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June 4, 2012, 3:46 PM IST
India’s Economic Crisis by the Numbers
The venerable folks at FICCI today held a press conference to try to galvanize the body politic – indeed, the nation – into ameliorating what they already termed an economic “crisis” for India. They would like the nation to rally to counter it the way it does in the face of an external crisis or a natural disaster.
They gave out a handy list of the statistics to show how India’s situation has deteriorated in the past four years, the sort of numbers you need at your beck and call in a dinner party where a guest says: “Why all this doom and gloom, India is doing just fine.” (Oh, and in case said guest starts blaming Greece, the overwhelming feeling of the FICCI folks is that India did this to itself.)
R.V. Kanoria, president of the Federation of Indian Chambers of Commerce and Industry, had the following bullet points:–In 2007-2008, government revenue from tax and elsewhere totaled 5.4 trillion rupees while total expenses were 7.1 trillion rupees, a shortfall of 1.7 trillion rupees. That was covered by 1.3 trillion rupees in government borrowings and other receipts. So the government overspent its income by one third and financed about one fifth of its expenditure through borrowing.
–Fast forward to 2011-2012. Revenue = 7.7. trillion. Expenses = 13.2 trillion. Shortfall = 5.2 trillion. The gap was funded largely by 4.4 trillion in borrowing. So the government borrows almost two thirds of what it earns and one third of what it spends. The fiscal deficit now amounts to about 68% of revenue.
–Today, a large piece of government spending is committed to fixed items such as interest payments (2.8 trillion rupees), defense spending (1.8 trillion), and subsidies (2.2 trillion.) So, Mr. Kanoria said, “there is very little room for the government to channelize spending to investment,” which is what is really needed to reverse the economic slump. That will be even tougher if the government proceeds with a food security bill this year (+1.5 trillion rupees in spending.)
Mr. Kanoria called on the Reserve Bank of India to slash its benchmark interest rate by 1.0 percentage point later this month, with a similar cut in the amount of money banks must keep in reserve at the central bank. Overall, the interest rate needs to come down by 2.0 percentage points, he said.
Oh, and nix the Land Acquisition Bill in its current form because it restricts the use of “irrigated multi-cropped land” for infrastructure development (supposedly a national priority) to 5% of the multi-crop irrigated area in a district. That will render some 55 million hectares, or 40% of arable land, as out of bounds for acquisition, he said. The restrictions could become even more severe.
Which in a country that is trying to boost manufacturing to 25% of the economy from 16% and to move farmers off the land into semi-skilled and skilled jobs, doesn’t make much sense. “The consequent impact on job creation will be devastating,” he said.
Speaking of jobs, another juicy nugget. What’ s the difference between 9% Gross Domestic Product growth and below-6% where we are now? About 30 million jobs that won’t be created, FICCI officials said. In a country that has 13 million young people come of working age annually, that shortfall matters. Goodbye demographic dividend, hello demographic disaster.
Paul Beckett is the WSJ’s bureau chief in New Delhi. Follow him and India Real Time on Twitter @paulwsj and @indiarealtime.
India’s Economic Crisis by the Numbers - India Real Time - WSJ
See who is talking. India's growth is at lowest point but still much higher than most others. 5.6% I guess.
