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India’s economy in shambles, headed for a double-digit decline

beijingwalker

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India’s economy in shambles, headed for a double-digit decline
COVID cases cross 5 million in India; Goldman Sachs foresees 14.8% GDP contraction for 2020-21. Global institutions bring down India’s growth projections to historic lows.

September 22, 2020


As India emerges to be the new global hotspot for COVID-19 with 54, 85,612 cases till 21 September, the economy struggles to sustain itself. Global institutions and economists are speculating a poor future for India’s economic growth as all trends point towards negative. The Asian Development Bank (ADB) has cut down India’s growth projections even further, after already estimating the historic lows. For the financial year March 2021, Goldman Sachs estimates a contraction in the GDP by 14.8%, while the ADB is speculating a growth of -9%. The Organization for Economic Co-operation and Development expects a contraction of 10.2%.

Lockdowns and phases of unlock

The economists believe that India’s failure to contain the virus will once again bring down all business activists that had been resumed after the months-long lockdown since March – one of the strictest the world had seen. While the infections rise over 5 million chasing the USA for the first place in the global ranking of COVID-19 cases, the death toll is only surpassed by Brazil and the US. Sunil Kumar Sinha, principal economist at India Ratings and Research Ltd. now speculates the GDP contraction to be 11.8% in the fiscal year, crossing his own earlier projection of 5.8%. He said, “While a second wave of infections is being witnessed globally, India still has not been able to flatten the first wave of infection curve.”


Slow potential growth

All eyes are awaiting the release of the Central Bank’s growth forecast on 1st October when the monetary policy committee will also announce its final interest rate decision. In August, the RBI had said that discretionary expenses on transportation, hospitality, recreation and cultural activities had taken a major hit due to COVID-19. This fall in the GDP while the banking and other financial sectors are already struggling, will curb India’s medium-term growth potential.

What are the economists saying?

The GDP and other growth potential of India were already on the decline when the country went into lockdown and the pandemic. The Bloomberg economists also expect a contraction of 10.6% in the fiscal year 2021, a rebound in 2022 and slow growth potential as the recession due to the virus continues to haunt for the rest of the decade.

Kaushik Das, chief economist at Deutsche Bank AG in Mumbai seemed optimistic about India’s future as he downgraded his estimates of GDP contraction from 8% to 6.2%. He said that India is “likely to see a shallow and delayed recovery in corporate sector profitability over the next several quarters. This will reduce the incentive and ability for fresh investments, which in turn will be a drag on credit growth and overall real GDP growth.”


Recommendations by the Policy Times

  • After the strict lockdown was lifted, there were some signs of revival, but the bigger picture still remains unclear.
  • There is no denial to the fact that India’s lockdown will be remembered as the greatest failure of the lockdown attempts by any major country because the cases are on a constant increase and the lockdown mitigated more damage than good, considering the migrant crisis and loss of jobs.
  • The economy will continue to decline further if the government and the financial bodies do not take any immediate action or even acknowledge the ongoing crisis.
  • The corporate profits have collapsed in the country, which means there are no investments, leading to no employment or growth.
  • Foreign investors can save the economy of the country if only it relaxes some of its trade policies.
 

beijingwalker

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india will get freedom for tibetan and uighar brothers at any cost .
They are waiting for you. lol..

 

Protest_again

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GDP is just a figure to measure monetary transactions that happen in the economy in a year. Given the pandemic, a forced lockdown was implemented for 3 months this year. It will have an impact on GDP given there couldn't be any transactions during this period.

If this year we are registering negative growth. Then the following year you'll see an tremendous growth to the tune of 15-20% in those 3 months, given the low base we are establishing this year. In 3 years, course correction would have happened and India would be back on track.

Nominal growth this year would still be in the positive in my opinion. As Indian rupee appreciated about 6% and inflation is around 6% too. This will offset majority of degrowth this year. Next year nominal growth will be above 20%.
 

beijingwalker

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If this year we are registering negative growth. Then the following year you'll see an tremendous growth to the tune of 15-20% in those 3 months, given the low base we are establishing this year. In 3 years, course correction would have happened and India would be back on track.
India unlikely to sustain growth of over 5% in coming years, says Ruchir Sharma
Updated : September 22, 2020 03:21 PM IST

India’s growth is unlikely to be sustained over 5 percent in the coming years, believes global investor and author Ruchir Sharma. Sharma says it is going to be extremely difficult for the Indian economy to achieve a growth of over 7 percent at any point.

