India’s great slowdown
Arvind Subramanian | Former chief economic adviser, Government of India
Josh Felman | Former IMF resident representative to India
The Indian Express
Subramanian and Felman note that the GDP numbers of the economy “are worrying enough, but the disaggregated data” is even more “distressing”. This is not an “ordinary slowdown”, it is “India’s Great Slowdown”, they write.
They argue that the Great Slowdown “stems from a balance sheet crisis that arrived in two waves”. The first wave “arrived after the global financial crisis, when the world economy slowed and infrastructure projects started during India’s investment boom of the mid-2000s, began to go sour”. The second wave “came from the collapse of a credit boom, led by NBFCs, and centered on the real estate sector”. This resulted in the economy confronting a “Four Balance Sheet (FBS) problem — the original two sectors, plus NBFCs and real estate companies”.
To tackle this FBS problem, in this piece, the authors concentrate on primarily two sectors — power and real estate. For both these sectors they recommend setting up “bad banks”, which are set up to buy the illiquid holdings and bad loans of other financial institutions to clear the balance sheet. However, at the same time, Subramanian and Felman concede that “bad banks are not magical solutions” and are only “one critical element” required to solve the FBS problem.
Time for CMs to take control
Subodh Mathur | Adjunct professor, John Hopkins School of Advanced International Studies
The Times of India
Even though everyone, including the chief ministers, knows India’s GDP growth rate has slowed down, they choose to do nothing about it, Mathur writes. The chief ministers “seem to think that economic growth is the Union government’s problem, not theirs,” he adds. Mathur notes that apart from the legalities, chief ministers “know the ground realities much better than the Union government” and thus, the Indian economy “will grow faster if all chief ministers create state-specific growth-oriented policies and administrative procedures”.
Since it is “impractical to try to motivate all chief ministers at once”. Mathur suggests that it is better “to focus on selected chief ministers who can quickly help a large number of Indians”. He looks at India’s most populous states, UP and Bihar, and writes that growth in these states would boost India. Additionally, he takes into account Maharashtra, Tamil Nadu, Karnataka, Gujarat and Andhra Pradesh as they have a good economic record. He calls them Weighty 7 (W7) states since they can “lift Indian economy” by the following measures.
He recommends four measures to improve the economy. First, there is a need to “improve power discoms, particularly in UP and Bihar”. Second, they must “support and facilitate micro, small, and medium enterprises (MSMEs)”. Third, the “ W7 chief ministers should do their best to reduce traffic congestion quickly”. Fourth, “begin to take charge of your rural areas, instead of continuing to let the Union government take the lead in agriculture and other rural schemes”.
BJP using CAA-NRC to reach out to Bengali-speaking Hindu voters in Assam, Bengal
Rajdeep Sardesai | Senior journalist and author
Hindustan Times
Sardesai observes that during the debate in Parliament on the Citizenship Amendment Bill, Home Minister Amit Shah remained “unbending when questioned about the inherently discriminatory nature of the proposed law”. He notes that Shah made it clear “that Indian Muslims had nothing to be afraid of, [and] he repeatedly emphasised that there is a basic difference between a Muslim immigrant and a Hindu refugee”. After aligning the CAA to the all-India NRC, Sardesai notes that the “link between citizenship and identity politics becomes even clearer”.
He argues that there are two narratives running concurrently. The first views “the Muslim as victim of a divisive political agenda where State power is being used to relentlessly single out a community”. The second “is to see the Muslim as a lumpen radical Islamist who is a law and order threat.” Sardesai maintains that “lost in the vicious and polarised debate is the fact that the CAA-NRC plan is actually located in the fragile ethnic identity politics of the Northeast where illegal cross-border immigration has long been a sensitive political issue”.
Furthermore, he writes, West Bengal Chief Minister Mamata Banerjee “has offered a strong counterpoint to the Modi government’s CAA-NRC gambit”. By focussing on NRC in her protests, Banerjee has created a new narrative: “Bengali sub-nationalism versus Hindutva nationalism, poor versus rich and not Hindu versus Muslim”.
Let politics not divert attention from a looming economic crisis
Sudipto Mundle | Distinguished fellow, National Council of Applied Economic Research
Mint
Mundle paints a gloomy picture of the Indian economy and concludes that the “government is increasingly distracted by a gathering storm on the political front”. After the Ayodhya verdict, scrapping of Article 370, CAA and NRC, the BJP government has entered a “new phase of confrontational politics…while the economy continues to flounder”, he writes.
Mundle lays out what’s at stake given the steep generalised decline in economic activity. The fall in electricity generation by 12.2 per cent is “particularly worrying” as electricity is the “universal input for all other lines of production”, he writes. “Most worrying of all is the decline in growth of fixed investment to only 1%,… down from 10.2% a year ago”, he adds.
With rising inflation, there are fears that India will experience stagflation — where unemployment and inflation are both high, however, there is “no generalized trend of rising inflation”, explains Mundle. While the Monetary Policy Committee (MPC) can take care of the “fragile” price situation, fiscal policy has a greater challenge of reviving growth, he adds.
Translating economic scale into financial heft
Shyam Saran | Former foreign secretary and is senior fellow, CPR
Business Standard
Saran discusses China’s efforts to improve its profile in the international financial markets. Despite being the second largest economy in the world with a GDP of $14 trillion, China’s “weight in the global economy is not reflected in its financial profile” and internationalisation of the yuan is still in progress, notes Saran.
China’s strategy includes integrating its massive equity and bond markets into global financial markets, he observes. It has already started “encouraging key global indices to include Chinese equities and bonds in their benchmarks” and Shanghai has become the “world’s third largest oil futures market, overtaking Dubai this year”, adds Saran.
China is set to launch a sovereign digital currency, writes Saran. It is simultaneously working on making its own international payment gateway, Cross-border Interbank Payment System (CIPS), an alternative to the Brussels-based SWIFT, he adds.
Reportedly, India, China and Russia are debating a “trilateral payments gateway independent of SWIFT in order to avoid being targeted by US sanctions”, explains Saran. Where all of this leaves India is still a question, he writes, especially since India has been “reduced to gazing angrily” at its neighbour.
Housing Sector Needs a Home
Shrikant Joshi | MD-CEO, L&T Realty
Economic Times
Joshi describes different angles by which one can view the ailing real estate sector — government, judiciary and customers.
First, he traces the poor financial health of the sector. “Transparency, credit crunch and accountability are pushing consolidation,” he writes. The sector is cash-strapped since its NBFCs, which play a big role in funding, are “currently … in a bind”, he adds.
According to consumer trends, people opt for “large reputed developers as they provide delivery certainty and quality” and are also taking a “wait-and-watch approach… to close any deal”, he explains. Recent Supreme Court verdicts, following “a consumer-centric approach”, have “forced developers to place a premium on their delivery commitments”, he adds.
To revive the sector, Joshi suggests, it should be granted industry status which related segments like affordable housing and logistics are already benefiting from. He also recommends the government simplify approval processes for projects, provide tax concessions at the central level and “discount in premium and development charges levied on projects”.