Back
RBI WATCH

Abysmal Jul-Sep GDP data further hits confidence

 

Cogencis, Monday, Dec 2

By Siddharth Upasani

Home Minister Amit Shah made an impassioned speech in defence of the economy over the weekend.

"Do not lose confidence simply because of temporary growth slowdown. The Indian economy and markets will emerge stronger because of the decisive, bold leadership that India is currently under. This is a crucial time. Industries must commit themselves to growth. Share your problems with our finance and commerce ministers," Shah said at an awards function on Saturday, with the who's who of India Inc in attendance.

Data Released On Friday Showed Growth Slumped To A Six-and-a-half-year Low Of 4.5% In Jul-Sep, Forcing Economists To Make Another Raft Of Downward Revisions To Their Full-year Forecasts; India's Growth This Year Is Now Widely Expected To Be The Lowest Since The Global Financial Crisis-hit Year Of 2008-09.

How Shah has concluded that the current slowdown is temporary is not known, especially when one considers the latest GDP numbers. Data released on Friday showed growth slumped to a six-and-a-half-year low of 4.5% in Jul-Sep, forcing economists to make another raft of downward revisions to their full-year forecasts; India's growth this year is now widely expected to be the lowest since the global financial crisis-hit year of 2008-09.

Shah labelled the last five years as "detoxifying years for the Indian economy" following the failures of the previous 70 years. Another quotable quote was about the effect of reforms ("reforms always have a ripple effect that must be dealt with"). And while the home minister exhorted the industrialists present to not lose confidence, he did not explain why the domestic economy--particularly the average consumer--had been hit so horribly in recent quarters.

Growth in private consumption expenditure, which crashed to an 18-quarter low of 3.1% in Apr-Jun, rose slightly to 5.1% in Jul-Sep, last week's data showed.

Confidence, or the lack thereof, may partially explain the ongoing slowdown, particularly from the production side. But weak consumption spending hints at forces the government is not ready to acknowledge, such as rising unemployment and poor policies.

TAILPIECE

Apart from defending the economy, Shah had to also defend the Bharatiya Janata Party-led government's tolerance levels.

In a now viral question, billionaire industrialist Rahul Bajaj said corporate India didn't have the confidence that the government would appreciate any criticism of its policies.

While Shah responded as expected ("there is no need to be scared", "if there is a government which has faced the most criticism, it is us", "this atmosphere you speak of, we will have to work to improve it"), Finance Minister Nirmala Sitharaman, also sitting on the dais, didn't mince words on social media later.

Writing on Twitter on Sunday, Sitharaman rebuked Bajaj for spreading his "impressions" about the government, saying his criticism of the Centre "can hurt national interest".

The irony would not have been lost on Bajaj.

RELATED HEADLINES

* RBI Das says see faster resolution of new cases under IBC

* RBI rejigs supervisory, regulatory depts to streamline functioning

* RBI Das says to review regulatory framework of co-op banks with govt

* RBI Governor Das says rate transmission is "incomplete"

* RBI retains CPI inflation forecast for Apr-Jun at 3.6%

* RBI cuts repo rate by 25 bps, FY20 GDP growth pared to 6.1%

* Sitharaman blames mindset of millennials for automobile slowdown

* Sitharaman says to suggest tax cut on automobiles to GST Council

* RBI Kanungo says FX volatility needs intervention to keep mkt orderly

* RBI Governor Das laments "doom and gloom" narrative on econ growth

* Sitharaman says doubts over Jalan panel, RBI credibility "outlandish"

* Jalan panel moots interim dividend by RBI only in exceptional cases

* RBI OKs Jalan panel views, gives 526 bln rupees as excess capital

* Unfazed by rupee fall, Sitharaman says current level to help exports

POLICY RATES

------------

Repo Rate: 5.15%

Reverse Repo Rate: 4.90%

Cash Reserve Ratio: 4.00%

Bank Rate: 5.40%

Marginal Standing Facility Rate: 5.40%

Statutory Liquidity Ratio: 18.50%

End

Edited by Avishek Dutta

Other News

RBI WATCH

No room for real rates in age of inflation targeting

Lowering inflation was a means to increasing the real rate of interest. A positive real rate of interest was itself a means to sustainable growth. However, mid-2016 onwards, inflation targeting, along with growth, became the ultimate objective.

Kotak Bk case delay spurs regulatory uncertainty

The Kotak Mahindra Bank vs the Reserve Bank of India case is crucial as it is a rare instance of a large bank taking the regulator to court, arguing that the norms don’t allow RBI to tell promoters what they should do

RBI WATCH

Focus rises on Apr CPI post MPC meet minutes

RBI Governor Das seems capable of throwing a surprise, going by his remark the MPC should consider changes to the repo rate not in multiples of 25 bps. May be Das would have preferred lowering the repo rate by more than 25 bps, but less than 50 bps?