The expiration of US waivers on sanctions targeting Iran and its foreign trade partners ends this Thursday. This will affect India, China, Japan, S. Korea and Turkey. While China is currently the largest purchaser of Iranian crude oil, both India and China have warned that such a step could destabilise the global energy market and the Middle East....Sputnik International
AbstractThis paper focuses on the different development strategies of China and India, particularly regarding the role of manufacturing and services, for long-run productivity growth, external competitiveness and financial fragility. The findings appear to support the argument that productivity improvements in manufacturing drive productivity improvements in other sectors. They also substantiate previous findings that the Indian services-led growth trajectory has had limited success in transferring surplus labor from agriculture to other sectors. Furthermore, the trajectories have affected the export performances of the two countries with the Indian trade balance and current account revealing persistent deficits, compared to China's surpluses. The paper also argues that the way in which India has sought to sustain these deficits entails elements of financial fragility, and that the Chinese struggles with the internationalization of the renminbi also imply a possibility of financial instability.
The Indian economy is in a tailspin. This cannot be attributed only to innocence in economic matters of the command-centre of the NDA government. While that is indubitably a contributing factor, the current travails of the economy point to something deeper, namely the dead-end to which neo-liberalism has brought the economy. Without moving away from the neo-liberal trajectory, the economy cannot come out of its current difficulties....Neoliberal solutions that rely on only a few factors, such the reliance on central bank interest rate setting and price rationing in markets, are insufficient for dealing with the complicated issues of a modern society, its politics, and its economy, especially in a country as large and diverse as India. A constellation of issues and causal factors must be identified and address comprehensively, especially growing inequality.
A combination of direct import controls on inessential items, reduction of petro-product prices, measures for reducing the consumption of such products, and direct taxation, especially on wealth, is the obvious way of getting out of the tailspin in which the Indian economy is currently caught. But this combination of measures which is desirable, not just for getting out of the current travails, but on other, more long-term considerations as well, runs contrary to the direction of neo-liberalism. There is however no alternative to them if we are to avoid the fate of countries that eventually run to the IMF and get caught in the vice-like grip of “austerity”....Although the author doesn't mention it, this also applies to India in that US interest rate policy affects everyone, since world economy uses the USD as the dominant global reserve currency. When the Fed increases the policy rate, this constitutes a global price rate in the cost of credit.
The theme of the book is corruption, and its co-evolution with the Indian economy as the ‘licence raj’ restrictions were progressively removed, and new sectors like telecoms grew dramatically. In this new world, the super-wealthy businessmen and the politicians found they needed each other: the deployment of legislation and contracts helped the former, the opportunity to take part in business helped the latter. As one of the interviewees puts it: “They [the politicians] are saying: ‘We don’t want briefcases full of cash and Swiss bank accounts and all that any more. We want to own businesses ourselves. We want equity stakes.”...The Enlightened Economist
Income disparity in India has become even more stark, showing that efforts to alleviate poverty and achieve more inclusive growth have had little success.
A survey carried out recently by international rights group Oxfam revealed that the richest 1% in India cornered 73% of wealth generated in the country last year, Press Trust of India has reported.
A similar survey last year showed that India’s richest 1% held 58% of the country’s total wealth — higher than the global figure of about 50%.
The Oxfam survey, ahead of the World Economic Forum summit at Davos, revealed that the 670 million poorest Indians saw their wealth rise by just 1%....How's Modi's neoliberalism workin' for ya?
The growing importance of Asia's major economies will continue in 2018 and beyond, according to a league table that sees the region dominating in terms of size in just over a decade.
The report by the Centre for Economics and Business Research in London sees India leapfrogging the UK and France next year to become the world's fifth-biggest economy in dollar terms. It will advance to third place by 2027, moving ahead of Germany.
In 2032, three of the four largest economies will be Asian - China, India and Japan - and, by that time, China will also have overtaken the U.S. to hold the No. 1 spot. India's advance won't stop there, according to the CEBR, which sees it taking the top place in the second half of the century.
Also by 2032, South Korea and Indonesia will have entered the top 10, supplanting Group of Seven nations Italy and Canada.
In October 2014, the International Monetary Fund said that China had overtaken the US as the world's largest economy when it is measured by purchasing power parity. The PPP measurement is based on the rationale that prices of goods are not the same in individual countries.…Ecns
It’s getting easier to do business in India. That’s not a boast by the Modi government, but something “confirmed” by the World Bank’s latest global survey on Doing Business.
Informal reports over recent weeks had suggested India would score a better grade than the 142nd ranking the country got in the DB report in 2015, the cut-off date for which was June 1, 2014 – just a week after Narendra Modi took over as prime minister.
In just three years India has jumped a massive 42 ranks higher, into the top 100 countries out of the 190 ranked by the World Bank. Modi has publicly stated that he would like to see India break into the top 50 countries in the rankings by 2020. And there’s a chance that could happen....India breaking out?
