‘GDP likely to average 6.5 % over next five years’

[my2cents]

‘GDP likely to average 6.5 % over next five years’ - The Hindu

There is only a 50 per cent chance India’s gross domestic product (GDP) will average even 6.5 per cent over the next five fiscals, according to a Crisil Research report, and that too, is predicated on a decisive mandate in the ongoing general elections. The report, titled ‘Of growth and missed opportunity’, notes that election outcomes don’t impact the economy beyond improving sentiment. What matters are the policies that follow. A decisive mandate will create an environment for speedy resolution of policy bottlenecks, hasten reforms and crank up investment efficiency.

India’s Incremental Capital Output Ratio or ICOR, which measures investment efficiency, has worsened to almost 8 in the last two fiscals from 4.4 during the high growth period of 2003-04 to 2010-11. Higher the ICOR, lower the efficiency of investment. So the task before the new government is laid out clearly — the focus has to be on improving the efficiency of the economy by debottlenecking it.

However, if there is no clear mandate at the battle of ballot, growth will likely remain in the 5 per cent rut.

The report says that evolving investment dynamics suggest there is a natural limit to the upside beyond 6.5 per cent. Neither a surge in investments nor improvement in efficiency witnessed in fiscals 2004-11 — which led to near-9 per cent GDP growth — would repeat in the next five years.

If the report is to be believed there is only one in five chance of growth being better than 6.5 per cent.

The ramifications for businesses and the economy at large will be huge in terms of social objectives and the opportunity loss for India Inc, the report notes.

Calculating the specific missed opportunities, Crisil Research said some 16.5 million passenger vehicles (cars, utility vehicles and vans) will be sold over the next five years if GDP growth averages 6.5 per cent. This number would have surged to 18.5 million at 9 per cent GDP growth. The missed opportunity, therefore, is 2 million vehicles or approximately sales of the entire passenger vehicles industry for the current fiscal.

A slower economy will also curb demand for steel and cement, which had hit unprecedented highs during fiscals 2004-11 on the back of near-double-digit industrial growth and housing boom.

Growth has more than halved since then. Predictably, therefore, the missed opportunity is greater here — 125 million tonnes of cement and 42 million tonnes of steel, when the economy expands annually at 6.5 per cent instead of 9 per cent.

GDP growth at 6.5 per cent will mean sales of televisions will be fewer by 13 million, refrigerators by 6 million, washing machines by 3 million and air-conditioners by 6 million. At 5 per cent growth, the missed opportunity bloats further — for television and refrigerators it is 17 million and 9 million, respectively.

Crisil calculates that as many as 226 million people will remain below the poverty line at the end of fiscal 2019 if growth averages 6.5 per cent. On the other hand, at 9 per cent growth, the number of destitute will reduce to 177 million, bringing about a sharp decline in India’s poverty ratio to 13.6 per cent from 22 per cent now. Conversely, assuming 5 per cent GDP growth would mean India’s poverty ratio would just moderate to 19.6 per cent.

Not growing fast enough will also mean as many as 15 million less non-farm jobs created, forcing many to remain locked in agriculture, Crisil Research said.

 

[Indo-guy]

‘GDP likely to average 6.5 % over next five years’ - The Hindu


View attachment 25343
There is only a 50 per cent chance India’s gross domestic product (GDP) will average even 6.5 per cent over the next five fiscals, according to a Crisil Research report, and that too, is predicated on a decisive mandate in the ongoing general elections. The report, titled ‘Of growth and missed opportunity’, notes that election outcomes don’t impact the economy beyond improving sentiment. What matters are the policies that follow. A decisive mandate will create an environment for speedy resolution of policy bottlenecks, hasten reforms and crank up investment efficiency.

India’s Incremental Capital Output Ratio or ICOR, which measures investment efficiency, has worsened to almost 8 in the last two fiscals from 4.4 during the high growth period of 2003-04 to 2010-11. Higher the ICOR, lower the efficiency of investment. So the task before the new government is laid out clearly — the focus has to be on improving the efficiency of the economy by debottlenecking it.

However, if there is no clear mandate at the battle of ballot, growth will likely remain in the 5 per cent rut.

