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From Underwear to Cars, India’s Economy Is Fraying
- abledon 7y agoskip-the-paywall link: http://archive.is/IHh34 http://archive.is/IHh34
- puranjay 7y agoIndia's policymakers seem to have no idea how the country actually works. Both Demonetization and GST are classic examples, as is the constant back and forth on taxes. The GST system is so draconian that most small businesses can't use it without seeking outside help. And this outside help is expensive - at least for a small trader making tiny profits. The surcharge on FPIs is another example. Could the government not have foreseen that there will be a flight of capital because of the surcharge? They ended up retracting it anyway.
- jorgen_is_alive 7y agoFormallization of economy does come at a price
- puranjay 7y agoDoes the price include weekly rule changes and the assumption that your largely poorly educated population will somehow learn to use your poorly designed, complicated software?
- sbmthakur 7y agoHaving a poorly educated population is no excuse for not bringing in technology. India is a country with huge population(more than 1 billion people). It will take time to get everyone "properly" educated.
- puranjay 7y agoIt's no excuse for bad policy making and poor software design either. India doesn't have a lack of software talent. Yet every single government touchpoint is atrociously designed with UX that gives even a seasoned computer user like me pause. Policy that disregards its intended target - the bulk of the population - is bad policy.
- rohan_shah 7y agoYes. Things that have never been done before on such large scale can be only be perfected with incremental changes after gathering data.
- puranjay 7y agoEasy for us to say sitting in our ivory towers my man. Draconian laws aren't impacting our ability to feed and clothe ourselves.
- sbmthakur 7y agoI'm not sure how complicated GST software impacted someone's ability to feed and clothe ourselves. Most of the key laws in India do impact many people in India because it's a country with a huge population. Nowadays there is the talk of banning single-use-plastic in the country. Companies are likely to lose business and some people will be severely impacted. Does that mean we should continue to use that kind of plastic(which harms the environment)?
- rohan_shah 7y agoI agree that there have been problems. And yes, many people are impacted due to the slowdown. But I am not sitting in an ivory tower. I am a middle class Indian living in tier 3 city who is trying to learn to code and make a living remotely...
- screye 7y agoGiven the size of the informal economy in the country, both GST and Demonetization were necessarily draconian for the scale of the problem they were trying to address. Admittedly both failed at improving the economy, but it has caused progress in strides towards the gargantuan problem that is the grey market. Everyone uses banks now, and online transactions have become the norm. My observations are restricted to urban areas though, so YMMV.
- kamaal 7y agoThis article states the symptoms without even remotely touching the root causes. When the current government took control in 2014, they moved swiftly and banned entirety of 1000 and 500 notes in circulation. This was a move called Demonetisation. This effectively killed the economy. This was originally hailed as an ace move by the government's supporters. Because it was originally thought untaxed money(also known as black money) is the root cause of India's illness. What happened in reality was a lot of capital intensive businesses suffered as an immediate aftermath. The most important of them being Real estate, which employees a huge section of people and drives a lot of business. Cement, Paint, Plumbing, Electrical, Logistics etc etc. Indian public is also very price sensitive. It's not considered wise to be spending money buying cars if you don't even have a home. This was the first blow. Secondly, there was a tax policy called GST. This was the next big blunder made by the government. The Indian economy is a result of tons of hacks carefully evolved and put into place over decades. GST had a flawed execution and with equally screwed up tax rates. Revisions are painful to impossible. Quarterly filing is hard for small businesses and rates are just unworkable. Combined with a lot of extortion like activities from Tax authorities. Tons of start ups suffered too. This is above and beyond the fact that the current government has possibly the worst possible social policy. India's diversity is at risk. Choice of food or religion can get you lynched. The government is planning a country wide citizenship register, on the same lines of Reich Citizenship Law, detention(concentration?) camps are already being built. This is a serious threat to India's future on the very longer run. These experiments have never worked anywhere in the world, and will be an even bigger disaster given how big and diverse India is. For what its worth stating, economy isn't even in the top ten list of priorities this government has and its constituency doesn't care either.
