Abhishek Srivastava is teaching live on Unacademy Plus
DAILY NEWS ANALYSIS FROM HINDU 2nd DECEMBER 2017 Abhishek Srivastava
Turning the corner The next few quarters call for focus on consumption, private investment, agriculture and exports Second quarter GDP data were released officially by the Central Statistics Office (CSO) Declining trend of four consecutive quarters of growth had finally been reversed GDP growth came at 6.3% for the quarter ending September, INDIA GDP Q2FY18 higher than 5.7% in the previous quarter, but still lower than 7.5% a year ago . The Finance Minister said that the effects of the demonetisation and initial rollout of the goods and services tax (GST) were behind us.
Devil's in the detail ofthepositivedetailsfromtheaPdatangtheJunequarterto58%inthis -industrial growth accelerated from 1.6% during the June quarter to 5.8% in this September quarter. manufacturing, too grew faster at 7% compared to only 1.2% during the previous quarter. bit puzzling since it seems inconsistent with the data on the IIP, whose growth is only 2.2% during this quarter. The services component of trade, hotels, transport and communications also grew smartly at 10.5% for the half year, as compared to 8.3% a year ago. GDP growth coming from fixed capital formation declined from 27.5% in the first quarter to 26.4% now. . This has to be closely watched, and needs high policy priority All the improvements in the Ease of Doing Business (EODB) ranking are meaningless unless we see substantial pick-up in private sector investment.
. The CSO says that GST collections data are provisional, and could be an underestimate The stock market react so negatively even the GDP trend is satisfactory. There are multiple influences, both domestic and global. . The stock market is always a forward-looking entity, a harbinger of things to come. Spooked markets The market was spooked by the data on fiscal deficit. At this stage of the fiscal year, the deficit is running at 96.1% of the annual target. Last year at this stage it was only at 79.3% etc), which is not the productive spending on items like infrastructure, is growing at twice the rate as budgeted The government can either (1)cut further into capital spending or it (2)can increase its market borrowing to tide over this year .Either way it is not good news for the markets. That's because the former implies (1lower economic growth, and the latter implies (2)higher interest rates.
This could be the main reason for the markets crashing It is also important to focus on the weaker components, which should become policy focus area. Private sector investment is still anaemic. - It is constrained by . low capacity utilisation, . deleveraging of balance sheets (as companies are reducing loan burdens), insolvency resolutions large influx of imports, especially manufactured goods. Consumption spending went down a notch from the last two quarters. Nearly two-thirds of India's GDP is consumption spending, and remains the key to sustaining the growth momentum. Its slowing means that purchasing power both in rural and urban areas is under pressure - Large job creating sectors like construction, agriculture, textiles, leather and tourism need to exhibit more vim
Exports are the key Among the biggest worries are India's exports. . When the world economy does well, India's exports should be flourishing. . The exporting sector's fortunes are closely linked with the manufacturing sector. Exports create jobs, especially in small and medium enterprises Why can't India's small enterprises sell on global portals like Alibaba and Amazon? -What are the hurdles? Is the GST framework (with delayed refunds) inhibiting the growth of exports? What are the policy and other bottlenecks? . These are the issues that we need to grapple with to sustain an upward growth path. . We need to acknowledge that unlike last year, this year the government has less fiscal room to pump prime growth. GST, Real Estate (Regulation and Development) Act, Insolvency Code are all great reforms for the medium to long term. . But the next few quarters call for sustaining consumption, inviting private investment, energising agriculture, and giving a big fillip to exports.
Scripting another Asian narrative Japan is filling the vacuum created by the U.S.'s withdrawal from the region . Japan : an economic powerhouse within a geostrategic pygmy. But China's muscular ascent combined with the capriciousness of a Trump-led U.S. is causing Tokyo to slough off its diplomatic slumber and rethink its role in Asia From proposing new security dialogues, to taking the lead in developing multilateral trade agreements, it is beginning to pick up some of the slack left by the U.S Japan is in a potentially explosive neighbourhood, and it no longer believes that a wholescale reliance on the U.S. for a defence umbrella is sufficient to secure its best interests. . Military normalisation is one prong of Japan's new foreign policy, and the constitutional revision would merely recognise the legality of Japan's long extant Self-Defense Forces (SDF) Offensive weapons and preemptive strikes would remain outlawed.
