THE SLIDE HAS SLOWED, BUT HASN’T STOPPED

India Today - - ECONOMY - By Bibek De­broy and Laveesh Bhan­dari

For at least three years now, things that should be ris­ing, such as in­come, in­vest­ment and sen­ti­ments, have been fall­ing. And things that should be fall­ing, such as in­fla­tion, in­ter­est rates and deficits, are ris­ing. This dou­ble whammy of un­wanted rise and un­de­sir­able fall has left many of us dizzy.

Dizzy enough to con­fuse slow­ing of the speed of fall with a halt.

A se­ries of re­cent eco­nomic data, like stemming the free fall of ru­pee, the im­prov­ing cur­rent ac­count deficit and ta­per­ing of run­away in­fla­tion, may sug­gest that an eco­nomic up­turn is fi­nally around the cor­ner. Hav­ing checked for all the vi­tal symp­toms of the econ­omy, we have to dis­ap­point you by pro­nounc­ing that a re­cov­ery is nowhere in sight.

A bad econ­omy has turned less bad, but it hasn’t turned bet­ter. Not as yet. Not till the end of 2013-14. And af­ter that too, the prospects and strength of re­cov­ery will de­pend on whether the new gov­ern­ment that is formed by the mid­dle of 2014 is able to steer the econ­omy that has long been left to drift.

Not a sin­gle quar­ter of this fi­nan­cial year will see a GDP growth of 5 per cent, and the full year growth rate will be lower than the al­ready low growth of 4.9 per cent in 2012-13. Since in­fla­tion rate is down­wardly sticky, in­ter­est rates won’t fall ei­ther—in fact we pre­dict rates will rise fur­ther this year. None of the re­cent re­forms has re­vived in­vest­ments, which means job cre­ation will re­main muted.

Food in­fla­tion will con­tinue to haunt, with veg­etable prices soar­ing by 30 per cent in 2013-14 over 2012-13. This will bring down real in­come of all salary earn­ers. Tax rev­enues will be off tar­get by at least 5 per cent, forc­ing the gov­ern­ment to cut cap­i­tal spend­ing.

In the graph­ics that fol­low, we take you through all the vi­tal signs of the econ­omy. Check them out to know what’s in store for both our house­hold and na­tional econ­omy.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.