Saturday, November 14, 2020

How do we know who to trust?

 "Atmanirbhar Bharat 3.0 may well be Finance Minister Nirmala Sitharaman's last Covid-19 relief package ahead of Budget 2021-22, but there is a discernible pattern to the four major announcements made over the last seven months." "Even if one takes an optimistic account of the extra spend this year, it will add up to just Rs 1,18,200 crore (Rs 1.18 trillion), not even half of what she said." She said Rs 2.65 trillion. "But even this Rs 1,18,200 crore extra spending this year, by no means, is insignificant; it accounts for 0.6 percent of GDP," wrote PV Iyer. "The third package confirms some patterns in the Central government's fiscal response to the pandemic," wrote Neelkanth Mishra. "The cumulative fiscal intervention is now 2.2 percent of GDP, close to the 3 percent of GDP of stimulus that was considered necessary earlier in the year." "India's currency is strong, the stock market is surging, and long-term interest rates are under control," wrote Andy Mukherjee. "The trouble is with demand." "How will the gap in private consumption and public investment get filled?" "One obstacle is the low starting point. India's exports never had much overseas value addition embedded in them, reflecting the country's isolation from the global supply chains." India's trade deficit was the highest this year at $8.71 billion because exports declined by 5.12% to $24.89 billion, even as imports fell by 11.53% to $33.61 billion. Though, "high-frequency indicators, including exports, automobile sales and manufacturing output, have shown strength in recent months amid an uptick in consumption", "the latest measures are an extension of a rescue plan announced in May, although that's done little to revive demand in the economy heavily reliant on consumption," wrote Anirban Nag. "Business leaders, policy makers and politicians alike are pinning hopes on the rural sector as bountiful rains have set the stage for another year of record crops. Higher disposable incomes with farmers are expected to boost demand from automobile to cement to gold jewellery," wrote Kotoki and Alfonso. If we are expecting bumper crops why are food prices so high? "India's retail inflation may stay elevated for at least three more months after hitting a six-year high in October, as excess rain has damaged standing crops and seedlings, while edible oils that the country imports have become expensive." New investments will happen only when Indians trust one another, wrote Prof Kaushik Basu. "But, "That is getting fractured." "India was among the world's three or four fastest growing economies, From that, this year, we are going to be in the bottom 10 economies in the world." Everything can be changed, but trust, once broken, is almost impossible to restore. Like Humpty Dumpty.                

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