by admin | May 25, 2021 | Interviews
Krishnamurthy Subramanian
By Vishav and Manish Gupta,
New Delhi : Chief Economic Adviser Krishnamurthy Subramanian is not worried about the upward revision of fiscal deficit target for 2019-20 to 3.4 per cent as he believes it will actually come down to 3.1 per cent after the revised GDP numbers are incorporated.
He adds that even based on the previous Gross Domestic Product (GDP) data, the government had missed the target this year by a mere 0.02 per cent which translates to a few thousand crores of rupees.
Subramanian also expresses satisfaction with the efforts taken by the government towards fiscal consolidation and said the country remained fiscally disciplined despite greater devolution of 42 per cent to states and implementation of the Seventh Pay Commission.
“The budgeted estimate for fiscal deficit (for FY19) was 3.34 per cent. The actual number has come to be 3.36 per cent. And as is the practice, it is rounded off to 3.4 per cent. So, actual slippage is 0.02 per cent which is just a few thousand crores,” the Chief Economic Adviser to the Finance Ministry told IANS in a post-budget interview.
He added the 3.36 per cent figure was derived based on the old GDP estimates and had not used the revised estimates which were released last Thursday.
The government had revised the GDP growth rates by 110 basis points from 7.1 per cent to 8.2 per cent for 2016-17 and by 50 basis points from 6.7 per cent to 7.2 per cent for fiscal 2017-18.
“If you use the revised GDP growth rate, we have calculated that the base would be Rs 225 lakh crore for the next year, which will bring down your fiscal deficit to 3.1 per cent,” he stated.
However, the CEA added, “We have to first study those numbers before using them.”
Subramanian said fiscal prudence had been followed “very well” by the government and expressed confidence of continuing on the glide path to reduce fiscal deficit down to 3 per cent by 2021 as per the Fiscal Responsibility and Budget Management (FRBM) Act.
“It is important to keep in mind that the fiscal deficit figures that we have are despite greater devolution of 42 per cent to states and despite the implementation of the Seventh Pay Commission.
“Historically, whenever pay commission recommendations have been implemented, the fiscal deficit number sees a huge jump. But that hasn’t happened. The government is committed to fiscal prudence and I have no worries on that front,” he said.
As for the tax changes brought about in the Interim Budget, which reduced tax liability to zero for income up to Rs 5 lakh, the economist said there was a need to encourage consumption and the government did exactly that by putting higher disposable income in the hands of citizens.
“Given the kind of headwinds that we are facing, especially on globalisation front, it’s very critical for us to build robust buying power in the domestic economy. Therefore, putting disposable income in the hands of the middle class is (important) considering 60 per cent of our growth is consumption-based,” he said.
He said when the consumption goes up, it should have a growth effect as well.
On the debate on lack of jobs in the economy, Subramanian said it was more a problem on the demand side rather than supply front.
“Jobs are outcome of both demand and supply. We keep asking questions on the supply side — are we creating enough jobs? The demand side is actually having people who have ability to take up those jobs.
“It’s done through skilling, which, by its very nature, doesn’t happen overnight. It takes time. That’s where Skill India campaign and investments will start showing their results,” he said.
(Vishav and Manish can be contacted at 1.vishv@gmail.com and manish.g@ians.in respectively.)
—IANS
by admin | May 25, 2021 | Opinions
By Frank F. Islam,
2018 was not a bad year in general for India. GDP growth has been relatively good, the Modi administration has launched several new initiatives, and Indias status and world image has strengthened. The problem is that these are all top-line measures and do not get down to how the Indian people are feeling.
Recent research on this, unfortunately, indicates they are not feeling very happy. India ranked as 133 out of 156 countries on the UN 2018 World Happiness Report (Happiness Report). This was 11 spots lower than India’s 2017 ranking. India’s dismal 2018 ranking placed it far below most developing nations around the world and near the very bottom for the South Asian countries surveyed.
A well-being study released by social science researchers at the end of 2018 revealed that life satisfaction in India dropped by 10 percent from 2006-17. What accounts for India’s poor performance on these assessments?
