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| Re: Recession Again ?
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I don't know if the US economy is headed for a recession but the Indian economy is probably going to chug along at the new Hindu rate of growth of 6% or so. I doubt it will fall below that. A well summed up article below {I have quoted some excerpts} that indicates we are not going to do 7% for sure and equally not likely to fall below 6% either. The combination of Brexit and the US economy getting into trouble cannot be fully predicted however. The chances of India remaining a relatively positive spot in a lack lustre global environment is a good possibility.
2018 reminded us of how important low crude oil prices are to the health of the Indian economy. When crude prices fall, we get a boost to growth; when they rise, the current account deficit widens, the rupee falls, prices rise, growth falters and foreign investors flee our stock markets. The high price of crude was an important reason why the UPA-II government wobbled in its final years and it was a big reason why the economy did so well under the current government in 2014-15 and 2015-16. Let's see.
--------------------------------------------------------------------------------------------------------------------------------------------------------- https://indianexpress.com/article/ex...t-yet-5516288/
"What to expect in 2019, Economy: Some gains likely in poll year, but don’t count on growth spurt yet"
Written by P Vaidyanathan Iyer ; December 31, 2018 11:18:31 am Quote:
The New Year will probably have a few things going for the Indian economy, even though these may not translate into higher growth. Gains from big legislative reforms such as the Goods and Services Tax (GST) and The Insolvency and Bankruptcy Code (IBC) will start accruing in the coming year(s). Lower global crude oil prices — of $50 or so a barrel — will certainly help. But a powering down of the global economy will restrain India’s manufacturing and services exports..…companies may go slow on investments due to policy uncertainty in an election year, and banks grappling with bad loans will still find it difficult to lend. There is limited fiscal space for extra government expenditure over the next three months. On the other hand, subdued farm incomes and the wearing off of Pay Commission awards may dent the consumption story. Pre-election noises promising unemployment allowances and farm debt waivers point to rising stress on the fiscal, both at the Centre and in the states. Added to this are global uncertainties. Overall, 2019 looks like a lacklustre year, presenting a weak outlook for the economy, and more volatility in the stock markets.
Two decisions taken by the BJP-led government over the past four-and-a-half years have been transformative: the GST Act, and the IBC. The initial hiccups in the implementation of GST could disappear in 2019, with streamlining of procedures. As revenue streams turn more encouraging, the government will probably fix a single tax rate for all goods and services. The IBC, on the other hand, offers huge possibilities in addressing the bad loans problem. The process will likely mature in 2019 and beyond, with a bulk of the cases being resolved through mutual consultations between banks and company promoters. These are huge pluses, and paint a wonderful investment picture for long-term investors.....The seeds of GST were sown in 2000, and insolvency reforms have been in the works since 1992. For the economy to start realising the gains from the two reform measures requires these to stabilise and consolidate on the ground.
Rahul Gandhi’s announcements on farm loan waivers will put competitive populist pressure on the BJP ahead of the Lok Sabha elections. Such policies adversely impact government finances, lead to higher deficits, and reduce the headroom for the central bank to reduce policy rates......In any election year, three or four crucial months are lost because there is no concerted expenditure push by the government. Bound by the Model Code of Conduct, the government will be able to present only a Vote on Account (also called Interim Budget) which allows for basic spending for a part of the year. Once the new government is sworn in, it takes about a month to present the full Budget, which symbolically also serves as its first big economic policy statement. In other words, the April-June quarter will just pass by, in elections and government formation.
By and large, economic momentum in the short run has little to do with politics. Whether it is the BJP-led NDA or the Congress-led UPA or a non-BJP, non-Congress Third Front, India’s reform path is more or less set.
In 2014, Narendra Modi promised development, an end to the so-called policy paralysis, a revival of investments, growth and jobs, and a war on corruption. The markets couldn’t have asked for more. Over the last four years, the government under Prime Minister Modi has launched many programmes and new schemes, but by and large, it has expanded its role in the economy…..But this hasn’t helped boost private sector investment, critical for job creation. ... the economy has clearly been unable to provide income-earning opportunities to the million-plus individuals who enter the labour market every month. This stance by the Congress will put competitive populist pressure on the BJP ahead of the Lok Sabha elections. Such policies adversely impact government finances, lead to higher deficits, and reduce the headroom for the central bank to reduce policy rates. This in turn, affects private investment decisions.
Multiple factors on the domestic front raise red flags for the economy. The liquidity crisis that has hit non-banking finance companies affects specific segments. Belt-tightening by the government due to limited fiscal space will prevent any dramatic rise in public sector expenditure. The balance sheet clean-up of banks and high-debt companies will take a while, and fresh capital expenditure may take up to 12 months. Even if companies have utilised their capacities, the first round of additional capacity would come more from brownfield expansion, rather than greenfield. Further, this has to be driven more through consumer demand within, rather than exports. But consumers need jobs to earn income and spend. Debt-funded consumption may not be sustainable....
Right now, the world is talking about a cyclical slowdown, if not a recession. The fall in the prices of crude oil, a bellwether of global growth, is of particular concern. Although the Federal Reserve has increased rates for five consecutive quarters, the last one less than two weeks ago, worries have emerged now over whether the US would grow as fast as it did in 2018, when the annualised quarterly growth was 4%. Interest rate hikes in the US would essentially mean a further strengthening of the dollar, making it more difficult for emerging economies to repay their dollar debts. In China, growth has already moderated, but there are still questions as to how much more its economy will slow down. Growth prospects in Europe do not inspire confidence. The International Monetary Fund expects the global economy to grow at 2.5% in 2019, compared with 2.9% in 2018.
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Last edited by V.Narayan : 1st January 2019 at 10:58.
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22nd October 2017, 22:01