The report says that evolving investment dynamics suggest there is a natural limit to the upside beyond 6.5 per cent. Neither a surge in investments nor improvement in efficiency witnessed in fiscals 2004-11 — which led to near-9 per cent GDP growth — would repeat in the next five years.

If the report is to be believed there is only one in five chance of growth being better than 6.5 per cent.

The ramifications for businesses and the economy at large will be huge in terms of social objectives and the opportunity loss for India Inc, the report notes.

Calculating the specific missed opportunities, Crisil Research said some 16.5 million passenger vehicles (cars, utility vehicles and vans) will be sold over the next five years if GDP growth averages 6.5 per cent. This number would have surged to 18.5 million at 9 per cent GDP growth. The missed opportunity, therefore, is 2 million vehicles or approximately sales of the entire passenger vehicles industry for the current fiscal.

A slower economy will also curb demand for steel and cement, which had hit unprecedented highs during fiscals 2004-11 on the back of near-double-digit industrial growth and housing boom.

Growth has more than halved since then. Predictably, therefore, the missed opportunity is greater here — 125 million tonnes of cement and 42 million tonnes of steel, when the economy expands annually at 6.5 per cent instead of 9 per cent.

GDP growth at 6.5 per cent will mean sales of televisions will be fewer by 13 million, refrigerators by 6 million, washing machines by 3 million and air-conditioners by 6 million. At 5 per cent growth, the missed opportunity bloats further — for television and refrigerators it is 17 million and 9 million, respectively.

Crisil calculates that as many as 226 million people will remain below the poverty line at the end of fiscal 2019 if growth averages 6.5 per cent. On the other hand, at 9 per cent growth, the number of destitute will reduce to 177 million, bringing about a sharp decline in India’s poverty ratio to 13.6 per cent from 22 per cent now. Conversely, assuming 5 per cent GDP growth would mean India’s poverty ratio would just moderate to 19.6 per cent.

Not growing fast enough will also mean as many as 15 million less non-farm jobs created, forcing many to remain locked in agriculture, Crisil Research said.

Not surprising ...given the economic mess that we put ourselves in

end result of lack of governance and policy paralysis ....

 

[my2cents]

What are the chances that we will even achieve 6.5% growth??

Will Modi effect will shift our economy to higher gear ??

 

[Indo-guy]

What are the chances that we will even achieve 6.5% growth??

Will Modi effect will shift our economy to higher gear ??

Difficult to say
It will have some positive impact

but the true effect will take time to show up ...

If we managed to achieve 6% growth also we should be happy ....

 

[my2cents]

Not surprising ...given the economic mess that we put ourselves in

end result of lack of governance and policy paralysis ....

Key is to remove the bureaucratic bottle necks and improve efficiency. It will bring needed FDI to our industry.

 

[Indo-guy]

Key is to remove the bureaucratic bottle necks and improve efficiency. It will bring needed FDI to our industry.

Indeed .

Let us see

this election is very crucial for India.
we need stable government at the center
Third front will spell doom for India .

 

[sancho]

Not surprising ...given the economic mess that we put ourselves in

end result of lack of governance and policy paralysis ....

India is not the middle of the world, but is effected by the world! Since 2008 we are living in a world of banking and financial crisis, in which India was one of the few countries, that could retain a constant growth. In times when even developed countries like Germany were applauded for 1-2% growth, in India everybody is crying about 4-5% and now when all predictions (not only of UPA's) shows that growth gathers speed again and we will see 6% and more in the the coming years, we don't even realize that that's a GOOD thing!!!

For those who didn't realised it, even China's growth is down to 7.5% this year and possibly less by next year, also a result of lack of governance and policy paralysis?

The reality is, that India did fairly well in the crisis years and now when the world is recovering, when their depts are under control, which makes them spend more into India and buy more from India, growth will make a jump again. But we were so used to 8-9% growth charts, that we only complained about growth reductions without looking or even understanding why the growth or FDI went down. In fact, no matter who wins or will be PM, will benefit from the gobal recovery without doing anything and even from the policies of the UPA in the crisis years that kept India stable. That's why growth is increasing, why the Rupee is coming back, why every foreign analyst suggest to invest in India again and shows the potential of the market.

