View: India has people. It needs consumers


A long-held belief of analysts in India is that the economy is supply-constrained. Demand isn’t even worth a footne, while a temporary squeeze in the onion market deserves obsession because it could be inflationary.

It’s increasingly obvious that this view is outdated. In October, inflation quickened more than expected to 4.62% because of, yes, an onion shortage. Yet core inflation, which strips out volatile commodity prices, slumped to 3.4%, the lowest since the current price series began in 2012.

One explanation is that people have less money to spend on other things after buying vegetables. Yet, as Mark Williams, chief Asia economist at Capital Economics puts it, a 1.1 percentage point drop in core inflation over three months is rare. “This weakness isn’t solely due to spending being diverted,” he says in a research ne.

It’s a demand funk. Until about 2012, temporary supply shocks dominated. The starting point of production and transport is hydrocarbons, and India needs to import most of its crude oil. The go nment also has to pay farmers to feed 1.3 billion people. Because of the outsize dominance of food and fuel in consumption, price stability is ephemeral: A few months of high inflation could drastically impact consumers’ expectations.






Any gap between (runaway) headline and (soft) core inflation would typically close with the core moving toward the main indicator. But something has changed. The supply-dominated headline number is now more likely to shift toward the demand-led core figure, JPMorgan Chase & Co. research has shown. Slack in the economy — of which there’s plenty — has become much more important than a transient disruption in commodity supplies.

Therefore, despite consumer prices rising more than the central bank’s 4% target for the first time since mid-2018, the new consensus is that the economy is deflation-bound. That’s the reason most observers are shrugging off the October inflation rate as any kind of a speed limit on the central bank’s rate cuts.

Whether the five rate reductions this year will lift demand is a different story. Banks aren’t passing lower borrowing costs down the line. As of August, their weighted average lending charge was almost double the Reserve Bank of India’s repurchase rate. This record spread is a crisis-like situation, Credit Suisse AG strategist Neelkanth Mishra says.




How fast an economy can grow is measured from the supply side — by slap together labor and capital inputs as well as productivity growth. But it’s here that demand is emerging as a constraint. Consumer spending fell in real terms in 2017-18, its first decline in four decades, the Business Standard reported Friday, citing an unreleased offi al survey. As Rathin Roy of the New Delhi-based National Institute of Public Finance and Policy has been arguing, the economy grows by producing what 150 million of the top income earners consume. When it comes to an inexpensive shirt that India’s workers can make for their billion-plus fellow citizens, Bangladesh does a better job.

India balked at the last minute from joining the 16-nation Regional Comprehensive Economic Partnership trade agreement because it can’t compete ag inst in making everyday things. Roy’s call for a meaningful minimum wage for workers in all Indian states rich and poor shows a sensible way to create sustainable demand. Make things well enough for a swelling home market, and eventually India will supply them to the world.




译文来源:三泰虎     http://www.santaihu.com/48806.html      译者:Joyceliu


Sanujit Roy

Consumer need to have money




Yes India has People but the Consumers will come from Mars and Jupiter




Govt should ban populist schemes & Personal Income tax to lift the economy and there by employment.




After Govt taking 35 % income tax and every other paid services will there be anything left to spend????



Girish Sahasrabudhe

India has knowledgeable masses of people. It needs recognition of that knowledge as one on par with modern knowledge ... and it''s recognition in terms of comparable remuneration to all their knowledge-based productive, service and cultural activities!





Level of remuneration is relative to productivity in market economies. It takes scores of Indians to do the job of one American.



H K Doshi

The article is ending with demand slow down but is not correct fully. Indian consumers has its limitations in respect of per capita income. Most of the companies except mobiles are treating Indian market like developed country market and floating various products very costly rather of economically priced , with long life and repairable. India is overall poor country with limited purchasing power. Only companies understand this will survive otherwise it will be finished.



Goswami Boy

We need producers and sellers too. Instead of acquiring these skills, we nurture the negativists and self haters in JNU. The policy went for toss due to this breed. Even in Modi govt Amitabh Kant and Nirm Sitharn are JNU products. We know how it is going.What we need is wisdom and pragmatic policy guided by people. Everything will come after that.



