What ails the Indian economy?

[MULUBJA]

World's fastest growing economy (according to Modi's magic GDP recalculations) with industrial growth of 1.6%?

Cheer lead till the data of third and Ivth quarter is available. At thet time, you will come out with a story that they are overstated.

 

[cirr]

According to Joshi: "At a growth rate of 3% a year, income per head would double, and reach about the same level as China's per capita income today

What a load of rubbish!

So this Joshi guy thinks that China's per capita income today is only double India's?

lolo....I very much doubt if this guy's head is stuffed with poo.

China's per capita income in 2016 is 4 times India's.

Get that right Mr. Joshi.

And stop making fool of Indians by talking absolute trash!

 

[deckingraj]

Now this is a relevant post.
Automation is the biggest threat to menial jobs.
Vast majority of workers may become jobless in the next decade.
Govt should consider social welfare pensions for such people as proposed by the Norwegians.

Is this the fist time automation has entered? A new technology doesn't necessarily only kill jobs...yes, you need to switch or learn new skills which is not easy and everyone's cup of tea....

 

[Rafi]

Is this the fist time automation has entered? A new technology doesn't necessarily only kill jobs...yes, you need to switch or learn new skills which is not easy and everyone's cup of tea....

Its about efficiency, and it's happening already, even in the IT industry.

 

[deckingraj]

Its about efficiency, and it's happening already, even in the IT industry.

I am in IT industry and would love to learn your perspective of what's happening in this industry... b/w AI and Machine learning are opening up new avenues which could not have been thought before...so it is really complex...a new technology does kill jobs but again at the low end of the food chain...(for example automation testing vs manual one)...but then it also compensates(somewhat) by creating high end jobs...I am not even talking about the efficiency it brings in...again..as said it is about flexible and learning new skills...It is evident that in about 10-15 years from now, more jobs would be in the world of creating/implementing/mining algorithms/data/models etc...the sh1tty investment banking job that i am in might be using such algos.....similar churn happened when cloud computing was introduced...so this cycle is inevitable and not necessarily job killers...no??

 

[Rafi]

I am in IT industry and would love to learn your perspective of what's happening in this industry... b/w AI and Machine learning are opening up new avenues which could not have been thought before...so it is really complex...a new technology does kill jobs but again at the low end of the food chain...(for example automation testing vs manual one)...but then it also compensates(somewhat) by creating high end jobs...I am not even talking about the efficiency it brings in...again..as said it is about flexible and learning new skills...It is evident that in about 10-15 years from now, more jobs would be in the world of creating/implementing/mining algorithms/data/models etc...the sh1tty investment banking job that i am in might be using such algos.....similar churn happened when cloud computing was introduced...so this cycle is inevitable and not necessarily job killers...no??

You are right, it's just about the medium and long term, that concerns me, these low level jobs will eventually go.

 

[deckingraj]

You are right, it's just about the medium and long term, that concerns me, these low level jobs will eventually go.

Fair enough....and unfortunately there is no way out...we need to keep enhancing skills

 

[wiseone2]

World's fastest growing economy (according to Modi's magic GDP recalculations) with industrial growth of 1.6%?



7% is the magic number that India needs to hit in order to create enough jobs every year for their unemployed youth.

Anything below that will create millions more unemployed youth, who might go into religious/separatist politics or other negative endeavors such as crime.

Are you dumb or plain idiot ? Just because an economist says 7% does not make it so. If India maintains a 5-6% growth rate things will be fine. Given the state of Indian agriculture a a high growth rate is not possible. agriculture employs 60% of the population

 

[deckingraj]

Are you dumb or plain idiot ? Just because an economist says 7% does not make it so. If India maintains a 5-6% growth rate things will be fine. Given the state of Indian agriculture a a high growth rate is not possible. agriculture employs 60% of the population

What you mean by that?? Agriculture as percentage of GDP is hardly at 18% and is constantly on the decline(in terms of percentage)...and there have been many instances when we have consistently grown above 8%...and yes a double digit GDP percentage is what we are looking at...As of now economy is sluggish...it is a fact...simple...and no 5-6% is not acceptable....having said that i am sure positives from GST will start appearing in 1-2 quarters...

