View Sliding economy needs serious structural fixes


When Narendra Modi was re-ed, optimists expected GDP growth to accelerate to 8%. Alas, it is plummeting towards 4%, having fallen steadily in the last four quarters — 7%, 6.8%, 5.6% and 5%.

Expect a further fall to almost 4% when the July-September figures come out. The Index of Industrial production was minus 4.3% in September, the worst in a decade, with 17 of 23 industrial categories recording declines. Capital goods output (representing fresh investment) declined 20.7%. GDP growth is approaching the 3.9% low of the Great Recession of 2008-09.

One reason is cyclical. The slowing world economy is pulling India down too.

But India also has serious structural flaws that will not mend easily. Unless mended, the new growth normal for India may be closer to 5% than the “miracle economy” benchmark of 7%. Former chief economic adviser Arvind Subrnian once theorised that statistical flaws were inflating offi al GDP growth by 2.5%. He said the distinct slowdown after 2011 in four indicators — exports, imports, ricity and credit growth — suggested GDP growth was between 3.5% and 5.5%, far lower than the offi al 7%.


预计7 - 9月份的数据将进一步下降至近4%。9月份工业生产指数为负4.3%,为10年来最差表现,23个工业类别中有17个出现下降。资本货物产量(代表新投资)下降了20.7%。GDP增长正接近2008-09年大衰退时期3.9%的低点。




I attacked this analysis saying no country derives growth estimates from just four indicators. He was to raise doubts about 7% growth, but his estimate of 3.5-5.5 was too low. However, even the offi al data has now fallen to this range. The problem is not fudged data. India’s momentum sustained 7% growth for several years despite poor performance in the four measures because of the gains of internal trade. India failed to r the gains of international trade, but a big expansion of roads, ricity and telecom to rural areas boosted internal trade between states, producing the economic gains that small countries can gain only from international trade. This sustained 7% growth for some years. But now over 90% of the country has roads, ricity and telecom, so further gains are tapering off. That, combined with global headwinds, has caused a plunge.

In the 2000s, India produced three world-class industries — software, automobiles and pharmaceuticals. In the 2010s, it hasn’t produced a single new world-class industry, mainly because of India’s lousy educational sy em. This produces a veneer of excellent graduates along with an army of unemployable semi-literates. The thin veneer was sufficient to create three champion industries in the 2000s, but it cannot create any more. The Economic Survey cried out for educational reform. But nothing has happened since the Budget.

India is uncompetitive in most economic inputs. Compared to competitors, India has higher costs of land, labour, capital, ricity, tax rates, rail and air freight. Only one of these — high corporate tax rates — has been tackled so far. Reportedly, the go nment plans to make larger land banks with environmental clearance available for major foreign investors. This is a partial solution. India needs more liberal land acquisition laws.




The RBI cut interest rates, but this has not transmitted to borrowers. One reason is high interest rates for small savings which seem po itically sacrosanct. This must end. High rates for industrial power subsidise farmers and towns. Electricity may be the next sector to default massively, extending the banking crisis. Power reforms are a must.

Railway freight rates have historically been kept high to subsidise passenger fares. That hits transport costs and hence exports. This too must stop.

In the short run, there is a case for fiscal stimulus. The fiscal deficit can be allowed to rise to anything up to 4% for this year. But history shows how difficult it is to end a stimulus, so caution is needed on this front. In any event we need to focus more on the long-term than short-term issues. Otherwise the days of miracle 7% growth will be over.





来源:三泰虎    http://www.santaihu.com/48846.html       译者:Joyceliu


Ramesh Pathak

While it is very convenient to point out the structural flaws, the writer must also suggest credible measures for reforms. the writer must also analyse and report the money that has gone down the drain in financial frauds. When the financial sy em itself is moth eaten how can any economist in his mind blame any govt. for this mess??..



Shadi Katyal

In the past we used to hear our economy is ahead of but evidently economy is in such downward move that no one dares to talk about it.Has any one heard about any agenda or Modi even talk of Economy. BJP goal is more po itical than econmics. Modi and Shah are fighting for ions. Where are all those millions of investments coming from abroad and what nation has gained if anything with all these trips by Modi.A nation which has Law and Order and free judiciary can move ahed but with lynching,mob rule and rapes weho will invest and when?




I think ,there is no need to lecture BJP govt about economy.It is not the agenda of BJP govt but po itics is.MOdi is running india on Indira gandhi''s formula and this has reduced growth to 2%.Pretty soon it will reach 0 % and then negative.

我认为,没有必要就经济问题对人民党政府说教。这不是人民党政府的发展目标,他们的目标只在于政治。莫迪是按照英迪拉·甘地的模式来管理印度的,这将经济增长率降低到了2%。很快就会达到0 %,最后会跌至负数。


Common Indian

The only thing I disagree with is Mr. Aiyar''s statement about savings rate for Bank deposits. They should indeed be sacrosanct, atleast in the case of senior citizens. I hope Go nment can provide long term fixed rate instruments with capital prection on their retirement savings deposits for them.



Common Indian

Good article. Structural fixes in banking will give fruits. We also need to encourage people to get Masters and PhD after completing undergraduation.



