India’s productivity is low Too early for conclusions

In the article, “Is fiscal deficit of 3.2% of GDP written in stone?” (October 12), Anand P Gupta discusses an important subject of how much the Budget deficit should be.

I agree with him that the limit to the Budget deficit should be based on the productivity of sectors. If the productivity is high or the potential to raise productivity is high, more financial resources should be allocated to them so that the present limit to growth can be raised. What is the productivity of various sectors in India? One example will suffice to say that there are serious issues here.

India takes pride in the White Revolution, having an ample supply of milk. For vegetarians in India, milk consumption is crucial. This year, the retail price of milk per litre in Pune is ~42, which, in terms of US dollar, is about 80 cents. This works out to about $2.50 per gallon. In the United States, bottled milk costs $1 per gallon. Also, the average income of milk consumers in India is around one-tenth of the per capita income in the US even at purchasing power parity. Relatively speaking, productivity in India is low, which puts consumers in hardship.

Of course, the budget deficit in the United States has skyrocketed, but that is a subject to worry about at the global level. ChandrashekharGRanade WashingtonDC of India and the International Monetary Fund. But it won’t be right to blame demonetisation and the goods and services tax (GST) only for the current state of the economy. Everyone knew there would be teething problems with the GST. Fortunately, the GST Council is willing and open about resolving some issues; hopefully, all the glitches will be sorted out soon. EAC head Bibek Debroy has stated the panel will provide clearly defined recommendations that can be implemented swiftly.

Fiscal prudence is key here. Also, unless private investment revives, not much will change in the economy. With capacity being underutilised at present, it is anything but an easy task. A good monsoon will likely spur demand, but that alone won’t be enough to raise consumption across sectors and revive capex investment by Indian Inc. The government needs to push reforms, take bolder steps and closely monitor its ongoing projects and initiatives. Bal Govind Noida With reference to the report, “Sitharaman’s charm may break IndiaChina ice after Doklam: Chinese media” (October 11), it was nice to learn that the Indian defence minister greeted Chinese soldiers with “Namaste” and they responded with “Ni hao”.

The report also quotes from the editorial of the premier Chinese newspaper, Global Times. Titled “Sitharaman greeting sends warm signal”, the editorial goes to the extent of observing that her traditional greeting to Chinese soldiers conveyed hope for peace along the border and unwillingness to precipitate a new stand-off.

While the attitude of both sides is appreciated, it may be too early to draw conclusions. Let’s see how China’s People’s Liberation Army behaves in the near future. It would be naive to count the chickens before the eggs are hatched.

S Kumar New Delhi