 

[ashok mourya]

Image captionIndia's once robust economy is slowing

India's economy grew at its slowest pace for three years in the April-to-June quarter and growth has declined for six quarters in a row. Economic analyst Vivek Kaul explains why one of the world's fastest growing economies is sputtering to a halt.

On Monday, Prime Minister Narendra Modi revived India's economic council, a body that he had abolished soon after coming into power in 2014.

India has just seen its slowest economic growth since Mr Modi took over as the prime minister on the back of promises over more jobs and a stronger economy.

For the period between April and June 2017, Indian GDP grew by just 5.7% (as against 9.1% a year earlier).

Much of that 5.7% was because the government spent more than it usually does. The non-government part of the GDP, which forms roughly 90% of the economy, grew by a meagre 4.3%.

Industry as a whole grew by 1.6%, with manufacturing and construction growing by 1.2% and 2% respectively.

The last time the economy grew by less than 6% (at 5.3%) was between January and March 2014, when Manmohan Singh was the prime minister.

Image copyrightGETTY IMAGES
Image captionNarendra Modi took over as the prime minister in May 2014
We live in a world where any rate of growth greater than 2% is considered to be good. But what is true for Western countries isn't necessarily true for India.

India's GDP needs to grow at a rate faster than 7% for the country to continue to pull millions out of poverty.

"Even a small change in the growth rate of per capita income makes a big difference to eventual income per head," writes economist Vijay Joshi in India's Long Road - The Search for Prosperity.

This is what economists call the "power of compound interest".

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• Why India's GST is one of the world's most complex tax reforms

And how would things look for India by 2040 at different rates of economic growth?

According to Joshi: "At a growth rate of 3% a year, income per head would double, and reach about the same level as China's per capita income today. At a growth rate of 6% a year, income per head would quadruple to a level around that enjoyed by Chile, Malaysia and Poland today.

"If income per head grew at 9% a year, it would increase nearly eight-fold, and India would have a per capita income comparable to an average high-income country of today."

Image copyrightGETTY IMAGES
Image captionAgriculture still employs half of India's workforce
Agriculture, which accounts for around 15% of GDP, continues to employ half the country's workforce.

But exports between April and August 2017 are lower than they were in 2013 and 2014.

There is also India's so called demographic dividend - 12 million young Indians are entering the workforce every year.

But given the lack of a good education, most of these young people need low-skilled jobs, which the construction and real estate industries can provide.

With both sectors growing at the rate they are, where will the jobs come from? The services sector continues to grow robustly, but it still needs support from industries like construction.

Image copyrightGETTY IMAGES
Image captionMillions of unskilled young people enter India's workforce each year
Even those industries that have the potential to create many jobs, such as apparel manufacturing, continue to operate on a small scale because of India's convoluted labour laws.

A recent report, Ease of Doing Business - An Enterprise Survey of Indian States, published by a federal institute, found that 85% of the firms operating in the apparel sector employed less than eight workers.

In fact, 85% of Indian manufacturing firms employ less than 50 workers.

The government feels that it has done enough to reform labour laws, and it is now the industry's responsibility to set up labour-intensive enterprises.

But as the data suggests, Indian industry continues to favour capital-intensive, rather than labour-intensive, methods of expansion.

As a result of all these factors, India has huge underemployment.

Numbers from 2015-2016 suggest that only three out of five people looking for a job throughout the year are able to find one.

The situation is worse in rural India, where only one in two are successful.

Image copyrightGETTY IMAGES
Image captionAfter 86% of currency was cancelled overnight, Indians flooded banks to exchange the old notes for new ones
Demonetisation (a surprise government decision to cancel 86% of India's currency) has also made things worse - many firms operating in the cash-only informal sector, which created so many jobs, had to shut down.

And the Goods and Services Tax, a major overhaul that replaced numerous federal and state taxes with a single tax rate, hasn't helped either.

The other big worry is that India's largely government-owned public sector banks are in a mess. Seventeen of 21 banks have a bad loans rate of 10% or more (as of 31 March).

Bad loans are loans in which the repayment from a borrower has been due for 90 days or more. One bank (the Indian Overseas Bank) has a bad loans rate of 25%.