Abhineshwar Jena

''over 90% of the country has roads, ricity and telecom''. where did the author get such figures from? Is it possible in a poor country like ours? The author''s hypothesis falls flat if it is not true.




Who cares for GDP numbers and industrial growth.in the present situation of global warming a slow down and reassessment of priorities is required.sustainable ,man power intensive,low energy requiring industries have to be encouraged.as for global competitiveness,how can you expect our products to be global standard?



Asis Banerjee

A Great article. Only on Education that has been called LOUSY - I would put my comment as: When BJP came to Power in 2014, I strongly suggested to HR Minister to disband UGC & AICTE (for Engineering). Of course, nothing was done due to the tremendous lack of "competent" people in the Ministry. By making some "committees" will not help. Few People with vision must devise something useful - starting with Syllabus, Teaching-Learning Process, etc.. Nothing else...




UGC-AICTE-MCI are already in process of dismantling.But the new syllabus by BJP govt seems to be copied directly from US universities which does not cater to our realities-industries and society



Asis Banerjee

1) University Education has an UNIVERSAL appeal - so copying may not be a bad idea per se.2) Even if we copied some of the best US Univ., we would hv been result-oriented - as they are very much innovative - and despite having a huge pential - we are not as much. Lets live with this TRUTH...



Kochar Bi

RBI has essentially choked off credit flow to the real estate sector, the largest employer of unskilled workers - causing lacs of them to lose their jobs and putting lifetime savings of lacs of homebuyers at risk. Time, RBI classifies this sector as priority and ensures that funding needs are met.



Shaleen Nath Tripathi

Lower tax cut by the Govt could increase demand and price expectations and investment spending... Lower taxes are also a form of public spending...



Shaleen Nath Tripathi

Lower tax....



Bijul Desai

Sometimes i wonder BJP performance Economy perspective has been dismal ...Jobs / GDP / Manufacturing all looks to be down ...

有时我很质疑人民党的表现,经济前景一直惨淡…就业/ GDP /制造业看起来都在下降……



Power tariffs can be brought down only if the power plants are located near the coal mines.



Rkrishna Aarkay

Sir Liberal land to MNCs seems not a good idea,more infra push from Govt is needed to improve consumer demand,maintenance of roads is shabby,is equi to nit having road at all.Re power implementation of renewables generation needs a cery sincere approach by all concerned



Vilas Save

1 scrap reservations in education immediately2 increase productivity of judges instead of number.3 revaluate all capital expenditure for cost benefit analysis4 challenge borrowers to use funds efficiently instead of demanding lower and lower interest rates.5 Give very harsh punishment to fraudsters in banking and finance to serve as example.



Ban Porno Bollywood Movies

If we watched movies in 60s and 70s they danced around trees and talked about moon and stars and walked across deserted roads and resided in bunglows. Today many in India dont see trees or moon or stars and roads are crouded and polluted and matchbox size apartments cost crores. Main problem is uncontolled increase in poooooooooooooopulation. Ban more than two kids for anyone and no kids for convicted criminals and rapists.



Anand Deshpande

Wake up India



Sujal Patil

wheel of economy way moving properly, it''s TRUE we had lots of problems but GDP growth was fair but we wanted more and for that we ed BJP but then its DEMONETIZATION, then its GST , this all things have slowed wheel of growth and economic activitys, people lost fa th, its very difficult situation, and other side is CHINA our biggest problem, CHINA is killing our industry''s by exporting each and every thing to INDIA, NO one is caring for us for NATION...



Joshua Pereira

So who’s fault is it.




Swamy mentions the lousy education sy em as a problem but has no solution. This is typical of the weak heads present all over India and the world - compning but having no solutions.




The point is that the lower GDP has genesis in that the BJP has not fully been able to solve and has not ly solved the economic inequalities menace in India and all over the world.




Let me set the record straight here, dodo bozo. First, GDP is not at all the way to measure the economic well-being of a geography and its people.




From day one after Independence India has been unfortunate not to have a leader with a vision to make India a truly economic power. Instead all the leaders are interested in getting ves to stay in power using methods such as reservations, ration cards, subsidies, nationalization backed by co ption.As a result industry is based on outdated technology, research and innovation is unknown, education sy em 100 years old. Sooner or later the economic comes up ag inst a mountain of problems and growth halts.



Mukund Kansal

Gujjus capable of doing only po itics... In economics, BJP is 2/10, po itics 9/10...




As of now, Indian real GDP is possible to reach only 3% or less(unless they ''cook'' the GDP figure or take the help of money launderers ......Before anything positive can happen, Indians should introspect how suddenly Indian GDP went up in 2009-12



Ashok Agrawal

The purchasing power of people has seriously dwindled due to a myriad of factors like low returns on savings, retrenchment, low white collar employment ,high personal taxes a d GST. There are tax evaders and dishonest people who are kee Tax to GDP ratio low at about 11-12 %.

由于储蓄回报率低、紧缩开支、白领就业率低、个人所得税和消费税高,人们的购买力严重下降。逃税者和不诚实的人,他们将税收占GDP的比例保持在较低水平,约为11- 12%。

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