- brainless 7y agoI am an Indian, in India. To be honest I think our current situation is not just a slowdown. I feel the country has become largely divided when it comes to day-to-day economics. I am sitting in a co-working space in Bangalore, I do that in Kolkata often and will head to Mumbai soon. I hardly see people talking about slowdown in these spaces. The cities seemingly are powered more by funds from outside and are alienated to the issues in agriculture or manufacturing. Not just the government, but the well-to-do educated class have simply stopped looking at the country as a whole - that is my feeling and I am guilty of the same.
- abledon 7y agowhat do you think of movements like Sadhguru's Cauvary Calling -- to replenish the greenery in India's agricultural areas and bring back prosperity to farmers who are on the brink of suicide. I find his talks very inspirational, from someone halfway across the planet.
- mav3rick 7y agoI think he is a charlatan who preys on insecurities and charges hefty amounts for his seminars. He was holding one such environmental one and the organization itself was deemed pretty bad for the environment. So much so that the PM didn't show up.
- abledon 7y agoThey've planted 35 million trees[1] through volunteer activity, trained farmers and provided schooling to poor villagers, and they are bad for environment? what sources are you using? And secondly, could you be so kind as to provide your preferred alternative organization that provides these resources in the country? I would like to learn why you think their efforts are disingenuous, and how they would function as an organization , buying assets such as centres/schools etc without charging rich(relative to the 400m starving ones in the country) people fees to attend yoga/meditation retreats. [1] https://www.ishaoutreach.org/en/project-greenhands https://www.ishaoutreach.org/en/project-greenhands
- robk 7y agoFunny to see how the nytimes manages to shoe horn in blaming Trump for this somehow. Hard to find anything bad these days without trump to blame.
- thombat 7y agoIt's referencing the trade disputes between the current US administration & India. So it's of relevance when talking about the Indian economy: https://www.piie.com/blogs/trade-and-investment-policy-watch/trumps-mini-trade-war-india https://www.piie.com/blogs/trade-and-investment-policy-watch...
- growlist 7y agoProblem is, for those of us that don't buy into the incessant 'Orange Man Bad!' narrative it's becoming like The Boy That Cried Wolf trying to determine the signal from the noise as regards Trump. And the fact you responded to point out 'no, this one is actually true' suggests it's a genuine problem.
- chillacy 7y agoWait you're blaming the parent for self-inflicted burnout not reflecting reality?
- patientplatypus 7y agoOh...and India is running of water. https://www.cnn.com/2019/06/27/india/india-water-crisis-intl-hnk/index.html https://www.cnn.com/2019/06/27/india/india-water-crisis-intl... You don't know scary until 1.3 billion people all decide they have to leave India at once or they'll die of thirst. And India has nuclear weapons.
- modi15 7y agoNo its not. India has a ridiculous number of rivers and surrounded by ocean on all sides. What India is facing is distribution issues and there are already broadly understood solutions to the problem.
- aitchnyu 7y agoMany of the ridiculous number of rivers depend on disappearing glaciers and worsening erratic rainfall patterns though.
- familysized 7y agoHow is having water problems related to having nuclear weapons? Please explain.
- devdas 7y agoLack of water leads to breakdown in civil society, which can end up in civil war. Also, India, Pakistan and China all depend on the Himalayan glaciers for water. With global warming, those glaciers are melting down, and there is likely to be a demand to secure water sources. Three nuclear powers fighting over a scarce, essential resource is not going to be fun.
- rohit2412 7y agoWhile I agree that water is an increasingly scarce resource, I find the argument that "people will die of thirst" very misinforming of the situation. The thing is that we may call it drinking water, but it's used for all purposes like washing, sanitation etc. An average person's daily water consumption is 150-300 litre in various countries, but she uses probably only 3-4 litre for drinking. The problem is scarcity of water to fulfill our wasteful living standard, where we flush drinking water by the liters everyone we go to the toilet. A different problem is the distribution of water, where the poor haven't been able to get reliable access to this water. This is why people die of thirst.
