidence is based on the parameters of the domestic growth and other favourable pointers. Real GDP grew 13.5 per cent in the first quarter of 2022-23, surpassing the pre-pandemic level by 3.8 per cent. However, private consumption and investment during July-September in many sectors was sluggish. Possibly he does not take money circulation into account which has doubled from about Rs 16 lakh crore in 2016 to Rs 32 lakh crore.
The international market and the stocks may remain subdued as the Ukraine war, the politics of sanctions and the energy crisis pose problems for the Euro zone as also adds to pressures on the US economy. Under its new Prime Minister Liz Truss, the UK economy following Brexit is going to be raunchy with high inflation, production issues and sterling losing to dollar.
Internationally it is not an easy situation. India has to see how imports are reduced and avoid international purchases like GM farm tech, train rakes and similar other products that the country’s highly experienced railway sector could produce. The metro coaches manufactured in the country and the Vande Bharat or T 18 trains produced by Integral Coach Factory have raised the hopes of the country’s capability to produce the best. It saves precious foreign exchange, increases jobs and gives the hope of earning if the country exports such products.
Rashtriya Swayamsevak Sangh (RSS) General Secretary Dattatreya Hosabale’s comments highlighting India’s poverty, unemployment and inequality at a Swadeshi Jagaran Manch (SJM) event has virtually been a reminder that if the country continued with boosting its indigenous production it could solve many of these problems. The domestic economy has always been strong even during 1970s and 1980s. The country was producing enough to feed its people. That is a prescription suggested for reducing income inequality.
In January, the Sangh-affiliated SJM, along with seven other right-wing organisations, has launched the ‘Swavalambi Bharat Abhiyan’ (SBA), is an initiative to spread awareness among people about startups, entrepreneurship, etc, which aims to make India unemployment-free by 2030. The latest event, ‘Swawalamban ka Shankhnaad’, was part of a series of events being organised under the SBA banner. The SJM has been a conscience keeper even during Prime Minister Atal Bihari Vajpayee’s time. The BJP has taken Hosbale’s comment, “We should be sad that 20 crore people are below poverty line and 23 crore people are earning less than Rs 375 a day” in its stride. Whether it means a change in the policy might be a bit too much to expect but moderation is possible.
It is often touted that globalization has improved the development of many countries, including India, by creating economic interdependence among them. Globalization has infused investments but there also have been high repatriation. Innovation is the key to success for economic growth and Atmanirbhar Bharat is not anti-globalisation, said Amitabh Kant, CEO, NITI Aayog two years back.
India without making much fuss has initiated petroleum imports cut with ethanol blending programme. The government proposes to blend 20 per cent ethanol in petrol by 2025. The average output growth of developing countries is to reduce by 3 per cent, says UNCTAD and recommends all governments for tighter regulations for price reductions. India is finding price control not easy.
It has initiated another move to reduce 40 per cent imports from China in 36 sectors. India imported around $87 billion worth of goods from China during 2021 wherein top 10 import product categories comprised around $54 billion. It can reduce imports in 36 sectors including including chemicals, automotive components, bicycle parts, agro-based items, handicrafts, drug formulations, cosmetics, consumer electronics, and leather-based goods among others. But it has also to consider how it can reduce some hi-tech imports planned for railways, rapid transit systems and such others.
The government has initiated steps to cut imports carefully to save forex. The exports during April-September rose by 15.54 per cent to $229.05 billion. Imports increased by 37.89 per cent to $378.53 billion. The trade deficit during the first six months of the fiscal has widened to $149.47 billion as against $76.25 billion during April-September 2021-22. But Commerce Secretary BVR Subramanyam expects trade deficit to moderate. Merchandise exports may range between $470-480 billion compared to $420 billion in 2021-22 and hopes trade deficit to remain at a comfort level.
The export basket has to be widened but in a shaky globe opening new markets or selling new products remains a challenge. The present fiscal may not be that easy but if exports could match the expectations, the rupee may have more stability.
It is tightrope walk. Global conditions remain difficult. September exports dip by 3.52 per cent. The present fiscal as per UNCTAD will remain critical. If the export trends improve so may do the rupee. Otherwise the country may slip into a challenging situation unless the internal economy improves. —INFA
