PM Modi’s goal of a $5 trillion economy by 2025 is at risk

Agencies
September 20, 2019

Sept 20: India’s slowdown and a simmering shadow banking crisis is putting Prime Minister Narendra Modi’s goal of crafting a $5 trillion economy by 2025 at risk.

The nation entered 2019 as the world’s sixth-biggest economy poised to become the fifth. Instead, it has slipped a notch to seventh place as a collapse in consumption slowed gross domestic product growth to the weakest in six years. External shocks from trade wars to surging oil prices are exacerbating that pain.

Troubled by the grim prospects, the central bank has lowered interest rates to a nine-year low and Governor Shaktikanta Das wants other stakeholders -- from the government to banks to the private sector -- to step up. But with Finance Minister Nirmala Sitharaman facing lower revenue prospects that threaten her budget gap goal, the heavy lifting on stimulus appears to lie with the Reserve Bank of India.

Das may be able to ease a financing squeeze, but it’ll take delivery on big bang reforms to unlock the productivity gains needed to power the economy toward Modi’s goals. While his return to office this year with a bigger mandate stoked expectations among investors for bolder reforms, that hope is fading 100 days into his second term as global investors head for the exit.

Unemployment at a 45-year high has hurt demand for everything from soaps to 7-cent cookies, while car sales have slumped the most on record and new investments have been sluggish as a lingering shadow banking crisis curbs lending. That’s caused growth to decelerate for five straight quarters to 5% in the three months to June -- the weakest since March 2013 -- and well below the 8% plus annual expansion needed to achieve the goal.

What Bloomberg’s Economists Say

“We expect the first-term reforms of the Modi government, including a clean-up of the banking sector, a new bankruptcy law, and a new indirect tax structure, to mark a transition to a faster-growth trajectory. These should lift potential growth to 8% from around 7.4% now. At the same time, we expect a recovery in actual growth, picking up from an estimated 6.2% in fiscal 2020 to 8.5% in fiscal 2025."

-- Abhishek Gupta, India economist

“For the economy to reach $5 trillion, it will take the types of reform that were long promised: massive reductions in regulations, streamlining of labor laws, privatization of state entities, investments in infrastructure," said Vivek Wadhwa, a distinguished fellow and professor at Carnegie Mellon University’s College of Engineering at Silicon Valley. “Yet little happened," he said.

That laundry list needs to be implemented quickly as India, according to most economists, faces a structural as well as a cyclical slowdown. New measures announced so far by the government to bolster growth are seen falling short of addressing the pain points.

Underpinning the target of $5 trillion is the government’s forecast of 8% average GDP growth, according to Shilan Shah, senior India economist with Capital Economics in Singapore. “That is setting a very high bar," he said.

Oil Prices

Volatile oil prices following the attack on an oil facility in Saudi Arabia are an added risk to the economy that imports 80% of its crude oil needs, while slowing global growth spawned by trade tensions have subdued demand for its exports.

“There is clearly a demand recession going on right now," said Girija Pande, chairman of Singapore-based Apex Avalon Consulting Pte. and a former CEO of Tata Consultancy Services Ltd. “One has to boost aggregate demand and one of the ways of doing that is by lowering rates."

Another way is by attracting large dollops of foreign investments into fresh projects and be part of trading blocs like the Regional Comprehensive Economic Partnership. While India has jumped in the ease of doing business rankings, it has not been enough to attract significant foreign capital to become part of global supply chains despite some initial hopes that businesses might relocate to shield themselves from the ongoing U.S.-China trade war.

While Modi has seen through far-reaching reforms -- giving RBI an inflation targeting mandate, introducing a nationwide consumption tax and passing an insolvency law -- in his first term, he’s fallen short of overhauling the banking system. Besides, large parts of the economy are yet to recover from his decision to ban high-value bills in 2016.

“Investors should await clarity in the coming months on what steps the government will take to ease labor laws, reform the banking system and privatize state-owned enterprises," said Amitabh Dubey, an analyst at TS Lombard.

“But at the same time they should be prepared for a continuation of past policies: namely, a mix of reform, state control and populism."

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November 4,2024

In a tragic turn of events, a young spectator lost his life during a bull-taming event, Kobbari Hori, at Chigalli in Mundgod taluk, Uttara Kannada, on Saturday. 

Parameshwar Siddappa Harijan, aged 22, was fatally gored by a marauding bull during the event, which had drawn large crowds as part of the Deepavali festival celebrations.

With thousands of spectators lining the path to witness the action, the event took a horrific turn when the bull charged directly at Parameshwar, inflicting severe injuries. 

Despite efforts to rush him to the hospital, Parameshwar tragically succumbed to his wounds on the way.

In response to the fatal accident, another bull-taming event scheduled for the evening in Mundgod town was promptly cancelled, as shock and grief swept through the community following the heartbreaking incident.

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November 5,2024

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Washington: The race between Democratic leader Kamala Harris and her Republican rival Donald Trump for the White House has been truly unprecedented as it saw drama, tragedy, political comebacks, fierce rhetoric and a historically razor-tight contest.

