Global Economy & macroeconomic development in India

Surprisingly India's Central Bank does not know what the estimated GDP would be. In Feb 2019, it reduced the figure to 7.9, April it came down to 7.2%. June is shown as 7.0% and August was revised to 6.9 and now GDP outlook for 2019-20, has been further reduced to 6.1%.

Just sample the numerous articles that have appeared in the last four months on India’s economic slowdown; 90% of the content was dedicated to an analysis of what has gone wrong. Cogent and seemingly erudite, such an article typically has a throwaway recommendation on fixing the problem in its last paragraph or line. Job done.

A growth slowdown has many causal factors. It can be traced to decisions taken or not taken by the private sector, Union government, state governments and the central bank, and also to the judgements of the Supreme Court and high courts. There are proximate catalysts, such as the collapse of Infrastructure Leasing and Financial Services and a few other non-banking finance companies, but the underlying causes run deep. Therefore, to be able to fix it with a few waves of a magic wand will not be easy. If anything, these will most likely be counterproductive or harmful or ineffective, or all three.

India can't escape the charge that it has performed poorly on several indicators. Put in context, China's GCI ranking has oscillated between 27 and 28 — regardless of the change in methodology which came into force in 2018 retrospectively from the 2017 rankings. In fact, the 2019 edition of the WEF GCI report castigates India on its low healthy life expectancy — of 59.4 years — which it says "is one of the shortest outside Africa and significantly below the South Asian average", which is above 61 years. Moreover, for all its bragging rights as the leading supplier of code-jocks to the world, India's rank in ICT adoption is an extremely poor 120 — out of 141 countries. Other factors that have undone India's competitiveness are its high delinquency rate in the loans segment, with 10% of the loans becoming NPAs, according to the WEF. There is however one silver lining for India — it was the best performing country on the WEF GCI in the South Asian region.

Experts, for all their wisdom on post-mortem analyses, are probably the least equipped to offer solutions. A somewhat unheralded article that appeared in The New York Times illustrates this rather well. Titled, “Health Facts Aren’t Enough. Should Persuasion Become a Priority?" 

What the new methodology and rankings mean is that India's best ever years on the WEF GCI are behind it — in the last 10 years, India's best ever rank was 49, in 2010, during the second term of UPA. This year's ranking — of 68 — is in fact the second lowest for India since 2009, after its rank of 71 in 2015, both of which incidentally were during the first term of the NDA government. Will this now be the next peg for a political slugfest between the ruling and the opposition parties?Urgent and concrete policy action is needed to reduce risks to the global economy and secure the foundations for stable and sustainable economic growth. A dynamic and inclusive global economy is central to delivering the ambitious targets of the 2030 Agenda for Sustainable Development. Policymakers must work to contain short-term risks from financial vulnerabilities and escalating trade disputes, while advancing a longer-term development strategy towards economic, social and environmental goals. Decisive policy actions rely on a multilateral, cooperative and long-term approach to global policymaking in key areas, including combatting climate change, sustainable finance, sustainable production and consumption, and redressing inequality. This also requires progress towards a more inclusive, flexible and responsive multilateral system.

As per Secretary-General of the United Nations, The World Economic Situation and Prospects 2019 offers timely warnings about a range of macroeconomic challenges facing policymakers as they aim to deliver on the 2030 Agenda for Sustainable Development. Last year’s report noted that after a long period of stagnation, the world economy was strengthening, creating opportunities to reorient policy towards the longer-term pursuit of sustainable development.

The intervening year has been punctuated by escalating global trade disputes and episodes of financial stress and volatility, amid an undercurrent of geopolitical tensions. While global economic indicators remain largely favourable, they do not tell the whole story.

The World Economic Situation and Prospects 2019 underscores that behind these numbers, one can discern a build-up in short-term risks that are threatening global growth prospects. More fundamentally, the report raises concerns over the sustainability of global economic growth in the face of rising financial, social and environmental challenges. Global levels of public and private debt continue to rise.

Economic growth is often failing to reach the people who need it most. The essential transition towards environmentally sustainable production and consumption is not happening fast enough, and the impacts of climate change are growing more widespread and severe. One overarching message is clear: while it is important to address the short-term challenges of today, policymakers must remain steadfast in advancing a long-term development strategy to meet the economic, social and environmental goals of tomorrow.

Decisive policy action relies on multilateral, cooperative approaches in key areas such as pursuing climate action, mobilizing sustainable finance and redressing inequality. I commend the efforts of the United Nations Department of Economic and Social Affairs, the United Nations Conference on Trade and Development, the five United Nations regional commissions and other contributors on the production of this joint report. It recommend its analysis to a wide global audience as we strive to implement the 2030 Agenda, achieve a fair globalization and build a peaceful, prosperous future in which no one is left behind.

Despite facing challenges at the domestic level along with a rapidly transforming global landscape, the U.S. economy is still the largest in the world with a nominal GDP forecast to exceed USD 21 trillion in 2019. The U.S. economy represents about 20% of total global output, and is still larger than that of China. The U.S. economy features a highly-developed and technologically-advanced services sector, which accounts for about 80% of its output. The U.S. economy is dominated by services-oriented companies in areas such as technology, financial services, healthcare and retail. Large U.S. corporations also play a major role on the global stage, with more than a fifth of companies on the Fortune Global 500 coming from the United States. 

The Chinese economy experienced astonishing growth in the last few decades that catapulted the country to become the world's second largest economy. In 1978—when China started the program of economic reforms—the country ranked ninth in nominal gross domestic product (GDP) with USD 214 billion; 35 years later it jumped up to second place with a nominal GDP of USD 9.2 trillion. 

Since the introduction of the economic reforms in 1978, China has become the world’s manufacturing hub, where the secondary sector (comprising industry and construction) represented the largest share of GDP. However, in recent years, China’s modernization propelled the tertiary sector, and in 2013, it became the largest category of GDP with a share of 46.1%, while the secondary sector still accounted for a sizeable 45.0% of the country’s total output. Meanwhile, the primary sector’s weight in GDP has shrunk dramatically since the country opened to the world. 

Today the Chinese economy is the second largest in the world and although it experienced massive growth in that 35-year span, authorities have taken a new approach to the economy called the “new normal.” To avoid overheating the economy, authorities are conducting a managed slowdown, which has seen growth gradually slow year after year since 2010. The economy is projected to grow 6.3% in 2019, which is nothing to sniff at, but is a far cry from the over 10% annual growth seen not too long ago.

Georgieva, in her inaugural speech in Washington, warned about the economic impacts of trade disputes between countries. She also said that the effects of global economic slowdown would be 'more pronounced' in countries such as India. In its latest Monetary Policy Committee (MPC) meet, the Reserve Bank of India slashed India's GDP outlook for 2019-20 to 6.1%.

Prof (Dr.) Kanayalal Raina specializes in spiritual teaching besides providing management consultancy services. His strategic plans are being used for obtaining funding to run various programs conducted by NFP nonprofit and business organizations. He strengthens NFP and business organizations through education, empowerment of leadership and mentoring, personal growth and strategic counselling. Areas of expertise are Govt. funding and preparation of Business Plans, Strategic Plans, Marketing plans, Sales and Pricing Plans, Balanced Scorecard, and Business Performance Management.