- wtdata 7y agoWell, this might actually be very good for the environment. Like the environmentalist keep repeating, the expectation of eternal economic growth is having a big toll on the environment and India was set to almost double their (already quite hight) CO2 emissions by 2030. This might actually be a blessing for the environment. https://climateactiontracker.org/countries/india/ https://climateactiontracker.org/countries/india/
- familysized 7y agoStupid statement. Nature doesn't care about country borders. Per capita emissions from India are extremely low compared to countries like the US. The same site says that the US has "critically insufficient" commitments towards climate change. https://climateactiontracker.org/countries/usa/ https://climateactiontracker.org/countries/usa/ Maybe look at your own country before blaming others. You have more work to do towards climate change than the Indians.
- wtdata 7y ago> Nature doesn't care about country borders. You are right, what nature actually cares greatly, is about exponential population growth with no regard for future sustainability. Maybe we should look at India's over-population before demanding other countries to sacrifice for India's (and many countries in South East Asia) shortsightedness.
- familysized 7y ago> You are right, what nature actually cares greatly, is about exponential population growth with no regard for future sustainability. Perfect, I was waiting for you to say this. Now I have the chance to educate you (which should have been done by your "superior western education" but anyway). Read these articles and you will find that exponential growth is a myth. We are already close to replacement levels. The population is high in India and China only because of historic reasons - they are one of the most fertile lands on the planet. https://en.wikipedia.org/wiki/Total_fertility_rate https://en.wikipedia.org/wiki/Total_fertility_rate https://en.wikipedia.org/wiki/List_of_states_and_union_territories_of_India_by_fertility_rate https://en.wikipedia.org/wiki/List_of_states_and_union_terri... Then watch this video to understand the real trends in population growth. https://www.youtube.com/watch?v=ezVk1ahRF78 https://www.youtube.com/watch?v=ezVk1ahRF78 Great! You finally rid yourself of these myths.
- aduana 7y agoIndia just like any developing country needs outside funds to run projects. Not easy, but that is just the way it is.
- OJFord 7y agoIt's tangential, but I hate sentences like: > Dollar pays him a monthly salary of 12,000 rupees, or about $167, and provides lodging and some subsidized food. It reads like it's supposed to illicit a 'Cor, just $167?' response, but what do I know of what $167 means to him? How hard would it be to include alongside it the retail cost of the underwear he's contributing to the manufacture of?
- aviraldg 7y agoA couple of dollars: https://www.amazon.in/Dollar-Bigboss-Cotton-Trunks-8902889315232_BB-LONG-COFFEE-90/dp/B01MRBV6GJ https://www.amazon.in/Dollar-Bigboss-Cotton-Trunks-890288931...
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- sifar 7y agoThis was due. It was disguised due the euphoria of the election year. I think the current government is going to find out the hard way that one cannot tame the economic beast. There are things like delays, feedback, international events, the weather which you cannot control and can render your models ineffective. Huge expenditures were lined up expecting increased tax revenues which declined due to faulty policies/increasing compliance cost leading to a downward spiral. No transparency in handling the NPAs. Instead we get bank mergers, saddling good ones with the bad. Also the increased exposure to sovereign debt denominated in foreign currency will be a greater risk. Everything is glossed over/tinged by nationalistic fervor which makes admitting you were wrong or you made a mistake an anathema.
- sbmthakur 7y ago> Also the increased exposure to sovereign debt denominated in foreign currency will be a greater risk. Borrowing from outside could be good if the interest rates are lower.
