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Economic Slowdown: India critical in global deflationary ecosystem

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By Gaurav Sharma

As the global headwinds gather speed, India, a major emerging market economy finds itself at a crucial juncture. The global economy is in a state of flux, even as the world currencies tumble to record levels against the US dollar and the brick wall of China devalues the Yuan in the face of an escalating slowdown in growth.

money-bag-400301_1280How will the Indian economy hold up in the midst of falling commodity and currency prices? Will it plunge as China has or does India have the firepower to withstand, or better still, translate the global crisis into a growth opportunity?

The macro numbers present signs of an impending danger to the Indian economy. After the BSE Sensex, the benchmark stock market index, crashed a whopping 1,624 point last week (the fourth largest in the market’s history), Prime Minister Narendra Modi had to call a meeting between bankers, economists and industry behemoths in order to urge them to jump-start the domestic investment and thereby calm down the declining temper of the market.

The Prime Minister had to intervene to stall the spiralling damage is proof enough of the urgency to protect and rekindle the economic fire.

Declining currency prices pose a challenge to Indian exports as international goods and services become cheaper and Indian exports become dearer. However, the damage has been negated somewhat due to the fall down in rupee vis-a-vis the US dollar. The decline in oil prices, on the other hand, should bring much cheer to policy-makers as India imports as much as 75 per cent of its total oil requirements.

This means the current account deficit (imports–exports or net imports) can be bridged further from its already negative figure of 0.3 per cent. The additional revenues also provide a leeway to the government to plug the structural deficits in the infrastructure sector

Meanwhile, the low inflation rate of 3.8 per cent has raised clamours for an interest rate cut from RBI chief Raghuram Rajan but the Governor has stuck to his dovish stance by arguing that the prediction of inflation target is looked upon by RBI at an approximate time span of one year before it takes a call on slashing interest rates.

Moreover, with the anticipated hike in US Fed Reserve interest rates, Rajan finds himself in a quandary as foreign institutional (FII) flows begin to taper-off from the emerging economies in the wake of improving unemployment data and pick-up in growth in the United States.

If the Governor succumbs to the clarion calls for reduction in interest rates, there is the risk of a further pull down in the foreign inflows which have already touched the $ 3.25 billion mark in the Indian equity and debt market. In addition to that the dismal monsoon season and the rising food prices and the Governor have every reason not to hold the interest rates at the current level.

Furthermore, the banking industry is in a mess as non-performing assets (NPA’s) or bad loans begin to take a toll on the banks’ finances. The increased debt burden implies a reduction in the already flagging credit growth in the country.

In this regard, the RBI has taken a step in the right direction by making the requisite regulatory changes (increased pre and post sanction due diligence) in the wake of an Ernst & Young report highlighting the misuse of borrowed funds which added to the woes stifling the banking industry.

On the part of the government, the failure to pass the much-anticipated Goods & Service tax (GST) bill along with the stalling of the land acquisition bill has raised much concern. The lack of a coherent tax structure and clear-cut investment rules will further drive the foreign inflows away from India.

However, steps such as financial inclusion (Jan Dhan Yojna), digitisation and skill development will add to the labour productivity and therefore contribute positively to the economic growth. RBI has extended a helping hand by allowing payment banks and small development banks to set up shop in the country. As many as 11 entities have already been granted license.

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The pertinent reason why the RBI is persisting with the watchdog mode is because it is guided by inflation as measured by the Consumer Price Index (CPI). With the gloomy monsoon season affecting the kharif output and the inherent high weightage given to food in the index, the current 3.8 per cent figure is bound to go up.

However, with the precocious bent towards CPI, one wonders whether a more cumulative benchmark such as the Wholesale Price Index (WPI) and the GDP deflator can be kept out of the scope for long. With a discriminatory inflation index, the RBI can easily lose sight of the overall deflationary trend afflicting India.

Hence, NewsGram urges the honourable Governor to take stock of the situation and include an all encompassing measuring of inflationary rate which is so critical in guiding the monetary policy of the Central bank. A cogent monetary policy is in-turn the key to attracting the ebbing foreign flows in the country, and therefore, at the heart of the current nosedive in the markets.

With the Organisation for Economic Co-operation and Development (OECD), a Paris-based think tank, predicting “firming growth” for India amidst the unpredictable global trends, the RBI can do much by giving the initial boost through revamping of the inflation index.

Besides, the top leadership of any central banking institution is hired for making the right judgement call and providing the requisite thrust during seemingly difficult and confusing economic environment, and not merely being a passive observer to the swinging tides.

Here’s hoping that Rajan makes the choice, soon.

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Copyright 2015 NewsGram

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Kejriwal’s Door to Door Donation Drive is a Farce: Munish Raizada

Chanda Bandh Satyagraha makes an appeal that AAP should immediately restore donors' list on its website and then only seek new donations.

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Kejriwal
Dr. Munish Raizada along with his Chanda Bandh Satyagraha team outside the office of AAP MLA Jarnail Singh (Tilak Nagar). File photo

Chicago: The Aam Aadmi Party Convener and Delhi CM Arvind Kejriwal has launched a door to door campaign seeking donations for the AAP.  According to former overseas co-coordinator of Aam Aadmi Party, Dr. Munish Raizada, this is nothing more than a misleading campaign!

Raizada says that Kejriwal has no moral right to seek donations from common man as he has dismantled financial transparency in AAP by removing donors list from its website. Displaying donors’ list showing real time donations and making the income and expenditure accounts available online were the basis and the promise of the AAP, emphasised Raizada.

Now, after hiding donors’ list and its balance sheets from the public, the AAP cannot claim to be practising alternative politics.

Munish Raizada, kejriwal
Lack of financial transparency in the Arvind Kejriwal-led AAP prompted a group of NRIs, who once worked to mobilise funds and support for the party, to turn against it. (File photo)

It may be noted that AAP removed the list of donors from its website in June 2016. Moreover, since then AAP has been surrounded with controversies related to donations. AAP had also received Rs 30.67 crore Income Tax notice, last year in November, implying that all is not well with AAP’s accounts, says Raizada.

He further questions Kejriwal, that if AAP has nothing to hide about its accounts and if AAP is honest with its account keeping then why is Kejriwal hiding the donations?

Even the donation policy that was earlier the pride of every AAP volunteer has been done away with. The donation policy on AAP website used to state: “Every single rupee donated to the party will be published on the website immediately along with the details of the donor. Every expense done by the party will also be published on the website.”

But rather than putting the donors’ list in public domain, the party’s corrupt leadership started blaming BJP and I.T. Department for harassing its donors.

 

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Chanda Bandh Satygrah demands restoration of  lost values in AAP ( File Photo)

 

Opaque political funding is the fountain head of corruption. Further, Raizada says that if the party cannot be transparent in its political funding, then talking about fighting corruption and graft is a mere rhetoric. He said that the appeals by Chanda Bandh Satyagraha have fallen on deaf ears as far as the party’s

leadership is concerned. 

Chanda Bandh Satyagraha makes an appeal that AAP should immediately restore donors’ list on its website and then only seek new donations. Chanda Bandh Satyagraha was started by AAP’s volunteers in 2016, with an appeal to the public not to donate to AAP unless it makes its donation lists open and transparent.