Expenditures can be deferred, discretionary expenditure cut, and disinvestment accomplished through inter-company holdings.
Economic discussions and debates are now a habit. With so much media time and space to be filled, it is just great to talk about such subjects. The official view-point mouthed by economists in the establishment play the familiar aria while those in the corporate world tend to discreetly appreciate the same, even if they disagree. Those in the academic field could differ sharply, but, in any case, there is no skin in the game for the profession! This was an exciting year from an economist’s point of view, and following are its top-ten highlights.
First, were the global phenomena—Brexit and the trade wars—which entered all discussions. Every policy document spoke of the fear or uncertainty of these two factors, which had replaced oil as the chief concern. This is notwithstanding the general consensus that these won’t have much impact on a domestic-oriented economy, except that there will be less discussion once they are resolved. Until then, they serve as a very good excuse for doing or not doing anything. The non-resolution of these issues means that we will hear more of them despite Boris Johnson’s promise that January 2020 will see something more firm.
Second, a feeling of déjà vu pervaded through 2019 when it came to NSS data. Recall that last year, GDP and the back series dominated media time, with the CSO, Niti Aayog, and PMEAC debating this with economists, analysts and ex-government officials. This year had its moment when the data brought out on consumption—this was not released, but rejected—showed unfavourable trends. This episode of data management gave one the sense that if the results are not to one’s liking, one debunks the approach and commissions another study on grounds of the methodology being incorrect.
Third, as a nation, we improved our position in World Banks’ Doing Business rankings. While naysayers still complain that we addressed only the elements which go into the formula, a better rank is a better rank. There is no gainsaying this achievement. But, were this ease of doing business to be juxtaposed with the cancellation of contracts in Andhra Pradesh that followed the change of guard, investors would be left dangling in ambivalence. State risk is even more devastating than regulatory risk (ask the telecom companies!).
Fourth, as the year started with the accepted GDP growth numbers, the tagline that went along was that India is the fastest growing economy in the world. When questions were raised on a slowdown, we were reminded that we are the fastest growing country in the world—a fact which could be seen on the IMF and World Bank sites. Therefore, the fall of the growth rate from 7% to 6% to 5% was not really a concern. But, the alacrity with which policies were introduced raised suspicion—the multiple measures wouldn’t be required if the economy was really doing very well!
Fifth, economists had a blast with words and the common thought was that we did not have to worry even if growth came down to 5% or lower because things were not ‘structural’, but ‘cyclical’. Simple words have complex undertones, and a layman may not understand these when there is unemployed, there are less jobs, and the price of onions is Rs 150/kg. What this means is any one’s guess as consumption, investment, overall growth, and exports have all slowed down, with no light at the end of the proverbial tunnel. But, the feeble explanation of things not being structural has dominated thousands of hours of conferences, economic discussions, and articles. It is no wonder that the credibility of economists has—having no skin in the game, they can say anything anytime!
Sixth, if the structural versus cyclical debate dominated discussion time, it was overtaken by the $5-tn-dollar aspiration. Now, frankly speaking, the number will be achieved at some point of time with sheer gravity. Besides, a $5-tn-economy with few jobs, little income, and poor living conditions means nothing. Yet, almost everyone has a view on the $5 tn number, including the IMF, which one would have expected not to get swayed. Truly, the quality of discourse came down to discussing whether it would take five or six or seven years to reach this number. Does it really matter, considering that no one has a solution for reviving the economy today?
Seventh, another subject that should not have merited any discussion was fiscal management. Will the 3.3% target be achieved or not? How much will the slippage be? Will it affect market borrowings? Will disinvestment target be achieved? Recent fiscal history proves that anything can happen, and everything can be managed.
Expenditures can be deferred, discretionary expenditure cut, and disinvestment accomplished through inter-company holdings. Once we fix what level of fiscal deficit is tolerable, the rest can fall in place with relative ease. This is akin to the magician who can pull out just about anything from their hat by waving a wand.Inflation came down, and then went up. But, all analysts know one thing for sure—whichever way the number goes, interest rates should be lowered, and the argument can be forcefully articulated. When inflation was below 4%, but core inflation was at 6% and food inflation at less than 1% or negative, we looked at headline inflation and argued for rate cuts. We did not say that food inflation, which is impervious to monetary policy, was responsible for this. When inflation is above 5% due to food inflation, the argument is that we should not look at the headline number, which is influenced by food prices, but only core inflation. English is a wonderful language, and the art of polemics is amazing.
Nine, bankers were a nervous lot. They appreciated everything done on recapitalisation (but are not lending). They said the NPA problems were over as a matter of being politically right (but RBI keeps finding understatement of such numbers). They assured the government that they would reduce interest rates (which they haven’t done to the extent expected). They applauded when they were told to lend more to SMEs and not recognise the NPAs, like had happened during demonetisation (the future offers trepidation). The ‘Yes People’ have said their lines, just as the playwright had dictated.
Last, the spoken word does not end at the door of Shashi Tharoor and his pompous Stephanian English, which often sends the reader running for the dictionary. This is now passé. This was upstaged by a member of the MPC when the monetary policy minutes revealed the word ‘floccinaucinihilipilification’. Policy minutes will surely get harder to read and understand if such terms are going to be used. But, there can be variety in expression given that the script is the same every time with new numbers.
The author is Chief economist, CARE Ratings
Views are personal