Dichotomous Times
We live in dichotomous times. In the midst of one of India’s most debilitating slowdowns, widespread destruction of business in industries such as SMEs, auto and telecom and rampant job losses, the stock market is spiralling out of control. GDP growth is at a 25-quarter low, and getting worse; industrial production has gone into the negative territory; new project announcements have halved; goods exports are flat since 2013; and consumer inflation on the rise is back where RBI hates to see it – above 4 per cent mark. Yet, benchmark indices, Sensex and Nifty, are at an all-time high.
What explains this dichotomy is the subject of Rashmi Pratap’s detailed cover story this issue. Hint: Mind your moves and don’t get fooled. This isn’t a secular boom.
The yawning divide between the economy and stock markets is thus at a nail-biting stage now. Much depends on the turn the economy takes from here on. By most counts, GDP growth numbers for the July-September quarter will be substantially worse than the 5.01 per cent in the previous quarter. That would take the distinction of the worst growth in 26 quarters. Economists then expect at least one more quarter of deceleration during October-December before the economy turns around, if at all. Provided, nothing untoward happens in the meantime.
Though, there is a huge disconnect. The economy is gasping for breath due to lack of demand and declining consumption. However, the Centre, instead of aiding consumption, is pushing for a new wave of investments. A dichotomy again, which could only prolong the slowdown. Every possible agency has already revised India’s 2019/20 growth forecast downward. IMF, Moody’s and S&P have revised downward between 5.8 and 6.3 per cent. RBI’s own forecast is now 6.1 instead of 7.2 earlier. SBI’s is the lowest at 5 per cent against 6.1 earlier.
Meanwhile, the pain grows. Joblessness has hit a new high in October. India’s unemployment rate in October 2019, at 8.45 per cent, is the highest since August 2016, when unemployment hit 9.59 per cent. Unemployment rates in states such as Tripura and Haryana are above 23 per cent, and Himachal Pradesh over 16 per cent. India’s largest state, Uttar Pradesh, has an unemployment rate of 10.1 per cent. That’s a serious cause for worry, especially for the socio-economic fabric of the nation. Read Team BT’s ground report from across the country in “Jobless India”. Plus, how insolvency hurts jobs.
There’s more pain in telecom, whose unfortunate decline has eerily coincided with the five-quarter downturn in the economy. Manu Kaushik lays bare the mess and what to expect next.
Staying with the economy, the government’s decision to withhold findings of NSO expenditure survey 2017/18 forced the Centre to take on alibi that the survey had “discrepancies”. True, the survey’s uncomfortable outcome didn’t suit the government’s narrative. But let’s face it, India has a pervasive data problem. And it needs fixing. On page 62, Joe C. Mathew examines what’s wrong with our data. More importantly, how to fix it?
In an economy full of contradictions, this may be just one more.