January 10, 2022
either/view ⚖️
Growth pangs
To: either/view subscribers
📰 FEATURE STORY
Will 2022 be the year of the Indian economy?
With the arrival of the new year, resolutions abound. It’s a new beginning, in some ways. In others, not so much as the pandemic continues with the Omicron variant continuing to spread across the world. So, this year, what shape will resolutions take for India and its economy?
Over the past 18 months or so, the Indian economy has seen its fair share of modest peaks and deep valleys. So perhaps one resolution is to reach new heights. Another, to sustain it and clear the inevitable hurdles that lie ahead. Will 2022 see the Indian economy bounce back and take flight, or will the pandemic continue to make the journey turbulent?
Context
The world is interconnected today more than ever, for better or worse. That means events in one part of the world can affect outcomes and decisions in another. The pandemic has painted this picture so evidently. Consumers, manufacturers, governments, policymakers, etc. have had to deal with the pandemic’s effects. As governments imposed unprecedented lockdowns and restrictions, economic activity went into flux.
That term, economic activity, it’s the lifeblood of a country and its economy. People buying goods and services with money or credit, the movement of labour, manufacturing, travel, and more comprise economic activity.
Let’s zoom out for a minute. India wasn’t and isn’t the only country with economic hurdles and opportunities. Governments worldwide have had to increase their spending significantly in light of the pandemic in the form of large stimulus packages. Healthcare most likely topped the list of priorities for obvious reasons. At the same time, revenue generation has been a challenge.
We’ll probably get a better idea of the economic road ahead for this year as the IMF will release its forecast, World Economic Outlook on January 25. It’s a week later than planned, owing to the Omicron surge worldwide. To provide a preview, economists think the IMF could cut growth forecasts for the US, the world’s largest economy. For a similar context, the Organization for Economic Co-Operation and Development (OECD) has projected global growth to slow down to 4.5% in 2022.
India’s loss of momentum and hurdles ahead
India’s economy was in distress before the pandemic hit. What the pandemic did do was expose the economy’s fault lines. It laid bare the sub-par state of India’s healthcare system and infrastructure to the world. Two things to keep in mind for India – it’s still an agriculture economy, and many are employed in the unorganised sector. Cast your mind back to the first national lockdown and the resulting migrant crisis. They bore the brunt of it.
As the pandemic hit, the Indian economy wasn’t in good shape anyway. As Mohan Guruswamy, a writer and policy analyst, cited an Oxfam study that stated, as much as 73% of India’s economic growth over the past five years benefited only 1% of the population. Not a healthy place to be before a catastrophic national public health emergency.
Last year’s budget bet big on infrastructure spending to revive the economy. However, India was hit with a deadly second wave. Hopes for an upward-looking recovery were dashed. The big pain point continues to be employment, and it’s likely to remain that way. It’s why a sector like construction is still struggling.
Some of the global problems, inflation, and supply chains will likely be hurdles the Indian economy faces this year. This could result in small and medium-size companies struggling, as they account for high employment, as Vikas Dhoot cites PHDCCI president, Pradeep Multani.
This means the government will need to handhold the economy. Also, the effects of the current Omicron surge will be known as this quarter (January-March) plays out. Imposition of restrictions and curfews won’t help matters.
Positive indicators for steady growth ahead
It’s clear and understandable that the current Omicron wave has cast doubts on India’s 2022 economic outlook. But there’s good news. Let’s take a look at one important non-economic aspect first. India began the world’s largest vaccination drive last year. Despite initial hiccups, the pace picked up significantly. More than 80% have received at least one dose, as of November 2021. After all, vaccines are the best tool against the virus and its variants.
Coming to the economic aspects, the numbers look good, all things considered. The growth rate is above 8.5% and performance for the second quarter of this fiscal is above Covid levels. The government has undertaken a few reforms that have started to pay off. Namely, the Insolvency and Bankruptcy Code, Goods and Services Tax, corporate profit tax, and labour laws, according to Dr Arvind Panagiriya, former Vice-Chair of the NITI Aayog.
The National Statistics Office (NSO) provided some initial estimates for GDP growth at 9.2% for FY2022. In that case, India’s economic growth will likely surpass pre-pandemic levels by March. In this context, the IMF had its say. It believes India could be the fastest-growing Asian economy this year. To look long-term for a moment, India could overtake Japan and become the world’s second-largest economy by 2030, as per IHS Markit Ltd.
India is in the midst of a massive privatisation drive. This will attract investors to India and help boost manufacturing and employment. Overall, the current surge will likely have only a modest impact on the economy. With the absence of national lockdown and only localised ones, states and cities are better equipped. Not to mention India’s positive foreign trade performance. Exports reached a new high in 2021, with export earnings going above $300 billion.
What’s your opinion on this?
(Only subscribers can participate in polls)
a) India’s economic growth outlook for 2022 looks promising.
b) India’s economic growth outlook for 2022 looks uncertain.
🕵️ BEYOND ECHO CHAMBERS
For the Right:
For the Left:
🏴 STATE OF THE STATES
Playing cricket amid curfew? (Delhi) – Delhi cops’ witty response to a Twitter user is amusing. As soon as the Delhi government announced the curfew, there had been queries and concerns from the public, addressed to Delhi Police. One such ‘unique’ concern was if one can play cricket while adhering to SOPs. Down came a fitting reply from the Delhi cops. “That’s a ‘Silly Point’, Sir. It is time to take ‘Extra Cover’. Also, #DelhiPolice is good at ‘Catching’,” the Delhi Police replied.
ED arrests former VC (Karnataka) – The former VC of Alliance University, Madhukar G Angur, was arrested by the Enforcement Directorate, on Saturday. Madhukar Angur and three others had allegedly swindled around 107 crores of University funds. They had sent out emails to the parents of the students directing them to deposit the University fee to illegally opened bank accounts (Srivari Educational Services). This illegal account was privately operated by the three accused.
Cattle smugglers pose a threat (West Bengal) – On Saturday night, the Mekhaliganj police station received a tip about cattle smugglers who were gathered in large numbers near the Indo-Bangladesh border. Upon reaching the spot, the cops were allegedly mobbed by smugglers. While the cops managed to arrest six smugglers and procure the cattle, some policemen were seriously injured and had to be hospitalised.
Swatantra Marg in Grant Road (Maharashtra) – Maharashtra’s tourism minister Aaditya Thackeray announced that the government is planning to create a Swatantra Marg in Mumbai’s Grant Road. He further said that as a part of the Heritage tourism development initiative, the August Kranti Maidan precinct and Mani Bhavan will be upgraded. It can be recalled that the August Kranti Maidan, earlier called Gowalia Tank Maidan, is the place from where Gandhiji called for the Quit India Movement, on August 8, 1942.
Half-century for the state (Meghalaya) – The state government of Meghalaya has decided to celebrate the golden jubilee of its statehood in splendour. Meghalaya is planning to celebrate this January 21st – the 50th year of its formation – in a grand manner despite the Covid surge. The Deputy CM has said that the government has planned for many events and has even requested PM Modi to attend the Golden Jubilee celebrations, though there isn’t any confirmation on his visit yet.
🔢 KEY NUMBER
USD 98.15 million – Amount shelled out by Reliance Industries to buy the premium luxury hotel Mandarin Oriental in New York.