"Now, we are in an environment where that has become much more difficult because we have a period of deglobalization. So, in that way, I think for the Indian economy to ever achieve those growth rates of 7-9 percent over the coming decade on a sustainable basis is going to be extremely difficult,” Sharma said in an interview with CNBC-TV18.

“If you look at post World War II history, all the cases of countries that were able to expand or grow very rapidly, were nations that were able to export their way to prosperity. This included China, this included, before that, Japan, Korea, Taiwan, Singapore, the entire East Asian economic miracle, that was the centerpiece as far as the development strategy is concerned," he added.

Sharma believes that India will never grow like East Asia if it allocates more to the social sector than infrastructure. “We can be unrealistic and think that the government can carry out massive reforms and we can achieve those growth rates just like China did in 1980 and 1990, but look at the politics of this country. I just don’t think that the politics of this country is conducive to enact those kinds of reforms... East Asia did not spend much on social welfare at this stage of the development," he explained.

Successful nations spend more than 3 percent of GDP on R&D, says Sharma. However, he notes that India spends less on R&D and it is a hurdle to growth in an era of digitalization.

"This I think is a major headwind for future economic growth because digitization is one of the big trends that has emerged over the last decade which has only been accelerated by this pandemic. So with such low level of R&D spend, it will be hard to get a big productivity bump in this era,” he said. Sharma further added that regulatory overkill in India and mistrust of businesses is not a good sign.

According to him, expectations of stimulus are far too unrealistic in India as we tend to always compare ourselves to the developed countries. It is a disadvantage for India that it went into the crisis with a high level of public debt and fiscal deficit, Sharma noted.

“We are still a developing country, our per capita income is still below USD 5000, and if you look at most countries in that cohort, they have not been able to enact such large stimulus plans because they are constrained by either having a very large public debt which is a very large government or because their inflation and currency are vulnerable to any large scale printing of money that the developed countries such as the United States or even UK are able to do," he explained.

However, he said what the Indian government has done post pandemic on stimulus is "quite realistic".

“The benchmarks of economic success have changed. The more we talk about self-reliance – you can argue that is a realistic strategy -- the more difficult it is going to be for the economy to grow much above 5 percent. So, if I were to hazard my best guess as far as what India’s growth rate is going to be over the coming few years, I doubt very much if on a sustainable basis we are going to be able to exceed 5 percent,” says the author.

In the adaptation of his New York Times 2016 bestseller, ‘The Rise and Fall of Nations: Ten Rules of Change in the Post-Crisis World’, Sharma uses his matrix of rules to identify, which nations will emerge winners in a post-pandemic world.

Based on data gathered over the last 25 years, Sharma has further distilled his 10 rules, to the top 4 that he believes will matter the most. These include a competent government, low debt, domestic strength and tech sophistication. Based on this, Sharma puts together a list of winners, that will thrive in the post-pandemic world.

"The 10 rules are perennial, evergreen, they matter for long cycles, but in the next 12-18 months as we recover from this pandemic, I think the 4 rules, in particular, will dictate a lot of choices that investors make or other business people make in terms of where to direct their capital in the foreseeable future,” he said.

 

Protest_again

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India unlikely to sustain growth of over 5% in coming years, says Ruchir Sharma
Updated : September 22, 2020 03:21 PM IST

India’s growth is unlikely to be sustained over 5 percent in the coming years, believes global investor and author Ruchir Sharma. Sharma says it is going to be extremely difficult for the Indian economy to achieve a growth of over 7 percent at any point.

"Now, we are in an environment where that has become much more difficult because we have a period of deglobalization. So, in that way, I think for the Indian economy to ever achieve those growth rates of 7-9 percent over the coming decade on a sustainable basis is going to be extremely difficult,” Sharma said in an interview with CNBC-TV18.

