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Where we stand now

GDP growth for the second quarter was at a six-year low of 4.5%. The Finance Minister has said earlier that the economy may have bottomed out; several analysts and experts, however, feel the worst may not be over yet.

Passenger car sales, which witnessed a marginal uptick of 0.3% in the festival month of October after sliding continuously over the previous 10 months, went back into decline mode in November. In the eight months of this financial year, passenger car sales have declined 18%, sales of medium and heavy commercial vehicles by 37%, and two wheelers by 15.7%. This indicates a slowdown in economic activity in both urban and rural areas, and in industrial demand.

Between April and October, gross bank credit growth expanded by just 0.7%; within that, the credit outstanding for the industrial and services sectors contracted 3.4% and 2.6% respectively. The personal loan segment expanded by only 7.6%.

Power demand has been falling — as of November 11, of the total 262 coal, lignite, and nuclear units, 133 were shut due to lack of demand. As of November 7, peak demand met was 1,88,072 MW, a little less than half the total installed generation capacity of 3,63,370 MW.

Both direct and indirect tax collections have slowed due to the overall economic slowdown, and it will be a challenge for the government to meet tax receipt targets set in the Budget. GST revenue collections have been slowing over the past few months. Barring November, when collections picked up due to festival sales, GST revenue has contracted for the previous two months, leading to delayed compensation payments to states.

What the government can do

There have been calls for the government to lead the revival through aggressive spending. The question is whether the government has the wherewithal to do so.

After the cut in corporate tax rates, there are expectations now of a reduction in income-tax rates, or adjustment of tax slabs in the Budget to stimulate demand. However, the government’s fiscal health does not provide it with much leeway for an aggressive expenditure push. The fiscal space is tight, especially after the sharp cut in corporate tax rates, which is estimated to cost the exchequer Rs 1.45 lakh crore.

Privatisation of state-owned companies such as BPCL, Shipping Corporation of India and Container Corporation of India Ltd is being lined up to generate resources to cover the expected shortfall in tax revenues. A rollover of subsidies this year could add close to 0.3% of GDP to the fiscal space. Even so, analysts expect the fiscal deficit to be around 3.7-3.9 per cent of GDP, against the target of 3.3% by March-end 2020.

With the Reserve Bank of India maintaining a pause in its rate reduction cycle during the latest review of monetary policy, the government might wait for the corporate tax cuts to drive investments in the economy.

One way for the government to give a spending push will be to postpone the fiscal consolidation plan. Industry executives argue that if reduction is put on hold for a couple of years, the government would have extra resources to push spending. As the economy picks up pace later, it can revert to the targeted reduction in deficit.

In the latest edition of NITI Aayog’s annual assessment of progress made by states in achieving the sustainable development goals (SDG), Kerala retained the top slot, followed closely by Himachal Pradesh, Andhra Pradesh and Tamil Nadu. In the lower ranks, still, are Jharkhand, Arunachal Pradesh, Meghalaya, Assam, and Uttar Pradesh, with Bihar at the bottom.
 This latest report, which is much more expansive in nature than the previous edition, provides insight on the variations in states’ performance across different parameters, and also serves as a useful guide to locate where state intervention is needed to achieve the SDGs.
The SDG Index 2019 measures the performance of states and Union territories on indicators such as poverty, hunger, gender equality, health, education, and clean water and sanitation, among others.
While the 2018 index measured performance on 13 of the 17 SDG goals, the latest edition goes one step further, covering all 17 SDGs (a qualitative assessment has been made for measuring performance on partnerships). It has been constructed using 100 indicators, and covers 54 targets.
At the aggregate level, India’s composite score has improved from 57 in 2018 to 60 in 2019, much of the improvement taking place due to progress on five goals — clean water and sanitation; affordable and clean energy; industry, innovation, and infrastructure; life on land, and peace, justice, and strong institutions. On all these indicators, India has scored between 65 and 99.
This year marks the fifth anniversary of the adoption of SDGs. The 17 SDGs and 169 related targets are to be achieved by 2030. As India’s success in achieving these goals will largely determine global outcomes, achieving these targets should be the cornerstone of economic policy. This calls for reorienting public policy away from its short-term emphases, towards focusing on long-term goals.
As people who have spent their lives collecting survey data, we are very conscious of how hard it is to get respondents to reliably answer questions that to some of us, used to the world of passport forms and their like, are almost automatic. We remember asking a 20-something woman in South 24 Parganas district in West Bengal where she was born. “Not in this village”, “over there, one-two hours away”, pointing vaguely south or east.
The NRC presumes that this woman would be able to provide enough details about her life to establish her true citizenship status. And if she cannot, there is the CAA — for migrant Hindus, or for Sikhs and Christians, Buddhists and Jains. But not for Muslims.

If they cannot establish their citizenship, they would be presumed to be guilty. Of being a foreigner. And perforce stateless. Or subject to the goodwill of some officials, who will decide what status they deserve. And one thing we have learnt from our field work is that this can be a very risky gamble.

This is not minimal government or maximal governance. It is introducing meddlesome officialdom into a question as fundamental to people’s lives as citizenship — if you are not citizen of the country where you have lived all your life, and no one else wants you, who are you? And it is what many young people are upset about.

In our recent book, Good Economics for Hard Times, we make the case that there is really no economic case against low-skilled economic migrants. All the evidence suggests that even after large bouts of low-skilled migration, the earnings of other low-skilled migrants are unaffected. This is, in part, because economic migrants tend to be hungry for opportunity and make the most of the chance they got by coming across, taking jobs that few locals would want. In part, it is also because migrants not only sell labour but they also buy food and haircuts and everything else with their new earnings.

The real economic challenge is for the middle classes, who worry that this new group of claimants will eventually reach for the prize that they have so far held onto, the ultimate gift of a local government job. But it is a sign of our poor governance that government jobs are as much of a windfall as they are now — the fact that in 2019, 19 million Indians applied for 63,000 low-level jobs in the railways, should tell us we are getting something very wrong.

Paranoia about immigration is a genie that needs to be put back in the bottle as soon as possible.

And the best way to get there is to embrace India’s vision of being one of the mother lodes of civilisation. Why not open our doors to everyone who signs up in our national mission of being democratic, open, tolerant and inclusive? Why not Ahmadis who are persecuted in Pakistan (which often fails to be the welcoming homeland for South Asian Muslims that it purports to be) or Hindu Tamils uncomfortable in Sri Lanka? We have 1.3 billion people — a few more millions would disappear in a flash in to that melting pot. And we would really be a lodestar for the world.


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