There is no simple explanation. It is instructive, however, to consider the factors that have the greatest impact on achieving good scores on them.
As noted in the Executive Summary of the Happiness Report, “All the top countries tend to have high values for all six of the key variables that have been found to support well-being: income, healthy life expectancy, social support, freedom, trust and generosity.” The well-being study disclosed that “The life satisfaction of individuals worldwide correlates with income, health, employment, education as well as with positive moods, freedom and beliefs about the benefits of work.”
India obviously does not score well on most of those factors. There are various studies that have highlighted major deficiencies in areas such as income, health, education and employment. There is not a systematic method in place, however, to assess the well-being of India’s citizenry on an ongoing basis.
India, as do most other countries, puts considerable emphasis on measuring GDP growth and tracking other economic indicators routinely and regularly. The assumption is that moving the needle positively on those metrics will cause benefits to flow through to citizens.
That is not the case. As Nobel Prize winning economist Joseph Stiglitz explains, “No single measure can capture what is going on in a modern society, but the GDP measure fails in critical ways we need measures on how the typical individual is doing (measures of median income do a lot better than measures of average income.)”
There are two old proverbs. One states: “What is measured matters.” The other says: “What gets measured gets managed.” By putting a well-being measurement system in place, India would demonstrate that the happiness of its citizens matter and provide the platform for developing and implementing policies for enhancing their life satisfaction.
Given that, I recommend the development of monthly Well-Being Index. Such an Index could be the definitive source for information on the well-being of the Indian citizenry.
Social scientists, economists and statisticians can decide what goes into the Index and its metrics. The important thing is that the Index be developed and put into place as quickly as possible. The reason for this is that the available data and evidence shows that India is moving backward rather than forward in terms of enhancing the happiness and life satisfaction of its people.
The Index results and findings should be released at the same time as GDP reports, so that all concerned individuals and organizations can determine whether the economic growth and progress of the country as a whole is translating into well-being for its citizens. With this information in hand, decision makers can take the actions necessary to ensure that when India does well, all Indians do well.
Mahatma Gandhi famously said: “Happiness is when what you think, what you say, and what you do are in harmony.” Gandhi was correct.
Research shows though that extrinsic factors such as income inequality and an inadequate education can reduce an individual’s potential for achieving happiness. Improving the conditions and the setting for well-being by addressing those factors will enhance a person’s ability to exercise choice and free-will in order to be happy.
Mahatma Gandhi also famously said: “Be the change you want to see in the world.” In this and in the years ahead, I am confident a change that all would like to see is a happier India.
A Well-Being Index would be a starting point for focusing attention on a happier India and bringing Indians together to work in unison on being the change that will be necessary to achieve that end.
(Frank F. Islam is an entrepreneur, civic and thought leader based in Washington DC. The views expressed here are personal.)
—IANS
by admin | May 25, 2021 | Economy, Finance, Markets, News
New Delhi : India’s GDP (gross domestic product) is estimated to grow at 7.2 per cent in 2018-19 compared to 6.7 per cent attained during the previous fiscal, official data showed here on Monday.
“Real GDP or GDP at Constant Prices (2011-12) in the year 2018-19 is likely to attain a level of Rs 139.52 lakh crore, as against the ‘Provisional Estimate of GDP for the year 2017-18’ of Rs 130.11 lakh crore, released on 31st May 2018,” the Ministry of Statistics and Programme Implementation said in “First Advance Estimates of National Income, 2018-19”.
“The growth in GDP during 2018-19 is estimated at 7.2 per cent as compared to the growth rate of 6.7 per cent in 2017-18,” it added.
—IANS
by admin | May 25, 2021 | Economy, News, World
Beijing : China’s gross domestic product (GDP) grew 6.7 per cent year on year in the first three quarters of 2018 to about 65.09 trillion yuan ($9 trillion), data from the National Bureau of Statistics (NBS) showed on Friday.
The growth was in line with market expectations and higher than the government’s annual growth target of around 6.5 per cent, reports Xinhua news agency.