The IMF said India's economy, Asia's third largest after China and Japan, would grow 5.4 percent in 2014 before improving to 6.4 percent next year, as export competitiveness improves and recently approved investment projects proceed.

China's GDP growth to slow to 7.5% this year: IMF - Channel NewsAsia

There are problems of course, inflation, price rise, infrastructure that needs improvement, we tend to see everything either completely as bad, or as very good in an overenthusiastic manner. There are a lot of good things that UPA has got India, there will be good things that NDA will bring India and both will have their bad sides too and that's something we often don't see. The other side, or in some cases (defence procurement and production) the better middle way!

 

[he-man]

India is not the middle of the world, but is effected by the world! Since 2008 we are living in a world of banking and financial crisis, in which India was one of the few countries, that could retain a constant growth. In times when even developed countries like Germany were applauded for 1-2% growth, in India everybody is crying about 4-5% and now when all predictions (not only of UPA's) shows that growth gathers speed again and we will see 6% and more in the the coming years, we don't even realize that that's a GOOD thing!!!

For those who didn't realised it, even China's growth is down to 7.5% this year and possibly less by next year, also a result of lack of governance and policy paralysis?

The reality is, that India did fairly well in the crisis years and now when the world is recovering, when their depts are under control, which makes them spend more into India and buy more from India, growth will make a jump again. But we were so used to 8-9% growth charts, that we only complained about growth reductions without looking or even understanding why the growth or FDI went down. In fact, no matter who wins or will be PM, will benefit from the gobal recovery without doing anything and even from the policies of the UPA in the crisis years that kept India stable. That's why growth is increasing, why the Rupee is coming back, why every foreign analyst suggest to invest in India again and shows the potential of the market.



China's GDP growth to slow to 7.5% this year: IMF - Channel NewsAsia

There are problems of course, inflation, price rise, infrastructure that needs improvement, we tend to see everything either completely as bad, or as very good in an overenthusiastic manner. There are a lot of good things that UPA has got India, there will be good things that NDA will bring India and both will have their bad sides too and that's something we often don't see. The other side, or in some cases (defence procurement and production) the better middle way!

U don't understand the real danger.
The indian economy is a consumption based economy.

Our manufacturing growth is in negative which will be a problem if it dosen't pick up.

We export nothing except fruits,vegetables and software products.

Bloody nothing.

And ur comparison with germany and china is wrong.

 

[Indo-guy]

India is not the middle of the world, but is effected by the world! Since 2008 we are living in a world of banking and financial crisis, in which India was one of the few countries, that could retain a constant growth. In times when even developed countries like Germany were applauded for 1-2% growth, in India everybody is crying about 4-5% and now when all predictions (not only of UPA's) shows that growth gathers speed again and we will see 6% and more in the the coming years, we don't even realize that that's a GOOD thing!!!

For those who didn't realised it, even China's growth is down to 7.5% this year and possibly less by next year, also a result of lack of governance and policy paralysis?

The reality is, that India did fairly well in the crisis years and now when the world is recovering, when their depts are under control, which makes them spend more into India and buy more from India, growth will make a jump again. But we were so used to 8-9% growth charts, that we only complained about growth reductions without looking or even understanding why the growth or FDI went down. In fact, no matter who wins or will be PM, will benefit from the gobal recovery without doing anything and even from the policies of the UPA in the crisis years that kept India stable. That's why growth is increasing, why the Rupee is coming back, why every foreign analyst suggest to invest in India again and shows the potential of the market.



China's GDP growth to slow to 7.5% this year: IMF - Channel NewsAsia

There are problems of course, inflation, price rise, infrastructure that needs improvement, we tend to see everything either completely as bad, or as very good in an overenthusiastic manner. There are a lot of good things that UPA has got India, there will be good things that NDA will bring India and both will have their bad sides too and that's something we often don't see. The other side, or in some cases (defence procurement and production) the better middle way!

May be you are trying to bring in other side of argument ...
But isn't it true that first time in 2 decades ever since economic liberalization was unleashed ....government itself crossed the red line it had set for itself as far as CAD is concerned ....
and this is the evidence of the fact that UPA didn't manage economy well .

China has slowed down too ....no doubt ...but China has slowed down after near double digit grown for more than 2 decades

Signs of Cooling of Chinese economy were evident even before these financial crises took its toll on global economy ....

