India's economy falters under Modi

India's economy falters under Modi
From Al Jazeera - October 12, 2017

The economy of the world's largest democracy is growing at a pace, which is the slowest in the last three years. Jobs are being lost. Inflation is threatening to pick up. There are few takers for bank loans. Consumer confidence is down.

In May 2014, the right-wing Hindu-nationalist Bharatiya Janata Party (BJP) came to power under the leadership of Prime Minister Narendra Modi. In the run-up to the elections, he had promised achhe din or good times.

But good times are yet to come for many Indians. On the contrary, their lives and livelihoods were rudely disrupted by the sudden decision Modi took on November 8 last year to demonetise high-denomination currency notes thereby making illegal 86 per cent of the total currency in circulation.

The impact of that decision is still being felt. Compounding the woes of large sections of citizens, especially small traders, the federal government's move to introduce a radically new system of indirect taxation - the goods and services tax (GST) - from June 1 onwards, has been far from smooth.

Deepchand Yadav is a chauffeur who works in Gurgaon, a suburb of India's capital New Delhi. He says that this Diwali he will think twice before buying new clothes for his wife and school-going son. Reason: he is not sure how prices will rise in the coming months and would rather save the extra money he earns during the festive season.

He earns approximately 16,000 Rupees ($245) per month. His income has not gone up over the last two years but his expenditure has on account of inflation - in other words, his real income has shrunk.

Patit Paban Mondal works as a cook in Kolkata, the capital of West Bengal state. He usually sends an extra 3,000 rupees ($45) to his ailing mother and brother who live in a remote village in this eastern Indian province. This extra amount is for the festive season. This year, he says he will cut his personal expenses in order to send the same amount of money to her.

Mondal's monthly income is 10,000 rupees ($153). According to the World Bank, in 2013, India's per capita income in nominal terms was $1,570 per year, implying a monthly per capita income of around 8,300 rupees ($127) - this means Mondal's income is just above the average. He says successive governments have not been able to check inflation.

The above estimates do not reflect the cost of living in India. According to the World Bank, India's per capita income in 2013 on the basis of purchasing power parity was almost 3.5 times higher at $5,350.

Mondal and Yadav are hardly alone. The Reserve Bank of India (RBI), the country's central bank and apex monetary authority, conducted a series of surveys across the country to gauge consumer confidence and business sentiments.

The findings, which were released on October 4, indicated all-pervasive pessimism.

Over 40 percent of the respondents of one survey said in September that the overall economic situation had deteriorated. This proportion was barely a quarter in September 2016.

Last month, the Central Statistics Office of the government of India said GDP had grown at an estimated rate of 5.7 per cent in the April-June period this year, the lowest quarterly growth rate in three years.

The RBI has brought down its forecast of growth for next year (until March 31) from 7.3 per cent to 6.7 per cent.

The Indian economy had been growing at close to 8 per cent in 2014 and 2015 making it the "fastest growing" among the major economies of the world, overtaking China. But what really went wrong?

As a matter of fact, many observers of the Indian economy believe that thelatest GDP figures are exaggerated, as the government tweaked the methodology of calculating national income statistics in 2016.

Former Finance Minister Yashwant Sinha has claimed that the actual GDP growth rate could be two percentage points lower than what has been put out.


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