Prime minister Narendra Modi has applauded India’s latest budget delivered by his finance minister Arun Jaitley, but the parallel chorus is fading out by the day. It was Utrjit Patel, RBI governor last week, this time it’s Modi’s former advisors, Arvind Panagariya, who was also deputy chairman of the Niti Aayog until August 2017.
The RBI's monetary policy committee listed out reasons why inflation could stay well above the RBI target of 4% throughout the next financial year. RBI expects a rise in food and vegetable prices, crude oil prices and cost of health and personal care. Three other factors that will likely fuel inflation emanate from Jaitley’s budget.
Much is said about liberalisation and globalisation which benefited only one half of the world population while leaving other half in distress. What is visible is the constant economic growth that had eradicated extreme poverty and at the same time helped rich to become extreme rich, albeit unjustly. The casualty is environment, over extraction of non replenishable natural resources and workers with stagnant wages in developed nations. Today, US has accumulated trade debt of $20 trillion, up from $1 trillion during 1980's and has no clue or any forward looking plans to repay that debt and trade gap of $100 trillion is likely in next few decades and is saddled with huge industrial work force with stagnated wages. On other hand, China armed with huge trade plus faces deterioration of social values, degradation of landscape & environment and over exploited 150 million labour force with no human rights for over 30 years. Economics are complex and any change usually has unintended consequences. Over dependence on either exports or imports, for prosperity, is detrimental to any nation. The prudence lies in living within means and/or maintaining manageable trade gap at all times. Economic growth is never a true indicator of progress, development and wellness of any nation.
The RBI's monetary policy committee listed out reasons why inflation could stay well above the RBI target of 4% throughout the next financial year. RBI expects a rise in food and vegetable prices, crude oil prices and cost of health and personal care. Three other factors that will likely fuel inflation emanate from Jaitley’s budget.
- Proposal to raise minimum support price (MSP) for farm products
- Hike in custom duties for various products including industrial inputs
- Wider-than-expected fiscal deficit
All this assuming that the south-west monsoon will be normal this year. The future of investments is as bleak as it was before. For Modi government, these nonchalant jabs from the RBI governor it is yet another sign that its populist budget may not help push the growth pedal.
Substantial liberalisation under PV Narasimha Rao and Atal Bihari Vajpayee, India became the first democracy to achieve 8% plus growth for nine years beginning in 2003-04. The top industrial tariff rate fell from 355% in 1990-91 to 10% in 2007-08 and imports and as proportion of the GDP expanded to 30% and exports to 24% by 2011-12. Sadly, a new generation of bureaucrats seems to have now replaced its more enlightened predecessor. It is on course to erect the wall of protection all over again.
Those who cannot remember the past,
are condemned to repeat it ... George Santayana
are condemned to repeat it ... George Santayana
Much is said about liberalisation and globalisation which benefited only one half of the world population while leaving other half in distress. What is visible is the constant economic growth that had eradicated extreme poverty and at the same time helped rich to become extreme rich, albeit unjustly. The casualty is environment, over extraction of non replenishable natural resources and workers with stagnant wages in developed nations. Today, US has accumulated trade debt of $20 trillion, up from $1 trillion during 1980's and has no clue or any forward looking plans to repay that debt and trade gap of $100 trillion is likely in next few decades and is saddled with huge industrial work force with stagnated wages. On other hand, China armed with huge trade plus faces deterioration of social values, degradation of landscape & environment and over exploited 150 million labour force with no human rights for over 30 years. Economics are complex and any change usually has unintended consequences. Over dependence on either exports or imports, for prosperity, is detrimental to any nation. The prudence lies in living within means and/or maintaining manageable trade gap at all times. Economic growth is never a true indicator of progress, development and wellness of any nation.
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