Yash Pal

It is not the policies of people like Amitabh Kant and Nirm Sitharn who have brought about this mess; rather it is SJM and fellow travellers who have dominated the economic scene from behind the curtains. RSS and affiliates hate JNU because it encourages free thinking.




one of the best ways to make consumers spend- is to stop tang them personally- no personal income tax- let them pay tax on every item they spend on - gst--- but the gst on essential items should be low and high on luxuries- --- this will unleash the animal spirit - and reduce black money because even the small traders and professionals like doctors/consultants etc who rarely pay taxes - will be more open- almost 40 % of the economy which is in the grey and black zone will become more transparent- and all that money will enter the banks and offi al statistics- think dear modiji- put money in the hands of the consumers and they will spend, spend and spend- and make india grow at 10% per annum- your dream of $5 trillions will become $10 trillions shortly -



Sk Kapoor

... and, India cannot find consumers in the world due to high cost of manufacturing....



Prithvi Chauhan

1)Stop distributing Loans to corrupt businessmen, 2)Start tang Po iticians, Wealthy farmers,3)Reduce personal income tax, we are double - triple taxed



Ashok Amin

Our Planners never consider mentality of our buyers.More than any country Indian consumer is very conservative and believe safety of future. become victim very easily of reumers.



Raj Tillan

It has consumers also it needs platform.



Raj Tillan

work cultures has been coroded by excessive legislation u cannot do any thing without breaching one or other law,rule , regulation, policy guideline



Mangipudi Vasudev Rao

Let the Govts both at Centre and the states be sensible and free themselves from the constraints of ideologies and appoint eminent economists and planners, irrespective of their ideological moorings. Listening to and respecting the learned would be beneficial to both the Govts and the people. So I ve the eminent economists ,seek their counsel and act,shedding illusory notions.



Vidyaranya Vijaypura

Goi should seriously investigate drop in petrol and diesel consumption, 31% is a very high number.Ground reality tells not so much fall is correct, there might be some foul play by private players bypassing state run oil corporations and taxes to sell their fuel at much discounted rates to retail petrol pumps! Or is goi hand in glove! why goi does not investigate such a steep fall. Shows co ption at very high place in collusion with govt. So much fall does not tally with our low growth rate!



Ramesh Shah

Very correctly conclusion.....mighty consumer population without spending powers...... the key is Import as much as you can N let people get cher goods..... our FOREX kitty very strong......



Radheyshyam Khandelwal

no one can consume anything as all blood being sucked by go nment, to spend on so called welfare schemes for their po itical vested interest



Udayan Pil

Sir, why did you left the caption incomplete? India has people. It needs consumers. Consumers need money.




All in all, India lacks leadership. India had everything it needed to be the best before Feku came to power. But, as we all know, Feku has dest yed the economy, the middle class, the consumers.



Raj S

What happened to the Mudra loans, for small enterprises? Aren''t they making inexpensive shirts that Bangladesh is making? Go nment has to prome rural industries and enterprises. Rural areas is still dependent on farming.



Padamnoor Pradeep

In India those earning Rupees one lac per month and having property wealth of Rupees one crore (family wealth) may be in the Top one percent. How much can be bought by the 99%? Just basics and we will be broke by the end of the first week!!



Anand Deshpande

If govt is sucking 20% from people with income 5-10 lakh, highest tax on petrol and diesel, 18%tax on services----- ---how people spend money, there is no money left with them. Hence people are not becoming consumers

如果政府从收入在5- 100万卢比的人群中征收20%税收,对汽油和柴油征收最高的税,对服务征收18%的税——人们能怎么消费,他们早就没钱了。因此,人们无法成为消费者。


Shrinivasa Kth

Successive reduction in interest rate has not revived the economy, neither it will. Purchasing power of those who depend on interest income has come down drastically. More will be added to the growing number of poor.



Sunil Sahota

I just wonder why not go nment brings a drastic rise in the income levels of all strata of employees particularly those of blue collar jobs. Let cost of living rise, but at the same with a sudden rise in income of lower rung of workers, will boost the economic activity exponentially and will create more and more jobs...


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