Modi’s goal of a $5 trillion economy by 2025 is at risk
India’s slowdown and a simmering shadow banking crisis is putting Prime Minister Narendra Modi’s goal of crafting a $5 trillion economy by 2025 at risk.
The nation entered 2019 as the world’s sixth-biggest economy poised to become the fifth. Instead, it has slipped a notch to seventh place as a collapse in consumption slowed gross domestic product growth to the weakest in six years. External shocks from trade wars to surging oil prices are exacerbating that pain.
Troubled by the grim prospects, the central bank has lowered interest rates to a nine-year low and Governor Shaktikanta Das wants other stakeholders -- from the go nment to banks to the private sector -- to step up. But with Finance Minister Nirmala Sitharaman facing lower revenue prospects that threaten her budget gap goal, the heavy lifting on stimulus appears to lie with the Reserve Bank of India.?
Das may be able to ease a financing squeeze, but it’ll take delivery on big bang reforms to unlock the productivity gains needed to power the economy toward Modi’s goals. While his return to office this year with a bigger mandate stoked expectations among investors for bolder reforms, that hope is fading 100 days into his second term as global investors head for the exit.?
Unemployment at a 45-year high has hurt demand for everything from soaps to 7-cent cookies, while car sales have slumped the most on record and new investments have been sluggish as a lingering shadow banking crisis curbs lending. That’s caused growth to decelerate for five straight quarters to 5% in the three months to June - the weakest since March 2013 - and well below the 8% plus annual expansion needed to achieve the goal.
What Bloomberg’s Economists Say
“We expect the first-term reforms of the Modi go nment, including a clean-up of the banking sector, a new bankruptcy law, and a new indirect tax structure, to mark a transition to a faster-growth trajectory. These should lift potential growth to 8% from around 7.4% now. At the same time, we expect a recovery in actual growth, picking up from an estimated 6.2% in fiscal 2020 to 8.5% in fiscal 2025.” -- Abhishek Gupta, India economist
“For the economy to reach $5 trillion, it will take the types of reform that were long promised: massive reductions in regulations, streamlining of labor laws, privatization of state entities, investments in infrastructure,” said Vivek Wadhwa, a distinguished fellow and professor at Carnegie Mellon University’s College of Engineering at Silicon Valley. “Yet little happened,” he said.
That laundry list needs to be implemented quickly as India, according to most economists, faces a structural as well as a cyclical slowdown. New measures announced so far by the go nment to bolster growth are seen falling short of addressing the pain points.
Underpinning the target of $5 trillion is the go nment’s forecast of 8% average GDP growth, according to Shilan Shah, senior India economist with Capital Economics in Singapore. “That is setting a very high bar,” he said.
Volatile oil prices following the attack on an oil facility in Saudi Arabia are an added risk to the economy that imports 80% of its crude oil needs, while slowing global growth spawned by trade tensions have subdued demand for its exports.
“There is clearly a demand recession going on right now,” said Girija Pande, chairman of Singapore-based Apex Avalon Consulting Pte. and a former CEO of Tata Consultancy Services Ltd. “One has to boost aggregate demand and one of the ways of doing that is by lowering rates.”
Another way is by attracting large dollops of foreign investments into fresh projects and be part of trading blocs like the Regional Comprehensive Economic Partnership. While India has jumped in the ease of doing business rankings, it has not been enough to attract significant foreign capital to become part of global supply chains despite some initial hopes that businesses might relocate to shield themselves from the ongoing U.S.-China trade war.
While Modi has seen through far-reaching reforms -- giving RBI an inflation targeting mandate, introducing a nationwide consumption tax and passing an insolvency law -- in his first term, he’s fallen short of overhauling the banking system. Besides, large parts of the economy are yet to recover from his decision to ban high-value bills in 2016.
"目前需求明显在衰退，"新加坡Apex Avalon Consulting Pte.董事长兼Tata Consultancy Services Ltd.前执行长Girija Pande称，"必须提振总需求，其中一种方法就是降息。"
译文来源：三泰虎 ???? http://www.santaihu.com/48463.html ??? 译者：Joyceliu
Do not go by maths, math did not helped Einstein discover gravity. We are already close to 3 billion economy, in 2025, we will multiply the number by 1.7 and there you go 5 billion economy.
modis dream staying as a dream only
5 trillion is possible only with Indira type of governance in emergency
Right from the annoy, this figure is at risk. Even current year tax collection, gdp etc are at risk
KRISHAN KANT Aneja
Before Assembly elections you will see India shining ,GDP 8% ,employment growth 45% No poor left in the country & what not!! Dreams & dreams.
10 trillion by 2030,20 by 2040 n 100 by 2100
There is no harm in having a dream. Only to worry is how the public money is spending, how NPAs are growing, who is not paying back. Insolvency of companies is not a solution since their loan have to be paid by public by taxes on petrol or as GST or other cess.
Swabhanu Mysore Venkataramaiah
2 YEARS BEFORE THE NEXT L.S. ELECTIONS WE WILL GROW BY 40-50% TO MAKE UP ! DREAMS & CASTLES IN THE AIR !
Bihari Krishna Shrestha
Since most of the major reform agenda remain not only undone but also not even contemplated, all indications are that the worse is yet to come. But the more dangerous aspect of the Modi go nment''s functioning at present is that the major leaders in the go nment including the PM himself are saying and doing things (like the Kashmir''s 370 stuff and Assam''s NRC) that have tremendous destabilizing possible fallout for the entire nation. All these seem to suggest that they have not a worry in the world about the worsening of the country''s economy that now seems to struggle at the brink of disaster. Tine for India to fasten its belt.
we have voted modi for a change that thats what he is doing
reforms is being opposed by vested interest with vehemence within party , why Maharashtra had to withdraw APMC action ??/
Dr. Subramanyanswamy put it rightly that the Prime Minister and the Finance Minister do not know economics. As so many false promises were by Modi this 5 trillion economy promise is also a false one. To achieve this more than 9% GDP growth is required. Wherefrom the money to spend by people and the Govt come? Due to the Economy slowdown the GDP came down to 5% and RBI laments that they did not expect it is coming. Workers lost their jobs, industries closed and huge slump in sales and everybody is fearing of their future. This is the singular achievement of Modi
Indian investors have lost close to Rs 20 lakh crore since presentation of budget. At this rate we all to witness bad & ugly days ahead.