Do you think the government's focus on its capex, fiscal consolidation and macroeconomic stability are enough for growth to pick up? Has a private investment cycle begun?
I welcome the emphasis on fiscal consolidation and macroeconomic stability. That's a necessary condition but not sufficient. In order to drive growth, the traditional four engines of growth must be firing and running.
Today, three are sputtering. Exports are down and if the world or the major advanced economies go into a recession, they will fall further. Private investment is sluggish and even the government admits the private sector is not coming forward to make large investments. India is a consumption-driven economy, 60% of our GDP is accounted for by consumption. But with inflation, unemployment, the global recession and a slowdown in global trade, and indirect taxes, our consumption also will decline. The only engine within the government's control is capital investment, which has been raised to an astronomical sum of ₹10 trillion. It's a bold bet...
Has the economy's productive capacity fallen?
There is no direct evidence for this but there is indirect evidence. If the Centre claims that gross fixed capital formation is at 27% or 28%, on an incremental capital output ratio (ICOR) of four, the economy should easily achieve 7% growth. But the government seems to be hoping for 6% to 6.5% growth. If you match the two, obviously the ICOR is no longer four,
it's more than four. If the gross fixed capital formation is 30% and economic growth is at only 6%, the ICOR has become five, which means the efficiency of the economy and the productivity of investments have declined.
هذه القصة مأخوذة من طبعة February 09, 2023 من Financial Express Mumbai.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك ? تسجيل الدخول
هذه القصة مأخوذة من طبعة February 09, 2023 من Financial Express Mumbai.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك? تسجيل الدخول
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