These bad loans are largely the result of lending to industry, where the overall bad loans rate stands at 22.3%.

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Image copyrightGETTY IMAGES
Image captionIndia's central bank is grappling with a crisis of bad loans
The government has already pumped in close to 1,500bn rupees ($23bn; £17bn) as capital since 2009 to keep these banks going.

But with the banks continuing to accumulate bad loans, they are going to need billions more as capital to continue to operate.

The federal government does not have this money but it remains reluctant to privatise or even shut down some of these banks. A major impact of bad loans has been that public sector banks are now reluctant to lend to industry.

The Indian economy is suffering from many structural issues and if a long-term growth rate of 7-8% per year has to be sustained, these issues need to be tackled on a war footing.

http://www.bbc.com/news/world-asia-41332272

#modinomics

 

[wiseone2]

What you mean by that?? Agriculture as percentage of GDP is hardly at 18% and is constantly on the decline(in terms of percentage)...and there have been many instances when we have consistently grown above 8%...and yes a double digit GDP percentage is what we are looking at...As of now economy is sluggish...it is a fact...simple...and no 5-6% is not acceptable....having said that i am sure positives from GST will start appearing in 1-2 quarters...

what % of labor force is in agriculture ?

 

[deckingraj]

what % of labor force is in agriculture ?

Dude I just shared the overall data with you....Irrespective of the percentage of people in Agriculture the overall impact in GDP is mere 18% and declining. Are you anywhere suggesting that there is shortage of labor in other areas because people are stuck in Agriculture which is why India growth is going to be about 5-6%?? Please clarify...

 

[wiseone2]

Dude I just shared the overall data with you....Irrespective of the percentage of people in Agriculture the overall impact in GDP is mere 18% and declining. Are you anywhere suggesting that there is shortage of labor in other areas because people are stuck in Agriculture which is why India growth is going to be about 5-6%?? Please clarify...

The output of agriculture may be 18%. That does not mean 18% of population is involved in agriculture.

833 million people live in villages. 377 million people live in cities. That is 68% of population in villages. I will let you decide what % of the workforce is involved in agriculture.

 

[Nilgiri]

I will let you decide what % of the workforce is involved in agriculture.

World Bank put workforce in agriculture at 51% in 2010. The rural population was around 69% then. (i.e around 74% pop/pop correlation)

Currently the rural population is 66.8% in 2016. Using same ratio (74%), one would assume employment in agriculture is around 49% currently.

Basic sustained route to development must be to let free market bring this surplus labour in agriculture to other more productive employment (industry and services) lubricated by education/training/housing sops (to extent of market failure in that regard which can be debated) with more efficient routes in operation today (DBT + aadhar) in new urban clusters and existing urban areas (that can handle it).

Fewer and fewer hands in agriculture will prompt more productivity (mechanisation) there too, and thats the only way agri wages and wealth per capita will go up sustainably. This needs more free market forces too for capital investment into more and better irrigation and larger farm sizes (better economies of scale) and more integration with the consumer markets. Everything also has to happen at same time given they have feedback loops to each other (i.e chicken and the egg phenomenon).

 

[wiseone2]

World Bank put workforce in agriculture at 51% in 2010. The rural population was around 69% then. (i.e around 74% pop/pop correlation)

Currently the rural population is 66.8% in 2016. Using same ratio (74%), one would assume employment in agriculture is around 49% currently.

Basic sustained route to development must be to let free market bring this surplus labour in agriculture to other more productive employment (industry and services) lubricated by education/training/housing sops (to extent of market failure in that regard which can be debated) with more efficient routes in operation today (DBT + aadhar) in new urban clusters and existing urban areas (that can handle it).

Fewer and fewer hands in agriculture will prompt more productivity (mechanisation) there too, and thats the only way agri wages and wealth per capita will go up sustainably. This needs more free market forces too for capital investment into more and better irrigation and larger farm sizes (better economies of scale) and more integration with the consumer markets. Everything also has to happen at same time given they have feedback loops to each other (i.e chicken and the egg phenomenon).

agriculture can be mechanized. but where will be the labor go ? That dictates the speed and face of mechanization in agriculture.

you are not going to have a sustained 7% economic growth rate with 50%+ in agriculture