RISING COSTS LOWER DEMAND, GROWTH
The nation needs wisdom to stir it out of difficult situation. An economy sinking for months hurt grievously by corona lockdown needs ability to come out of the blues with humane moves to help the traumatized people.
Everyone in the society is traumatized. The price rises of food items, garments, rail and bus fares, and fuel are driving people out of the market.
Some lopsided policies and advices even as international petro prices are hovering at almost 20-year-low are playing havoc. Truck operators are finding parking their vehicles more profitable. The cost of captive generation by industry, power back-ups by housing societies or institutions has become prohibitive.
The daily rise in prices making diesel more expensive that petrol, though production cost of diesel is far less, is hitting everyone – industry, farms, shops, taxi and truck operators or poorest households.
The doles that some farmers are getting would be used to support rising farm input cost. The rising fuel prices may ultimately lead to lowering of demand, severe crunch in production and overall inflation.
The farmers are at their wits end. Potato is fetching seemingly “good” price amid about 40 percent low production. It seems to be good news though really not. They lost last year due to high production and low prices. Overall this year the farmer is likely to earn not more than what he did a year back.
The syndrome causes losses to all related sectors – the cold storage, because it has less to store, labourers earning less as there are fewer bags to handle, the transporter also gets less since he has less to carry. It is almost happening nationally as the losses are seen uniformly everywhere because of excess rainfall.
The corn is hit by low production, again owing to bad weather, and low demand as processing factories are closed due to lockdown. The previous processed products are yet to be picked up as people are not queuing up to buy. Despite doles of millions of tons of food grain, direct benefit cash to some and Rs 50,000 crore job scheme for migrant labourers in UP, MP, Bihar and other states, the rural economy is not pepping up.
The silk hubs of Bhagalpur or carpet weaving centres at Mirzapur are crashing due to loss of export markets and low demand in domestic ones. The Trump threat of H1B visa cancellations has put IT professionals under stress.
People do not have the money because of job losses or severe wage cuts across the spectrum. The CMIE figures say that jobs have been restored almost to pre-lockdown level. On ground it is not being witnessed. It is just not the industry even the NGOs, educational institutions or private universities and schools on the sly either have not paid salaries or resorted to 30 percent or more cuts.
Aacross large number of employees have been chucked out or have been asked to wait for better days. About 12 crore workers are in distress in India, according to World Bank (WB) figures. Global lost income from school closures could amount to $ 13 trillion, says WB. Even physical distancing has its cost.
The LD may have been a necessity but the country has to work out a plan to face any future epidemic-like situation without LD. McKinsey says physical distancing to cost Rs 96 to 231 trillion for India.
The climate is changing. Many more new diseases or various mutants may emerge. The procedure for tackling such situations has to be worked out without getting bogged down by Covid-19. The production lines have to remain open. Closed lines can create problems, including movement of essentials even to border regions. The country is stated to have faced a few such problems during the LD. Security is perennial and LD-like situation can hamper it.
Prime Minister Narendra Modi is right in his aversion that signals show India set to bounce back. He pegs it with the coal block auctions likely to generate Rs 33,000 core. The experts, however, want wider discussion. Some lure for money should not disturb pristine forested or natural ecological reserves.
The Supreme Court guidelines for Niyamgiri in Odisha provide the base. The recent LD has also revealed that how it has helped restoration of the nature, reduction of pollution, dust and cleaning of river waters. A bit of delay to discuss course correction would pave way for a better future.
The country in post-LD situation is under stress to do things fast. It need not. Rather it has to tailor out policies for long term. The revival needs money but it should not be the sole aim. The advisors, who suggested continuous hike in petrol prices, have not helped the policy makers. It may have raised some quick funds but that cannot be the plank for long-term sustained recovery. Instead it needs to review the situation and create conducive atmosphere for continuous recovery and strengthening of the economy.
The UPA government committed such follies over a long period. They came under severe criticism. Repeating it would lead to complications. If prices of essentials continue to rise and cash transactions are not eased it can cause severe problems. The housing sector is facing crisis due to job losses, pay cuts and surge in home loan defaults. The delinquencies at India Mortgage guarantee Corporation (IMGC) have double in a year at Rs 8500 crore. The IMGC guarantees 20 percent of the loan amount, which covers EMIs for two years.
The excise duty-hike in May of Rs 10 per litre on petrol and Rs 13 on diesel (not wise) a litre to mop up Rs 1.6 lakh crore till next March. This is in addition to gains of Rs 39,000 crore in March 2020. The daily hikes are to add to about similar amount to government’s kitty.
It is hitting the economy badly. Fitch and Moody’s are constantly portraying difficulties. ADB is not happy over Asia.
The corona challenge may remain for some months. It is more urgent to look for lower cost and inflation for sustainability. Petro price hike or LD or corona-centric policies cause more losses. There can be policies that save many more and pace up the economy.
RISING COSTS LOWER DEMAND, GROWTH