[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he Economic numbers for November and December made available by Government and the numbers do not inspire confidence. At the time of writing, US stocks are down about 2% on China concerns and it is only a matter of time before India catches this contagion, even if India consumes a significant portion of what it produces.
Explaining reduction in capital goods output as being due to Chennai floods is laughable.
Firstly Inflation. Retail inflation has been steadily inching up since August and touched 5.6 percent in December, the highest since September 2014. This has been driven mainly by food prices – food inflation in December was 6.4 per cent, after remaining below the 6 per cent mark from April to November.
Again Food inflation was driven mainly by pulses, where inflation remained in the above 40 per cent range despite an improvement over the previous year. Inflation in prices of oils and fats and vegetables has been inching up, since July and September, respectively. Continued food inflation could affect significantly the middle class and aspiring middle class mood and Government does not seem to be concerned.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]I[/dropcap]f Dal is above Rs.200($3) you can’t argue that automobile sales are going up — that is not India. Index of Industrial Production(IIP) shrunk to 3.2 % in November – Power plants and Capacity utilization are at a dismal 60% and CPI (Consumer Price Index) is at 5.6 % – pulses increased by 46% as indicated earlier. 17 out of 22 industry groups posted contraction in November and Capital goods sector is indicating that investment demand shrank by 25% – this gives danger signals. Explaining reduction in capital goods output as being due to Chennai floods is laughable.
Secondly Savings. Finance ministry should think of enhancing household savings, cutting taxes to household income and larger credit availability to the Un-incorporated sector which are primary engines of our `growth. As already seen imports have slowed down and a painful slowdown in exports complicates the problem. In the absence of these triggers, it will be difficult to even match last year’s growth numbers (7.3 percent) even with the revised down growth targets (7 – 7.5 percent as against 8 – 8.1 percent earlier).
In the midst of crisis in real economy Finance ministry is considering reducing corporate taxes – giving justification as suited/ booted Sarkar – that would be a pathetic decision. The ministry should come out of its financial markets obsession serving only global fund managers; real India is in deep crisis and cosmetics won’t help.
1. The conversion rate used in this article is 1 USD = 66.79 Rupees.