India’s economic growth unexpectedly slid to a three-year low in the last quarter, delivering a blow to Prime Minister Narendra Modi who is facing criticism for disrupting business activity through his shock cash squeeze last year.
Gross domestic product grew 5.7 per cent in April-June, its slowest pace since the January-March quarter 2014, government data showed.
It was a marked slowdown from a 6.1 per cent growth in the January-March period and was far worse than the median forecast for a 6.6 per cent in a Reuters poll. It was in line with the poll’s lowest estimate.
Although growth was already slowing, Modi’s decision last November to scrap high-value old banknotes — a bid to flush out the money Indians hide from tax officials — wiped out about 86 percent of currency in circulation virtually overnight.
While his drive to unearth unaccounted wealth did not deliver the desired result, it hurt consumer demand in an economy where most people are paid in — and buy what they need with — cash.
Since then, an improvement in high frequency indicators such as sales of two-wheel vehicles, oil consumption, cargo traffic and rail freight raised hopes that the impact of the cash clampdown had bottomed out.
The GDP data belied those hopes. Confusion ahead of the launch of a new goods and services tax (GST) also seems to have dampened economic activity.
“The numbers seem to suggest that the slowdown from last the quarter has intensified due to the combination of long-term slowdown and temporary shock factors like demonetisation and GST,” said Abheek Barua, chief economist with HDFC in New Delhi. “We have to revise our GDP outlook numbers for the full year.”
A draw-down in inventories in the lead up to the tax change dragged down the manufacturing sector, which slowed to 1.2 per cent in the June quarter from a 10.7 percent growth last year.
With companies still grappling with new tax rules, business surveys are pointing to more pain ahead. Services and manufacturing activity contracted at their fastest rate in years in July, the month that the GST was launched.
After Thursday’s disappointing figures, economists are looking to review their full-year growth estimates.
“These trends will prompt a downward revision,” said Radhika Rao, an economist at DBS Bank in Singapore.
Annual growth in consumer spending, which powers more than half of the $2 trillion economy, slowed to 6.7 per cent in the June quarter from 7.3 per cent a quarter ago. Government spending too slowed. It grew 17.2 per cent year-on-year compared with a near 32 per cent year-on-year growth in the March quarter.
However, in a silver lining for Asia’s third-largest economy, the services sector gathered steam, posting a growth of 8.7 per cent in the latest quarter, up from 7.2 per cent in the previous three months.
Capital investment also rebounded from a 2.1 per cent contraction in the March quarter.
Modi promises bonanza to traders if re-elected
Mumbai: Prime Minister Narendra Modi promised traders Rs 50-lakh loan without any collateral, credit card facility and a pension scheme for small shopkeepers as he made a strong re-election pitch to the business community.
Modi said while his government has stood by traders in thick and thin, the opposition Congress has abused businessmen by calling all of them ‘chor’ (thieves).
Addressing a traders’ convention in New Delhi, he said the Bharatiya Janata Party-led National Democratic Alliance government in the last five years at the Centre worked to simplify the lives and businesses of traders by scraping 1,500 archaic laws, simplifying processes and providing easy credit.
Traders are “backbone” of the Indian economy but had in past never got the respect they deserved, Modi said, adding that doubling the size of the economy to $5 trillion is not possible without their contribution.
“I am impressed by the hard work of traders… their business has helped the economy bloom,” he said.
“I have tried to make your life and business easy in last five years.”
“The country is also seeing how we have stood by you in thick and thin,” Modi said.
With a household audience, the prime minister said the trading community is like weather forecaster who can anticipate future tidings.
Hitting out at the opposition Congress, the prime minister said the party has in its 70-year rule only “insulted” businessmen.
“They called all businessmen chor (thieves)” without realising the contribution of the business community in the economy.
Stating that Mahatma Gandhi too came from businessmen community of banias, he said the country has seen the “insults” meted out by the Congress to traders.
After being re-elected, he said, his government will set up a National Traders’ Welfare Board, bring trader credit cards and a pension scheme for small shopkeepers.
Also, the provision will be made to provide loans of up to Rs 50 lakh without collateral, the prime minister promised to traders.
Congress-led governments blamed traders for ills like price rise when it was the party’s own hoarders who were black marketing commodities, he alleged.
Listing his government’s achievements, he said the NDA regime has ended 1,500 archaic laws at the rate of one per day in the last five years to make doing business easier in the country.
Processes have been simplified, inspector raj largely checked and personal interference in income tax assessment removed.
“I consider you (traders) as biggest stakeholder of the economy. Opposition parties remember you only on special occasion,” he said.
Modi said the Goods and Services Tax, which was brought in July 2017 by amalgamating 17 different central and state taxes, has made doing business transparent, ended state check-posts and resulted in doubling of registered traders.
“I do not say there may have not been mistakes (in implementing GST) but we have quickly addressed any anomalies based on suggestions from traders,” he said.
Based on suggestions of traders, most daily use items are taxed at zero rate while 98 per cent of the commodities are taxed at less than 18 per cent, he said adding the process of filing tax returns under GST has also been simplified and exemption limit for small businesses doubled.
“We are continuously making this process simple,” he said.