The Modi government made its supposed determination to end corruption in India its signature theme. The massive damage done by demonetisation as well as the continuing chaos produced by the flawed introduction of the Goods and Services Tax have all been justified on the grounds of reducing possibilities of corruption and tax avoidance. Similarly, the imposition of Aadhaar requirements on the population for access to all manner of publicly provided goods and services is regularly justified on the grounds of reducing “leakages” and misappropriation of benefits. The Prime Minister has sought to burnish his image of anti-corruption crusader through emotional appeals and dramatic public claims that he is willing to be sacrificed for the larger good of “cleaning up” the country.
Yet, like so many other policy initiatives of this government, the heavily publicised anti-corruption moves also were mostly about optics and hype rather than substantive change, since the quiet, careful and systematic measures that could have dented various types of corrupt practices at different levels were rarely undertaken....Real-World Economics Review Blog
India has more than 1.2 billion people, and it is has been growing rapidly and carrying out substantial policy changes, but it seems to get only a small fraction of the attention paid to China. For those looking to get up to speed on India's economy, a useful starting point is the Economic Survey 2016-2017, published in January 2017 by India's Ministry of Finance (where Arvind Subramanian is the Chief Economic Adviser). The page also has a drop-down menu with links to previous annual surveys.
The title of this post is taken from the title of Chapter 2 of the report. "Precocious" refers to the facgt that India has been a democracy for so long, and that it turned to democracy started when the country was at such low level of per capita GDP. The term "cleavaged" refers to separations in India. As the report notes: At the same time, India was also a highly cleavaged society. Historians haveremarked how it has many more axes of cleavage than other countries: language and scripts, religion, region, caste, gender, and class ....
Here are seven points from the report that stuck with me....
While piecemeal anecdotes and surveys have already exposed the devastation that PM Modi's demonetization plan has had on the Indian economy, tonight we see the first hard evidence as Foxconn has asked 25% of its workforce to leave after the cash ban caused sales to collapse by 50% forcing the company to slash production by half.
On 8th November 2016, at around 8pm, the Prime Minister of India, in a shock announcement, announced that 86% of currency notes in circulation—notes denominated ₹500 and ₹1,000—are no longer legal tender from midnight. Instead new notes with denominations ₹500 and ₹2,000 will be issued. The press is calling this “demonetisation”, although “remonetisation” seems to be a better word.…Ramanan explains.
The Indian policymakers are barking up the wrong tree. Such tantrums as Delhi is displaying can only make India look foolish — not only in Beijing but in the world capitals too, which take China’s rise as the most consequential event in modern history. Chinese writings increasingly have an air of condescension toward the Modi government’s policies. Worse still, a window of opportunity is closing on a potentially productive relationship that could help advance India’s development meaningfully, which ought to have been Modi’s top priority today — not geopolitics.China is developing rapidly while India remains a basket case relatively with little hope on the horizon without major changes that will be difficult to implement without enormous restructuring across the board. The development that is taking place is under the aegis of US firms with the aim of extracting economic rent rather than assisting Indians.
India is now officially the world’s fastest growing economy, with GDP growth of 7.6 per cent in the past year. This is why it has been lauded as the new Asian tiger, or even elephant on steroids, in a global economy that otherwise is full of gloom and showing signs of impending crisis. The fact that India is a huge beneficiary of the low global oil prices is another reason for seeing it in a “sweet spot” that brings a lot of potential for growth.
But it is surprisingly hard to see much evidence of this rapid economic growth on the ground in India, or even find it reflected in indicators that most people would appreciate. The way national income is calculated has been changed, and it has found skeptics even among the government’s own economic advisors. So while GDP growth is apparently still rapid, employment continues to stagnate, especially formal employment that provides any kind of social or legal protection. Real wages (that rose throughout the previous decade) have been falling for a year now, more sharply in rural India. The agrarian economy is close to crisis, as farmers reel from the effects of two consecutive poor monsoons and reduced public spending that could affect agriculture. Public delivery in nutrition, health and education is in a mess after massive fiscal cutbacks in previous years.
Investment rates in the economy are actually falling (down to less than 30 per cent of GDP last year compared to around 34 per cent in previous years) and industrial production is limping along, growing at only around 3.5 per cent. Both exports and imports are falling. Banks, particularly public sector banks, are facing financial stress, burdened with large unpaid debt from infrastructure investments many of which have stalled. So many people ask: where is all this so-called growth actually occurring?
Obviously, we need measures to increase domestic demand by improving wage incomes and possibilities of employment. More real spending on agriculture, on social sectors and on employment schemes can do this directly and indirectly through very large multiplier effects.
Sadly, the Budget just unveiled by India’s Finance Minister has missed this chance….
All this because it wants to keep its fiscal deficit targets,….More insanity.
Global ratings agency Moody’s Investors Service estimates India’s economic growth at 7.5 per cent in both 2016 and 2017, as it expects actions by policymakers to lift the country’s economic growth.
“India is relatively less exposed to external factors, including China slowdown and global capital flows. Instead, the economic outlook will be primarily determined by domestic factors,” a new report said.
“The 23.55 per cent increase in public sector salaries proposed by the 7th Pay Commission is worth 0.7 per cent of gross domestic product (GDP). It is not yet known how this proposal will be implemented but higher public sector wages will most likely contribute to strong consumption growth,” it said.
India’s $2 trillion economy is growing fast but not creating enough jobs to employ an expanding workforce.…The BRICS Post
