Similar to 2008, but with added lockdowns.

The Indian economy is improving "as confirmed by high frequency indicators such as goods and services tax (GST) e-way bills, vehicle registrations, electricity demand, rail freight and petrol consumption", wrote Aditi Nayar. However, PMI for both manufacturing and services contracted in June. "The Nikkei Purchasing Managers' Index (PMI) compiled by IHS Markit, declined to an 11-month low of 48.1 in June from May's 50.8, moving below the 50-level separating growth from contraction," Economic Times (ET). IHS Markit's Services PMI "plunged to 41.2 last month from an already depressed 46.4 in May", the lowest level since July 2020, ET. "Indian states' weaknesses outweigh their strengths as they battle the pandemic and they need financial support from the Centre, which is already dealing with drastically reduced revenue, according to S&P Global Ratings," ET. If the Centre increases share of taxes it pays to the states "it may embolden states to accelerate capital expenditure; this would be growth supportive", wrote Nayar. Or, the "cesses levied on petrol and diesel could be reduced by Rs 4.5 litre each", which would be revenue neutral and reduce consumer inflation by 10 basis points. The government could see that public sector enterprises (PSE) clear pending dues of micro, small and medium enterprises (MSME) which will immediately improve their cash flow and allow them to continue paying their employees. Instead the Finance Minister Nirmala Sitharaman announced a Rs 1.1 trillion loan guarantee scheme for sectors including health and Rs 4.5 trillion Emergency Credit Line Guarantee Scheme (ELGS) for MSMEs, ET. "Based on consolidated data for FY2019-20 (data for the recent fiscal year is still not fully available) , registered MSMEs were awaiting dues that amounted to a mammoth Rs 15 trillion," wrote Gautam Das. Instead of paying legitimate dues the government wants them to borrow money on which they will have to pay interest. There are three challenges facing the Bharatiya Janata Party (BJP) of Prime Minister Narendra Modi before the general election in 2024, wrote Roshan Kishore. 1. The rich are becoming richer because of the relentless rise of the stock market with price/earnings (PE) ratio at 32. "The market capitalisation of the BSE S&P index has increased by 2.6 times between the quarter ending March 2014 and March 2021," while nominal GDP has increased 1.9 times. 2. Growth in private sector earnings has been weak which makes people unhappy. "In a potential boost to consumption ahead of the festival season, the Union government's employees and pensioners will likely see their emoluments rise effective July 1, thanks to a likely big hike in dearness allowance (DA) and dearness relief (DR). The move is seen to enhance their monthly pay by Rs 3,000 to Rs 30,000, depending on the pay scales," Financial Express. 3. India's consumer price inflation (CPI) jumped to 6.3% in May from 4.23% in April, ET. "What is perhaps an even bigger threat is the possibility of a wage-price spiral. As prices rise, nominal wages will have to increase, especially for those who spend most of their income on essentials." There is a danger of increasing bad loans in public sector banks (PSBs), wrote Mythili Bhusnurmath. "If the post-2008 period saw banks increase lending to the infrastructure sector at the behest of the then FM P Chidambaram, we now see PSBs being exhorted to lend to the MSMEs sector by finance minister Nirmala Sitharaman." "The transition from low- and medium-risk MSME borrowers to the high risk segment, is 'noteworthy' and implications of business disruptions following the resurgence of the pandemic could be 'significant'," says a report by the RBI (Reserve Bank). "Read that as RBI gobbledegook for impending disaster, given that for much of the period in question, the Supreme Court had imposed a standstill on asset classification." After 2008 there was no lockdown. Now no one knows.