In the third quarter, China’s GDP rose 6.5 per cent from a year ago, compared to a 6.7 per cent increase in the second quarter, the NBS said in a statement.
The economy has expanded in a reasonable range and maintained a trend of overall stability and steady progress, the statistical authority said, while acknowledging that the country faces more external challenges and rising downward pressure.
The service sector gained 7.7 per cent year on year in the January-September period, picking up from a 7.6 per cent increase in the first half, and outpacing 3.4 per cent in primary industry and 5.8 per cent in secondary industry.
—IANS
by admin | May 25, 2021 | Opinions
By Taponeel Mukherjee,
Real per capita GDP, stock market indices and consumption trends in India are currently interesting. Even as real GDP at an aggregate and per capita basis have broadly trended higher, equity market valuations have fluctuated. Amidst the noise of market data, it is often easy to forget that some of the best investment opportunities arise when market valuations arent quite at their peak.
The single most significant takeaway is that as real GDP has trended upwards, the equity market, in real terms (inflation adjusted), has moved higher with considerable volatility. What many view as market downturns are opportunities to build and scale value-creating businesses.
Market downturns in public markets (equity markets) invariably compress valuations in private markets as well. One way to generate returns from the growing GDP per capita over the next two decades is through creating a valuable platform company to aggregate assets. Such a strategy is especially relevant when high-quality assets can be acquired in a market downturn.
At a fundamental level, a platform company would be one that uses acquisitions to build a business. Capital allocation is the principal function of any company, and in the case of a platform structure, the capacity to inorganically grow the business through meaningful acquisitions is the core objective.
Two fundamental factors determine the success of the platform. Firstly, the pricing environment needs to be one that is in some way a “buyer’s market”, i.e. valuations provide for attractive acquisitions. Market downturns are usually such an environment that is conducive to attractive pricing for deals. The ability of the platform structure to make attractive acquisitions is vital.
It is important to note that the platform company making purchases provides sellers with liquidity in a market downturn, thereby creating liquidity in relatively volatile market conditions. Even in situations without a market downturn, attractive deals are available through sourcing in the private markets or acquiring assets from companies with impaired capital structures.
The second most important factor for a platform structure is to get access to relatively low-cost capital for a longer duration. A healthy balance sheet for the parent business and focus on cash-flow rich businesses is critical in this regard.
A platform business in India has the advantage of one of the fastest-growing economies in the world. To leverage the growth in the economy it will be critical to choose products or services where the product or service meets two main criteria. One, extremely low-risk of substitution; and, two, low technology risk in the product.
Low-risk of substitution is that the need for the product will not disappear in the near term. For example, pharmaceutical products to manage chronic diseases will be a requirement for the foreseeable future. While technology as a backbone will be crucial to scaling the business, low-technology risk implies that the product by its very inherent nature isn’t at risk of technological obsolescence. An example would be the demand for baby foods in the FMCG space.
Using successful templates from other economies, the products and services offered for a platform structure can be for both B2C and B2B businesses. Such platforms usually work better in relatively fragmented markets. The ability to acquire relatively smaller firms from both private and public markets provides an opportunity to scale a business to command a higher valuation multiple relative to a smaller company.
Besides operational efficiency, the strategy that a platform company adopts in India will be dependent on factors such as whether the acquisitions are for regional expansion or a broadening of the product and service suite offered by the platform company. The critical determinant being: How the sum of the parts adds up to create more value than the individual components.
For instance, a successful consumer credit company in one region can create a platform for growth in other regions utilising the existing successful business model. Alternatively, a company selling baby food can generate greater value by acquiring companies that sell products related to baby care.
At a fundamental level, capital allocation through mergers and acquisitions is the cornerstone of creating a successful platform structure. In the Indian context, public market valuation volatility that compresses valuations provides long-term investors with entry points to develop platform companies to leverage the India growth story.
(Taponeel Mukherjee heads Development Tracks, an infrastructure advisory firm. Views expressed are personal. He can be contacted at taponeel.mukherjee@development-tracks.com or @Taponeel on Twitter)
—IANS