“If you look at post World War II history, all the cases of countries that were able to expand or grow very rapidly, were nations that were able to export their way to prosperity. This included China, this included, before that, Japan, Korea, Taiwan, Singapore, the entire East Asian economic miracle, that was the centerpiece as far as the development strategy is concerned," he added.

Sharma believes that India will never grow like East Asia if it allocates more to the social sector than infrastructure. “We can be unrealistic and think that the government can carry out massive reforms and we can achieve those growth rates just like China did in 1980 and 1990, but look at the politics of this country. I just don’t think that the politics of this country is conducive to enact those kinds of reforms... East Asia did not spend much on social welfare at this stage of the development," he explained.

Successful nations spend more than 3 percent of GDP on R&D, says Sharma. However, he notes that India spends less on R&D and it is a hurdle to growth in an era of digitalization.

"This I think is a major headwind for future economic growth because digitization is one of the big trends that has emerged over the last decade which has only been accelerated by this pandemic. So with such low level of R&D spend, it will be hard to get a big productivity bump in this era,” he said. Sharma further added that regulatory overkill in India and mistrust of businesses is not a good sign.

According to him, expectations of stimulus are far too unrealistic in India as we tend to always compare ourselves to the developed countries. It is a disadvantage for India that it went into the crisis with a high level of public debt and fiscal deficit, Sharma noted.

“We are still a developing country, our per capita income is still below USD 5000, and if you look at most countries in that cohort, they have not been able to enact such large stimulus plans because they are constrained by either having a very large public debt which is a very large government or because their inflation and currency are vulnerable to any large scale printing of money that the developed countries such as the United States or even UK are able to do," he explained.

However, he said what the Indian government has done post pandemic on stimulus is "quite realistic".

“The benchmarks of economic success have changed. The more we talk about self-reliance – you can argue that is a realistic strategy -- the more difficult it is going to be for the economy to grow much above 5 percent. So, if I were to hazard my best guess as far as what India’s growth rate is going to be over the coming few years, I doubt very much if on a sustainable basis we are going to be able to exceed 5 percent,” says the author.

In the adaptation of his New York Times 2016 bestseller, ‘The Rise and Fall of Nations: Ten Rules of Change in the Post-Crisis World’, Sharma uses his matrix of rules to identify, which nations will emerge winners in a post-pandemic world.

Based on data gathered over the last 25 years, Sharma has further distilled his 10 rules, to the top 4 that he believes will matter the most. These include a competent government, low debt, domestic strength and tech sophistication. Based on this, Sharma puts together a list of winners, that will thrive in the post-pandemic world.

"The 10 rules are perennial, evergreen, they matter for long cycles, but in the next 12-18 months as we recover from this pandemic, I think the 4 rules, in particular, will dictate a lot of choices that investors make or other business people make in terms of where to direct their capital in the foreseeable future,” he said.

He is of anti-modi brigade. Had been since the beginning. No one takes him seriously except NDTV and their cohorts.

Modi govt’s criticism by Ruchir Sharma falls short of facts and logic

2019 polls very competitive, too close to call: Ruchir Sharma

And what happened next, modi won by landslide in 2019.

And by the way for someone who despises Indian media, you can cherry pick negative articles to suit your narrative pretty well.
 
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Baibars_1260

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india will get freedom for tibetan and uighar brothers at any cost .
How about the freedom in India to eat what you want and believe what you want? Isn't India the only "democracy " to constitutionally ban a certain kind of meat ( with heavy punishment for violations) and legally require permission to change one's personal beliefs?
How about freedom for Dalits who have to step back from the "twice born" lest their defiling shadow falls on the divine ordained.
 

Baibars_1260

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How about the freedom in India to eat what you want and believe what you want? Isn't India the only "democracy " to constitutionally ban a certain kind of meat ( with heavy punishment for violations) and legally require permission to change one's personal beliefs?
How about freedom for Dalits who have to step back from the "twice born" lest their defiling shadow falls on the divine ordained.
 

Baibars_1260

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first you get freedom from slavery of china , saudi arabia , UAE who give you few billion dollars to get you daily bread and butter .
Saudi Arabia?
Every one of the janitors I saw there were high caste Hindus. They won't clean toilets back in their own country where the Dalits are supposed to be doing the job but will go abroad to willingly do what is " forbidden" to them by Divine Law.
 

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