Should we be complacent about 50% drop in our GDP growth because China is also slowing down ....?

 

[he-man]

May be you are trying to bring in other side of argument ...
But isn't it true that first time in 2 decades ever since economic liberalization was unleashed ....government itself crossed the red line it had set for itself as far as CAD is concerned ....
and this is the evidence of the fact that UPA didn't manage economy well .

China has slowed down too ....no doubt ...but China has slowed down after near double digit grown for more than 2 decades

Signs of Cooling of Chinese economy were evident even before these financial crises took its toll on global economy ....

Thd main concern is manufacturing and exports.
Rest is bullshit.

Just improve manufacturing and we have a potential to cross 10 pc.
Without it we will be lucky to clock 6 pc

 

[Indo-guy]

I think it's well known and widely accepted fact that lack of governance and policy paralysis contributed to flight of FDI as well as downturn that economy took

Off course global factors also contributed ...

But then think why we could pass 2008 crisis largely unscathed ....only to receive jolts of economic slowdown in recent years ....

 

[Abingdonboy]

To be honest these predications are based on the current ground situation going foreword and can be changed for the better or worse depending on external factors and policies adopted by the Govt.

6.5% isn't bad at all- it isn't great but it isn't terrible.

However there is no doubt in my mind that with some reforms and some new policies the GoI can get India back to 7-8% from 2015/16 onwards. Any economic policies launched today would take about 18 months to really see any impact so no one can expect an over night miracle.


Let's see what the next GoI can do, IF it is Modi, then he has a hell of a lot to live up to. He is said to have boosted Gujarat's economy and has promised to do the same for all of India- let's see if he lives up to the hype....

 

[Indo-guy]

Thd main concern is manufacturing and exports.
Rest is bullshit.

Just improve manufacturing and we have a potential to cross 10 pc.
Without it we will be lucky to clock 6 pc

Economy is not a modular structure with watertight compartments....
Everything is intricately linked to each other

Things are not as simplistic as you are trying to put forth !!!

 

[AugenBlick]

To be honest these predications are based on the current ground situation going foreword and can be changed for the better or worse depending on external factors and policies adopted by the Govt.

6.5% isn't bad at all- it isn't great but it isn't terrible.

However there is no doubt in my mind that with some reforms and some new policies the GoI can get India back to 7-8% from 2015/16 onwards. Any economic policies launched today would take about 18 months to really see any impact so no one can expect an over night miracle.


Let's see what the next GoI can do, IF it is Modi, then he has a hell of a lot to live up to. He is said to have boosted Gujarat's economy and has promised to do the same for all of India- let's see if he lives up to the hype....

Try telling that to the person who is struggling to break into middle class , but can't.
This is the guy from rural India who gets a degree but has to mend a counter at a retail store. at 5000k p.m.

 

[Indo-guy]

To be honest these predications are based on the current ground situation going foreword and can be changed for the better or worse depending on external factors and policies adopted by the Govt.

6.5% isn't bad at all- it isn't great but it isn't terrible.

However there is no doubt in my mind that with some reforms and some new policies the GoI can get India back to 7-8% from 2015/16 onwards. Any economic policies launched today would take about 18 months to really see any impact so no one can expect an over night miracle.


Let's see what the next GoI can do, IF it is Modi, then he has a hell of a lot to live up to. He is said to have boosted Gujarat's economy and has promised to do the same for all of India- let's see if he lives up to the hype....

Yes 6.5 % is rather good , given prevailing conditions ....

But it will take years before effects of reforms will be seen .

Damages done to economy in last 1 decade can't be recovered in matter of few months ....

Markets will respond positively ....but economy will take time to come on track ...

There are a lot of good things that UPA has got India, there will be good things that NDA will bring India and both will have their bad sides too and that's something we often don't see. The other side, or in some cases (defence procurement and production) the better middle way!

Sorry to ask this question ..hope you won't feel offended .

What " lot of good things" UPA got India ???

( I do not see anything good besides RTI ....frankly speaking )

I am not Pro NDA ..and neither want to turn this thread into NDA Vs UPA thread ....yet I can't restrain myself from asking you ..

what do you mean by " lot good things " ???