Coordinated Efforts Needed to Reduce Petroleum Prices

This increase in oil prices has a multifaceted negative impact on the economy. It will not only adversely affect the inflation in the economy but the governments’ revenues in the medium to long term also by hurting the individuals’ capacity to spend (as a large portion of their income will be spent towards the oil component of the expenditure basket).

The increasing prices of petroleum products will elevate the inflation in the economy from two sides. It should be noted that crude petroleum is a constituent of the consumer price index (CPI) basket so any increase in the oil prices is bound to directly push the inflation upwards. On the other hand, indirectly, the transportation cost is dependent on the prices of the petroleum products. It has been predicted in many reports that the oil prices in the international market are expected to rise in coming months. Considering the situation, it is certain that inflation in coming months will elevate.

भारतीय अर्थव्यवस्था मंदी के चक्र से बाहर

ब्लूमबर्ग न्यूज द्वारा जनवरी महीने के लिए ट्रैक किए गए 8 संकेतकों में से 5 संकेतक स्थिर रहे हैं, 2 संकेतकों में वृद्धि और 1 संकेतक में गिरावट दर्ज किया है। सर्वेक्षण के अनुसार अर्थव्यवस्था में उपभोक्ता गतिविधियों और औद्योगिक गतिविधियों के सूचकांक में क्रमशः 11.4% और 1% की वृद्धि हुई है। चालू वित्त वर्ष की तीसरी तिमाही में सकल घरेलू उत्पाद (जीडीपी) में पिछले वर्ष की तुलना में 0.5% का विस्तार हुआ है। रिजर्व बैंक ऑफ इण्डिया RBI के आंकड़ों के अनुसार, दिसम्बर के महीने में अर्थव्यवस्था में ऋण की वृद्धि दर 6% से अधिक रही थी। इससे पहले लगातार छः महीने में यह वृद्धि दर 6% से कम रही है। द मार्किट इंडिया परचेजिंग मैनेजर्स कम्पोजिट इंडेक्स (पीएमआई) 52.8 पर पहुंच गया है। यह स्पष्ट रूप से इंगित करता है कि भारतीय अर्थव्यवस्था मंदी के दौर से बाहर निकलकर विकास के चरण में प्रवेश कर चुकी है।

India on the Road to Exit Recession

Out of 8 indicators tracked by Bloomberg News, 5 indicators have been steady, 2 indicators posted growth and 1 indicator deteriorated in the month of January. According to the survey the indices for the consumer activity and industrial activity in the economy have increased by 11.4% and 1% respectively. In the third quarter of the current fiscal year, the gross domestic product (GDP) has expanded by 0.5% in comparison to the last year. As per RBI data, the credit growth in the economy during the period was 6.5%. The Markit India Purchasing Managers’ Composite Index (PMI) has risen to 52.8. This clearly indicates that the Indian economy has exited the recessionary phase and transitioned to the growth phase.

आर्थिक गतिविधियां पूर्व-महामारी के स्तर पर वापस

आर्थिक गतिविधियों के लिए सूचकांक के साथ गतिशीलता, बिजली की खपत और श्रम भागीदारी जैसे उच्च आवृत्ति संकेतक बताते हैं कि भारतीय अर्थव्यवस्था पूर्व-कोविद के स्तरों से लगभग सिर्फ 1.9% नीचे ही रह गई है। आर्थिक गतिविधियों में सुधार को देखते हुआ कहा जा सकता है अर्थव्यवस्था तेजी से रिकवरी के ट्रैक पर है। इन उच्च आवृत्ति वाले आर्थिक संकेतकों में पिछले छह महीने से अधिक समय से लगातार सुधार हो रहा है। PMI के साथ-साथ IIP भी ऊपर की ओर बढ़ता हुआ दिखाई दे रहा है परन्तु गतिशीलता और श्रम भागीदारी जैसे संकेतकों में अभी भी सुधार दर्ज नहीं किया जा रहा है। गतिशीलता और श्रम भागीदारी के संकेतकों को पूर्व-महामारी स्तरों को प्राप्त करने में अभी और समय लगेगा।

