Skip to main content

A dampening of economic activity? (thehindu)



Prime Minister Narendra Modi’s decision to abruptly withdraw legal tender status for Rs.1,000 and Rs.500 notes to save the country from “the grip of corruption and black money” has had one predictable side effect: a dampening of economic activity. With cash availability significantly impaired as a result of the sudden withdrawal of the high-value banknotes that constituted more than 86 per cent of the currency in circulation as of March 31, a palpable impact has been felt across the entire economy. A snapshot of manufacturing from the Nikkei India Manufacturing Purchasing Managers’ Index released on December 1 revealed that demonetisation had slowed buying activity and production across the board, and led to the weakest expansion in orders in four months. The survey indicated that producers of consumer goods are among the worst hit, a signal that a key engine of India’s world-leading pace of economic growth — private consumption demand — appears to be sputtering on account of the cash shortage. That the impact is likely to extend beyond the current quarter appears certain, according to the downward revisions of growth projections announced by brokerages and credit rating agencies. The median reduction in GDP growth estimate for the year by the 13 forecasters indicates that the pace of growth will be slower by at least 50 basis points, with two of them dialling back the number by one percentage point or more.

Data released by the government on November 30 put GDP growth in the July-September period at 7.3 per cent, as the agriculture sector’s performance was buoyed by an almost normal south-west monsoon. That this came after two successive years of drought helped boost the area sown. Still, a moot question relates to gauging the impact the cash shortage is likely to have had in rural areas both from a consumption perspective and in terms of the potential disruption caused to farming operations. Given the less-than-adequate penetration of formal banking channels, economic activity in small towns and villages is largely cash-based, and it remains to be seen how the agrarian economy will recover in the short to medium term from this disruption. While the biggest contributor to gross value added, the services sector, is expected to sustain a hit, small and micro enterprises that conduct a sizeable part of their business through cash transactions are also bound to be impacted. And with the external environment yet to revive, the RBI and the government have their task cut out to ensure that the economy doesn’t slide into a protracted slowdown.
Labels:

Comments

Post a Comment

Popular posts from this blog

SC asks Centre to strike a balance on Rohingya issue (.hindu)

Supreme Court orally indicates that the government should not deport Rohingya “now” as the Centre prevails over it to not record any such views in its formal order, citing “international ramifications”. The Supreme Court on Friday came close to ordering the government not to deport the Rohingya. It finally settled on merely observing that a balance should be struck between humanitarian concern for the community and the country's national security and economic interests. The court was hearing a bunch of petitions, one filed by persons within the Rohingya community, against a proposed move to deport over 40,000 Rohingya refugees. A three-judge Bench, led by Chief Justice of India Dipak Misra, began by orally indicating that the government should not deport Rohingya “now”, but the government prevailed on the court to not pass any formal order, citing “international ramifications”. With this, the status quo continues even though the court gave the community liberty to approach i...
3 comments
Click Here To Read more »

"ISRO has capabilities to build geostationary satellites for air quality monitoring” (downtoearth)

Pawan Gupta's findings on trans-boundary movement of pollution (Punjab to Delhi) from biomass burning in 2015 spurred debates. He participated in discussions with Indian regulators early September at the Better Air Quality Conference in Busan on the advantages of using satellite data for air quality monitoring. He explains to Down to Earth how air quality monitoring is done using satellite data. How is satellite data used to measure air pollution? Satellites that provide information on atmospheric pollutants are normally (not always) in the low earth orbits (400-1000 km above the Earth’s surface). A single satellite can carry one or more remote sensing instruments onboard that look down to earth and obtain information about the object in the field of view of satellite sensor. The Earth receives electromagnetic radiation from the sun, which travels through space and reaches the earth-atmosphere system. The radiation then interacts with the Earth’s atmosphere and the surface...
1 comment
Click Here To Read more »

What's ailing Namami Gange programme?(DTE)

Winters are extremely hectic for Sushma Patel, a vegetable grower in Uttar Pradesh’s Chunar town. Her farm is in the fertile plains of Ganga where people grow three crops a year. But this is the only season when she can grow vegetables. And before that, she needs to manually dig out shreds of plastic and wrappers from her one-hectare (ha) farm. “This is all because of the nullah,” she says, pointing at an open drain that runs through her field, carrying sewage from the neighbourhood to the Ganga. “Every monsoon, the drain overflows and inundates the field with a thick, black sludge and plastic debris. We cannot even go near the field as the stench of sewage fills the air,” she says. But Patel has no one to complain to as this is the way of life for most people in this ancient town. About 70 per cent of the people in Chunar depend on toilets that have on-site sanitation, such as septic tanks and pits. In the absence of a proper disposal or management system, people simply dump the faec...
3 comments
Click Here To Read more »