Countering China Tokyo needs to use its strengths, its capital, its technological know-how and its democratic credentials to influence countries across the region and beyond. .It needs to beat infrastructure sugar daddy China at its own game. Japan is a trading heavyweight too, and is attempting to stake leadership on the With the U.S.'s departure from trade negotiations, Japan has become the principal . At November's Asia-Pacific Economic Cooperation summit in Vietnam, Japan got the . It wants to lead rule-making on trade in the Asia Pacific, rather than let China set the regional platform with the Trans-Pacific Partnership (TPP). driving force keeping the deal alive. 11 countries still involved to agree on the "core elements" of a deal. agenda with alternatives to TPP such as the Beijing-backed Regional Comprehensive Economic Partnership (RCEP) . At the same time, Japan is stepping up aid and investment in Southeast Asia. A train line near Manila, a seaport in Cambodia, and assistance in the reconstruction of Marawi City in the Philippines are some examples.
Japanese investment in major Southeast Asian countries is estimated to have averaged $20 billion per year, from 2011 to 2016. .Japanese sales pitches to countries in the region always have one eye on China, emphasising advantages in areas where Beijing is vulnerable such as safety,reliability and solutions that deliver benefits to local populations. Looking to India . China's $900 billion, Belt and Road Initiative (BRI) is a gauntlet that Japan has picked . Japan and India have announced an Asia-Africa Growth Corridor, aimed at creating sea . In addition, Japan is cooperating with India in third country infrastructure projects such up by turning to the only country in the region with the heft to match China. India. corridors linking the countries of the Indo-Pacific to Africa. as Iran's Chabahar Port, Sri Lanka's Trincomalee port, joint development of the Dawei port along the Thai-Myanmar border.
. Japan has bagged the $17 billion contract to build India's first high speed railway line, linking Mumbai and Ahmedabad . Tokyo is also investing in development projects in the Northeast and the Andaman and Nicobar islands. And Japan's Diet gave the go ahead to a Japan-lndia civil nuclear energy deal earlier this year. . The possibility of purchasing Japanese submarines and search-and-rescue planes to help the Indian Navy is being discussed. Creating a Quad' . A free and open Indo-Pacific, a phrasing that places India as a major actor in the Pacific, is an idea being proselytised by Japan in conjunction with the U.S . This is a response to concerns over the expansion of the Chinese navy and Beijing's territorial claims in the South China Sea, waters through which a huge majority of Japanese energy supplies transit It is against this background that Tokyo's championing of the Quadrilateral dialogue with the U.S., India and Australia aimed at creating a community of democratically oriented interests in the region must be understood .
Accident-prone The apathy over enforcing road safetyrules must stop . The most effective measure to keep roads safe is enforcement of rules with zero tolerance to violations. - But it is not an administrative priority in India. Even the periodic directions of the Supreme Court in a public interest case, Dr. S Rajasekaran v. Union of India, have not produced any dramatic change in the official attitude. . In spite of the court setting up the Committee on Road Safety to help implement its recommendations, -it is mostly business as usual for the police in enforcing road rules, for engineers tasked with forming roads and pavements, and transport officials in charge of licensing The death of 1,50,785 people in accidents in 2016, which represents a 3.2% rise over the previous year, indicates the scale of the challenge.
. Court-appointed Committee on Road Safety has written to States on the need to prosecute every case of driving under the influence of alcohol and drugs, seeking imprisonment and fine, to treat driving on the wrong side of the carriageway as an offence under Section 279 of the Indian Penal Code, . which can lead to imprisonment, and not merely under the Motor Vehicles Act. Stringent penalties have a lower chance of being imposed, compared to fines that are proportionate to the offence remain hazardous due to poor engineering. indifference. . Yet, even the existing minor penalties are not being imposed, and road conditions . This is proof of the apathy of the system. It's time to shake the system out of its