अंतर्राष्ट्रीय मातृभाषा दिवस

आज अंतर्राष्ट्रीय मातृभाषा दिवस है। मतलब अबतक की चली आ रही परंपरा के अनुसार एक इवेंट। सालगिरह टाइप का! यदि इसे इवेंटनुमा तरीक़े से देखा जाए तो बधाई तो बनती ही है। मतलब कुछ 'हार्दिक बधाई' या 'हार्दिक शुभकामना' जैसे परंपरागत परन्तु पॉप्युलर (शायद थोड़े प्रोग्रेसिव भी) जूमलों को आसमान में तो उछाला जाना ही चाहिए। और इस तरह इस वार्षिक इवेंट का इतिश्री रेवा खण्डे समाप्तः; बिल्कुल हिन्दी दिवस व पखवाड़े की तरह! वैसे इन जूमलों से कुछ हो ना हो परन्तु थोड़ी जनजागृति व थोड़ा माहौल तो बन ही जाता है और माहौल का अपना ही अंतर्निहित सुख होता है! शायद स्वार्गिक!

Economic Activities Back to Pre-Pandemic Levels

High frequency indicators such as mobility, power consumption and labour participation along with index for the economic activities suggest that Indian economy is on the fast track of recovery with economic activities only about 1.9% below the pre-COVID19 levels. These high frequency economic indicators have been improving continuously for more than six months barring a few exceptions such as mobility and labour participation indicators. PMI as well as IIP have also been showing upward movement. However it will take longer for the mobility and labour participation indicators to achieve the pre-pandemic levels.

Growth will Continue to Drive the Monetary Policy

The monetary policy committee (MPC) of RBI has decided to keep the benchmark policy repo rate unchanged at 4% despite the fact that the rate of inflation has remained above the upper threshold of 6% continuously for six months before CPI inflation falling to 4.6% in December 2020 and the risk of elevated core inflation. On the growth front, the central bank has found strong signs of recovery in the service sector and a resilient agriculture sector from the first advance estimates of GDP for 2020-21 by the NSO. The GDP growth rate for fiscal year 2021-22 has been pegged at 10.5% however it is lower than the IMF projections. MPC has also decided to continue with the accommodative policy till as long as it is necessary for the sustained recovery and growth in the economy as the CPI inflation for the last quarter of 2020-21 is expected to remain 5.2% and will be in the range of 5-5.2% in first half and 4.3% in the third quarter of 2021-22. 

Union Budget 2021-22

Post lockdown, the way Indian economy has shown the resilience with V shaped recovery, it indicates to an optimistic future and this good for Indian economy as a whole. This optimism in the environment has also been echoed by the stock market. However, it is very important this optimism in the economy gets strong fiscal support with proper anchoring from the government in the budget.

The government has tried to align the budget 2021-22 with the Atma Nirbhar Bharat Abhiyan which mainly focused on the supply side of the economy. In this budget can be termed as mixed budget as it has provided enough support to industries to increase the economic activities but has not be able to provide direct support to increase the income. There is no personal tax rate cut in this budget. Also at the same time, the fund allocation to the MGNREGA scheme has gone down by 34.5% from ₹1,11,500 crores to ₹73,000 crores. MGNREGA has provided huge support to Indian economy during the COVID period. This can be an indicator of the shift in the policy on the front of the employment. The government might be looking for the ways to increase the employment opportunities with formal jobs than informal jobs. However if this is the thing of scheme of the government, it is very high expectation (possibly unachievable in short term). But to some extent this will ease the fiscal position.

Healthcare Policy Needs to be Revisited in Budget 2021-22

I hope this budget would be a stepping stone in transforming the Indian economy as whole in general and the public sector healthcare system in particular. Extraordinary times like this require extraordinary policy responses from the government on every issue. Considering the bitter experiences that India had to have with the private sector healthcare service providers which single handily focused only on the profits even during the COVID19 pandemic than managing, responding and containing it efficiently.

Banking Licenses to Corporate May be a Bad Idea

As per the suggestions of the Internal Working Group of the Reserve Bank of India, the big business groups may be allowed to promote banks in India. The government must consult experts and follow due diligence before it takes the final decision as this decision may cut deeply than the benefits.

It is certain that the entry of big business houses in the banking sector's will increase the lending capacity of the banking sector as whole and accelerate the development of financial services and its penetration but at the same time the risk in the banking sector will surely increase substantially. It is quite possible that this single decision may jeopardize the whole banking sector in particular and the economy in general.