- sbmthakur 7y agoTo expound further, the government borrows roughly INR 5 lakh crores net per year. In the next year, the estimate of revenue that we want to collect just taxes, Indians will collect about 16 lakh gross, the government will pay 6.5 lakh crores in debt interest payment. About 40% percent of all of money that you're paying as a tax, is going not to build infrastructure, not to feed the hungry, not to pay farmers for food. It's going towards interest payments on the debt they borrowed in the past. Why would this be a problem? because we borrow debt at extremely high rates part.[1] 1. https://podcasts.google.com/?feed=aHR0cDovL2NhcGl0YWxtaW5kLmxpYnN5bi5jb20vcnNz&episode=NzM3YTRlNjc3NGFlNGU4MzhjMjk1MDU5NGFmYWNhYTI https://podcasts.google.com/?feed=aHR0cDovL2NhcGl0YWxtaW5kLm...
- sifar 7y agoI know most of the revenue goes into interest payments. The solution to that is not to borrow more at lower interest and waste on profligate projects which won't generate revenue.
- sbmthakur 7y agoThe Government has recently slashed Corporate tax.[1] We will have to see how much it helps in addressing the economy. 1. https://www.livemint.com/news/india/govt-proposes-to-slash-corporate-tax-rates-1568954944900.html https://www.livemint.com/news/india/govt-proposes-to-slash-c...
- 0xmohit 7y agoObligatory reading: The IMF Confirms That ‘Trickle-Down’ Economics Is, Indeed, a Joke https://psmag.com/economics/trickle-down-economics-is-indeed-a-joke https://psmag.com/economics/trickle-down-economics-is-indeed...
- m23khan 7y agoglobal economy is slowing down, it’s not just India.
- noufalibrahim 7y agoI live and work in a Tier 3 city in India. I generally find it more comfortable and liveable in (though perhaps a little too slow and boring). Anyway, one of things that I've reading about and slowly beginning to align with is the massiveness of the unorganised sector in the country. Lots of transactions and activity takes place in a way that the central government and planning agencies don't have direct visibility into. To use a programming metaphor, it's a huge ball of legacy code with patches on top of patches on top of workarounds and special cases. Trying to systematically manipulate this is hard, to say the least. I'm not sure if the push to digital transactions, the demonetisation and other things will change this. I don't think it's likely but neverthless, it's an interesting thought exercise. One interesting podcast that recently discussed this is https://www.thinkpragati.com/podcast/the-seen-and-the-unseen/7954/demystifying-gdp/ https://www.thinkpragati.com/podcast/the-seen-and-the-unseen.... It specifically discusses GDP as a performance measure, what its limitations are and how those are relevant to India.
- sbmthakur 7y agoI live in a Tier 1 city and online transactions have gone up over the years. Not sure how much of this is due to the Demonetization, but UPI has played a significant part.[1] 1. https://www.financialexpress.com/industry/banking-finance/india-loves-upi-90-crore-upi-transactions-so-far-10-crore-in-august-alone/1697018/1 https://www.financialexpress.com/industry/banking-finance/in....
- noufalibrahim 7y agoMy experience as well. A lot of people even in Tier 3 places ask whether if you have Tez or something especially if they don't have change.
- mnywise563 7y agoThere exists a category of Indians who apologise for being Indian...They like to 5uck on f0reign d1cks
- forgotmypw 7y ago>Families are even skimping on the 7-cent packets of Parle biscuits that are a staple of India’s morning milk and tea. They are turning instead to even cheaper snacks made by local food vendors, according to Mayank Shah, a Parle executive. Biscuit sales are down about 8 percent, he said, and if current trends continue, the company may cut as many as 10,000 jobs. Sounds like grave news for the "economy", and good news for India's next seven generations of humans and their habitat.
- DrKabab 7y agoHow is this good for future generations?
- forgotmypw 7y agoA smaller portion of their habitat will be ground up and reshaped into factory farms.