As the fight reaches its crescendo with the big election day just a few hours away, many political observers billed the unpredictable race for the 47th President of the US as the most consequential one in decades while appearing to project a grim picture for the country’s future under a Trump presidency.

In her final days of campaign, Vice President Harris focused on a message of hope, unity, optimism and women rights whereas Trump remained fiercely combative in targeting his Democratic rival and even suggested that he may not accept the election outcome in case of a defeat.

Overall, it has been a roller-coaster ride for both 60-year-old Harris and 78-year-old Trump.

Trump received his party’s nomination in March and formally at the Republican National Convention (RNC) in July — in a historic comeback after remaining in political wilderness for months following several court cases.

In effect, he became the first former president to get the nomination for the top office on the planet after being convicted of a felony.

“Trump has made one of the biggest political comebacks since Richard Nixon’s in terms of the political struggles that he has had in the last four years,” Communication Strategist Anang Mittal said.

Just days ahead of the RNC, Trump was shot at during a rally in Pennsylvania. He suffered an upper ear injury. Minutes later, a bleeding Trump raised his fist in defiance, images that drew a lot of emotional support from his die-hard supporters.

For Harris too, it has been a dramatic ride after Biden ended his re-election campaign in July, nearly weeks after he came under severe scrutiny following his incoherent performance at a televised debate with Trump.

While dropping out from the race, Biden, 81, endorsed Harris to succeed him as the Democratic candidate.

Finally in August, the Democratic National Convention formally nominated Harris as the party’s candidate for the presidential election.

The presidential election will be a chance to “move past the bitterness, cynicism and divisive battles of the past”, she said in a powerful speech at the Convention.

If Harris wins, she will become the first woman, first Black woman and first person of South Asian descent to become the US President.

In the overall campaign, Harris has been projecting the election as the one to protect the country’s fundamental freedoms, safeguard constitutional values and ensure women’s rights.

On his part, Trump has maintained his signature aggressive rhetoric and promising to rebuild the economy and rid the US from illegal immigrants.

However, there has been strong criticism of the Republican leader’s roadmap to repair the economy.

"Donald Trump is offering a vision of crony rentier capitalism that has enticed many captains of industry and finance,” said Joseph E Stiglitz, a Nobel laureate economist, in a column in Project Syndicate.

"In catering to their wishes for more tax cuts and less regulation, he would make most Americans’ lives poorer, harder, and shorter,” he said.

With election day just a few hours away, there is no clarity on who has a better chance of winning the race.

"The elections are very close. They (the outcome) may change on the basis of a few thousands votes here or there. I think the big issue will be voter turnout tomorrow. That will determine the outcome in certain swing states,” said Executive Director of the US chapter of Observer Research Foundation Dhruva Jaishankar.

Kapil Sharma, a non-resident senior fellow at Atlantic Council’s Middle East Programmes, also echoed similar views.

“This election is probably one of the closest elections that I can remember. I have been working in Washington for over 30 years and I don’t recall an election being this tight,” he said.

More than 78 million Americans have already cast their votes as of Sunday, according to the University of Florida’s Election Lab that tracks early and mail-in voting across the US.

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November 12,2024

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The Taliban regime has appointed Ikramuddin Kamil as the acting consul in the Afghan mission in Mumbai, Afghan media has reported.

It is the first such appointment made by the Taliban set up to any Afghan mission in India.

There was no immediate comment from the Indian side on the appointment that came.

The Ministry of Foreign Affairs of Afghanistan has announced the appointment of Kamil as the acting consul in Mumbai, the Taliban-controlled Bakhtar News Agency reported on Monday, citing unnamed sources.

"He is currently in Mumbai, where he is fulfilling his duties as a diplomat representing the Islamic Emirate," it said.

The appointment is part of Kabul's efforts to strengthen diplomatic ties with India and enhance its presence abroad, the media outlet said

Kamil holds a PhD degree in international law and previously served as the deputy director in the department of security cooperation and border affairs in the foreign ministry, it said.

He is expected to facilitate consular services and represent the interests of Afghanistan in India, the report added.

Kamil's appointment comes days after the external affairs ministry's point-person for Afghanistan held talks with the Taliban's acting defence minister, Mullah Mohammad Yaqoob, in Kabul.

Sher Mohammad Abbas Stanikzai, the Taliban's deputy foreign minister for political affairs, also posted on X about Kamil's appointment.

The appointment of Kamil is seen as part of efforts to facilitate consular services to the Afghan population in Mumbai.

There has been almost negligible presence of diplomatic staff at the Afghan missions in India.

Most of the diplomats appointed by the Ashraf Ghani government have already left India.

In May, Zakia Wardak, the seniormost Afghan diplomat in India, resigned from her position after reports emerged that she was caught at the Mumbai airport for allegedly trying to smuggle 25 kg of gold worth Rs 18.6 crore from Dubai.

Wardak had taken charge as the acting ambassador of Afghanistan to New Delhi late last year, after working as the Afghan consul general in Mumbai for more than two years.

She took charge of the Afghan embassy in New Delhi last November, after the mission helmed by then ambassador Farid Mamundzay announced its closure.

Mamundzay, who was an appointee of the Ghani government, had moved to the United Kingdom.

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