http://economictimes.indiatimes.com...-growth-wrong-expert/articleshow/58973943.cms
India's national accounts on economic growth wrong: Expert
By PTI | Updated: Jun 03, 2017, 01.51 PM IST
WASHINGTON:
India is not growing at a seven per cent rate as being reported by the government, an eminent Indian-origin economist has claimed, citing flat
growth in several key sectors.
"They (India's national accounts) show India's growing at seven per cent a year.
But I along with many other economists, I'm afraid don't believe the national accounts. They were redone in 2011," Vijay R Joshi, Emeritus Fellow of Merton College, Oxford and Reader Emeritus in Economics, University of Oxford, told a Washington audience.
Joshi, the author of a book titled 'India's Long Road--The Search for Prosperity' alleged that India's growth rate is back at 5.5 per cent, but the national accounts show a much rosier picture.
During a discussion organised by the Carnegie Endowment for International Peace, a top American think-tank, the London-based economist gave several reasons to prove his point.
"I will say one thing, (India's national accounts) is the only place where you can see seven per cent growth. You can't see it anywhere else. If you look at exports and imports, they have been flat. Shrinking or flat or growing very slowly. If you look at employment in the organised sector it's at a standstill," he argued.
"If you look at industrial production, it has been growing very slowly. If you look at bank credit, it has been growing very slowly. Bank credit in the industry has grown poorly in recent years," he asserted.
"And especially if you look at investment, it has collapsed. The investment ratio which was 34 per cent of GDP in 2011 is now 27 per cent of GDP. So investment has really collapsed. (Thus) it is hard to believe that national income is growing at seven per cent a year," Joshi said.
Responding to questions, Joshi said that under the present trends,
India is unlikely to grow at seven-nine per cent a year for the next 25 years.
"Not on present trends. Not unless we really get our act together. We can probably continue to grow at 5-5.5 per cent a year,"
he said, adding that a long-term growth rate of seven to nine per cent a year is a feat that has rarely been achieved by a democratic country like India.
"This is a feat that has been achieved very rarely. It has been achieved only by three countries. That is China, South Korea, and Taiwan and perhaps Singapore."
Responding to another question, Joshi said while the Indian government led by Prime Minister
Narendra Modi has done quite well, but it has completely neglected the
education and
health sectors.
http://www.livemint.com/Opinion/IyM...ls-to-61-Narendra-Modi-should-be-worried.html
India GDP falls to 6.1%, Narendra Modi should be worried
India’s no longer the fastest-growing large economy in the world, and government ministers are going to need a new first line for their speeches
Mihir Sharma
For quite awhile now, it’s been rare to hear the name “India” without the giddy qualifier, “the world’s fastest-growing large economy.” Those seeking to promote India as a destination for investment — including, perhaps especially, its government — have driven home the message that India is the “bright spot” in the global economy.
The latest data on economic growth have, however, punctured that narrative reasonably effectively. While full-year growth for 2016-17 came in at a respectable 7.1%, the numbers have benefited from a change in how inflation is measured. The real news is that fourth-quarter GDP growth fell to 6.1% — lower, in other words, than China’s. India’s no longer the fastest-growing large economy in the world, and government ministers are going to need a new first line for their speeches.
It would be easy to blame this on Prime Minister Narendra Modi’s disastrous decision, last November, to withdraw 86% of India’s currency from circulation. His predecessor, Manmohan Singh, said in Parliament at the time that the move might dent growth by two percentage points or more, and that estimate might well be borne out by these numbers.
But what’s more worrying is that it’s now clear that India’s economy was slowing well before Modi delivered a coup de grace last November. Growth in gross value added — output as measured from the economy’s supply side — has slowed every quarter since last spring: It’s down from 8.7% to 5.6% in these latest figures. The problem isn’t just demonetization: Something is very wrong with India’s engine of growth, which looks to be spluttering.
The biggest problem is, of course, that nobody is investing. Those speeches about how India was the world economy’s sole bright spot might have won enthusiastic applause, but too few investors and companies followed up with actual money. As a proportion of GDP, investment has trended downwards for some time, and is now well below 30%. Investment actually shrank in absolute terms in 2016-17.
Partly, that’s because the government has simply not moved swiftly or decisively enough to address India’s mountain of bad loans beyond passing a bankruptcy law and, more recently, giving the central bank additional power to force resolutions in the most pressing cases. Much of Indian investment, even for large-scale, growth-enhancing infrastructure projects, is routed through banks. And public-sector banks, struggling with their balance sheets, are reluctant to lend. Bank credit growth has recently hit multi-decade lows.
But that’s hardly the only problem. As and when banks are willing to lend, they find too few takers for funds. Companies complain, of course, that the Reserve Bank of India — now officially targeting inflation — is keeping real interest rates too high. What’s more relevant, however, is that the government hasn’t worked hard enough to reduce the sort of risk that worries investors who’ve been burned multiple times in the past when they reposed faith in the “India story.” India desperately needs a more efficient and less intrusive state, as well as deeper and more flexible markets. But structural reform of that sort has been taken off the government’s agenda.
The finance minister, in a press conference after the GDP data was released, defended the government’s record by highlighting the troubles it inherited, and the poor monsoons with which it’s had to deal. He wasn’t wrong, but that’s not the whole story. While the government inherited an underperforming economy in 2014, the data show it was tracking upwards. The business cycle was turning, commodity prices were easing and growth was increasing steadily as Modi took office.
And while there have indeed been bad monsoons, the last one was excellent — a fact that’s visible in the strong performance of the agricultural sector in the latest data. In other words, if the economy started slowing two years into the government’s tenure, and that loss of momentum has continued and intensified, then it can blame nobody but itself.
What has India’s government done wrong? Its greatest faults have been a lack of focus, a shortage of ambition and misplaced priorities. Since he took over three years ago, Modi has focused on being simply a competent manager and an investment-oriented marketing man for the India story. He seemed to believe that would be enough to propel India to double-digit growth.
But it’s now clear that this simply isn’t enough. Deeper reform can’t be avoided any longer: defanging India’s obstructive state, cleaning up its judicial processes and dispute resolution, reforming and privatizing state-owned banks, easing restrictive land and labor laws. Investors were willing, early in Modi’s tenure, to buy into the idea that he would start on some of these long-pressing problems; that enthusiasm has clearly dissipated now.
Given that the political opposition is in disarray, Modi might imagine that he will coast to reelection easily in 2019. But these numbers should be a wake-up call. Unless he starts working on real structural reforms immediately, the damage to India’s growth story — and to his own image — could be permanent.
Bloomberg