- tmbsundar 7y ago"Parle denies reports of 10,000 job losses, calls for rational tax structure on biscuits" "The facts have been hyped by the media. The condition of job loss is actually an eventuality if our demand for lesser tax rates is not met," Mayank Shah told ANI." [1] [1] http://www.newindianexpress.com/business/2019/aug/27/parle-denies-reports-of-10000-job-losses-calls-for-rational-tax-structure-on-biscuits-2025012.html http://www.newindianexpress.com/business/2019/aug/27/parle-d... This is how bad the "factual" NYT media coverage about the whole thing is. BTW, consumption of higher value biscuits/ cookies have gone up.[2] [2] https://economictimes.indiatimes.com/industry/cons-products/fmcg/cookie-demand-grows-while-biscuit-sales-slow/articleshow/70851123.cms?from=mdr https://economictimes.indiatimes.com/industry/cons-products/...
- geodel 7y agoThe fact is at average indian income level the consumption has drastically increased compared to Income in last 2 decades. So slowdown like this inevitable. It is strange that some people claim GST is bad which is kind of forcing lot of firms to pay taxes which otherwise operated in grey area for a long time and never really being captured by existing tax mechanisms. As if not paying taxes is better if well-off people continue buying more cars and eat out more often. Saving rates in India is much lower so it can not fund further economic expansion. Government and financial media is generally obsessed with petty money in form of Foreign investments for growth. No country has sustainably developed just by foreign funds. It must have substantial saving level to provide low cost funds for investments.
- rohan_shah 7y agoI've a theory but that is not backed by data. Land prices in India are dropping rapidly. Here how (my hypothesis): People for generations have thought that land prices will always increase. It might have been true before Demonetization. But now it is almost impossible to do anything with cash (expect the purchase of land). So if anyone thinks of buying land for any residential, commercial or industrial purpose, they will not able to use their cash in building because there are subsidies available for those who take loans to finance such building. So people will use loans (accounted money) to build their buildings. You cannot also buy cars with cash (unaccounted cash). Because of this, land purchases have either gone down or vanished (by unaccounted cash which was majority of the purchases). So the prices are rapidly falling as people decide on selling and don't find a buyer at the perceived market rate. So they lower the prices and the vicious downward cycle continues. Put simply: There was a land price bubble because of black money. Now the bubble is slowly bursting. IMO the bubble was so huge (as a % of the GDP), I think we're in serious trouble with the spillover effect of fallen property prices.
- sbmthakur 7y agoNot just the land but also Real Estate in big cities. A lot of Real Estate deals happened with significant cash percentage so that people could cheat with Stamp duty and Registration. At the same time, this also inflated the prices , thereby making them unaffordable to a large section of society.
- kylehotchkiss 7y agoAmerican (who spends lots of time in India) here: what is stamp duty and registration? I see a lot of stamp paper and still don't really understand what it is
- selimthegrim 7y agoPakistani-American here - land transfers in subcontinent are carried out by first going to the local patwari (clerk) in charge of land revenue records. Stamp duty and and registration is charged after that on declared transfer price of the property, so cash portion is under the table and not subject to it https://joshandmakinternational.com/legal-procedure-pertaining-to-selling-property-in-pakistan-excluding-federal-territory/ https://joshandmakinternational.com/legal-procedure-pertaini... Source: family selling a house in Karachi
- abhi_kr 7y agoI think the average Indian consumer has become more aware and conservative in their spending. Thanks to the wider reach of the internet, financial literacy is gradually increasing. Combine that with an economic slowdown and people are just more thoughtful about where they spend money. This is a natural consequence of a slowdown as Indian people are very risk-averse. Prices of Cars and Houses have increased at a much higher rate than the Incomes, so people are delaying spending on expensive purchases. However, this is probably just one of the factors. Demonetisation has definitely had an adverse effect on small individual businesses that operated on cash. Cash was the primary mode of transaction for maximum number of Indian people, especially the non-urban population. Unavailability of sufficient cash in the system for a long period of time has hit them hard. You cannot expect a barely literate rural person to suddenly start using digital form of payments.