Stating that he is a ‘sevak’ and not a ‘malik’, Modi gave an account of his government achievement in five years – release of 70,000 free LPG gas connections to poor women every day, providing electricity connection to 50,000 households per day, opening of lakhs of Jan Dhan bank accounts for poor every month and 1 lakh entrepreneurs being given loan under Mudra scheme on a daily basis.
Modi said India has jumped 65 places on World Bank’s ease of doing business ranking to rank 77 in the world and the target is to break into top 50 in the next 5 years.
Traders, he said, should get the credit for what they have done for the economy and not government interference.
Procedural difficulties in getting credit are being ended and loans of up to Rs 1 crore are now available in 59 minutes, he said. “We have largely succeeded in checking inspector raj.”
India’s growth trajectory holds immense potential for stakeholders: UN
United Nations: India’s growth trajectory holds immense potential for global stakeholders to establish energy, infrastructure and technology collaboration with the country, a UN forum here has been told.
Counsellor in India’s Permanent Mission to the UN Ashish Sinha stressed at the ECOSOC Forum on Financing for Development Follow Up that India wanted to use growth as a mechanism to pull the maximum number of people out of poverty and improve quality of life in an inclusive manner.
“India has retained its position as the world’s fastest growing major economy. Indian economy has been growing over 7 per cent for several years and the forecast for the future is equally robust,” he said.
Sinha noted that India improved its ranking by 23 positions in the World Bank’s Ease of Doing Business rankings last year. India improved its ranking on the World Bank’s ‘ease of doing business’ report for the second straight year, jumping 23 places to the 77th position on the back of reforms related to insolvency, taxation and other areas.
“India’s growth trajectory holds immense potential for our global stakeholders to establish energy, natural resource, and infrastructure and technology collaboration with us,” Sinha said.
The current global economic outlook also reiterates the need for the promotion of policies for enhancing economic growth and growth inducing investments, he said.
Earlier this month, the World Bank said India’s GDP growth was expected to accelerate moderately to 7.5 per cent in fiscal year 19-20, driven by continued investment strengthening, particularly private-improved export performance and resilient consumption.
“The objective is to bank the unbanked, secure the unsecured, fund the unfunded and service the un-serviced areas,” Sinha said.
Noting that India has taken strong initiatives for financial inclusion, he said in the the past three years, the government has opened over 320 million bank accounts for those who never had an account.
“We have leveraged these bank accounts with the power of a biometric identity system and mobile phones, to deliver subsidies and services to the deserving poor,” he said, adding that 1.6 million people have benefited from the recently launched cashless health insurance scheme called ‘Ayushman Bharat’ in the first four months of its launch.
India is also the sixth largest producer of renewable energy in the world and Indian solar power capacity will grow robustly at an annual average rate of 15.3 per cent to reach 105.9 GW by 2028, up from 26 GW in 2018, he said. Sinha noted that research and innovation would be the driving force in the 4th industrial revolution era.
The Indian government has introduced the flagship programme Start-up India with 1.4 billion dollars fund for four years to create a startup ecosystem in India. The effort of the government has also been to maximise resources with lowering of the tax rate by following the theory of lower taxation, higher compliance, he said.
“However, we fully acknowledge the role of international cooperation on tax matters in a globalised and digital economy. In this regard, to further strengthen the work of the UN Tax Committee, India continued its contribution to its Voluntary Trust Fund for the Tax Committee for the second consecutive year in 2018,” Sinha said.
Stepping up our cooperation with the fellow developing countries here at the United Nations, India established the India-UN Development Partnership Fund that supports Southern-owned and led, demand-driven, and transformational sustainable development projects.
A sum of USD 150 million has been committed for the next decade focusing on developmental projects in Least Developed Countries and Small Island Developing States.
The Fund already has projects in 39 countries. Sinha said the world finds itself at a critical moment which calls for an action-oriented resolve in an increasingly complex inter-dependent world.
“The 2030 Agenda, Paris Agreement and Addis Ababa Action Agenda have been remarkable acknowledgements of these interlinked challenges, and our collective responsibility to overcome these with collective action at the international level,” he said.
SpiceJet hires 500, mostly from now-grounded Jet Airways
New Delhi: Low-cost carrier SpiceJet has hired as many as 500 pilots, cabin crew, technical and other ground staff in recent weeks, most of them coming from the now-grounded Jet Airways.
“As we expand and grow, we are giving first preference to those who have recently lost their jobs due to the unfortunate closure of Jet Airways. We have already provided jobs to more than 100 pilots, more than 200 cabin crew and more than 200 technical and airport staff,” said Ajay Singh, Chairman and Managing Director, SpiceJet.
He added that SpiceJet will induct a large number of planes soon.
The airline on Thursday had said it will induct as many as 27 planes in a record time of less than two weeks. The low-cost carrier is the second-biggest carrier by domestic market share of 13.7 per cent (as on February 2019).
It has a fleet of 48 Boeing 737s, 27 Bombardier Q-400s and one B737 freighter.
The Gurgaon-based carrier has fast captured traffic by aggressively expanding its fleet. Following the fall of rival Jet Airways, it has bagged most of the grounded carrier`s unused slots.
“SpiceJet has got 24 slots compared to 20 of IndiGo,” an airline industry source said.