- intended 7y agoAn absolutely avoidable problem. On the day the Indian govt announced demonitization, the first phone calls I made were to economists and to people with actual experience working in the hinterlands. Because the fact that was true in 1990, 2000, and the day of demonitization was that more than 70% of India transacts through cash. This has never changed. Demonitization meant that for those people, the economy didn’t just stall, it stopped. However, people are resilient and the belief was that people would recover. Except that the govt followed up with a new tax regime that applied to everyone - including these cash driven workers. These are people who don’t have electricity, and aren’t even necessarily literate. I think most people can appreciate the cost to their razor thin margins when the costs of compliance, translation, formal accounting and more get tacked on. The part that most people forget, because this govt has superb PR, was that before The elections the largest protests by farmers was taking place in Delhi. Farmers commit suicide in india at some rate measurable in multiple dead farmers per day. It was bad before and was getting worse. However this was obscured A few days later, by India’s assault on terrorist camps in Pakistan territory. The dramatic and muscular response changed the focus- people went from complaining to “I should endure, see what my country is doing to my enemies.” In short : the signs have always been there, they have never been hidden, and it’s likely the relatively more privileged classes who were unaware of what was happening.
- sbmthakur 7y agoDemonetization is just one of many issues. It mainly affected cash and credit based businesses. It's not directly responsible for the lack of demand in various sectors. The current slowdown is a result of many more things. Some issues are structural, while others are cyclical. https://www.quora.com/Do-you-think-demonetization-is-the-reason-for-the-current-economic-slowdown/answer/Subodh-Mathur-4 https://www.quora.com/Do-you-think-demonetization-is-the-rea... https://www.livemint.com/news/india/15-ways-to-define-india-s-slowdown-1565715613762.html https://www.livemint.com/news/india/15-ways-to-define-india-... https://podcasts.google.com/?feed=aHR0cDovL2NhcGl0YWxtaW5kLmxpYnN5bi5jb20vcnNz&episode=YjE3NDlhOWVhODEwNDc5MWJiMGEyOWIzZTM2MDQ5OTk https://podcasts.google.com/?feed=aHR0cDovL2NhcGl0YWxtaW5kLm...
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- BAReF00t 7y agoLooking at the CO2 pollution charts ... It's clear that India is the next China: The country that we order cheap manufactured goods from, so our own CO2 numbers keep looking good and we don't have to concern ourselves with worker rights, pollution, etc. Also, what many people forget, that the country is so big, their middle class (or even rich class) is bigger than their/my entire country.
- naruvimama 7y agoI come from TN in India where it is an open secret that the politicians, their thugs and benamis [proxy] own a large chunk of the economy. Nepotism had become the norm. Indian industries have also woefully lagged behind China in technology and sophistication. And even new entrants like Vietnam & Bangladesh pushed on by their export oriented economy have surged ahead. The changes made since the new government took to power has shaken up this. The backbone of the old network of big wigs thriving on subsidies and crony capitalism has been broken. This is both a short term pain and a great opportunity to fill the void with more advanced industries. There is no fundamental reason India can not aim for 10+% growth rate, given its young population and the fact that it has a lot of productivity growth to catch up with. My own prognosis is that even with a global recession, this might be a temporary realignment of industries. Unlike many other commenters here, maintaining "Status quo" is not in India's best interests.
- sbmthakur 7y agoI think it's important that proper lessons are learned and reforms are taken. Just like what happened in 1991. https://www.capitalmind.in/2019/09/dont-waste-a-slowdown-part-1-whats-going-on/ https://www.capitalmind.in/2019/09/dont-waste-a-slowdown-par...
- pkphilip 7y agoIndian economy is in a mess. The National Saving Scheme (NSS) which is where a lot of people store their life savings has been raided by the present government to fund the Food Corporation of India (FCI) in a very scandalous way to artificially hide the fiscal deficit. The Life Insurance Corporation (LIC) has also been plundered by the present government and most recently the Reserve Bank's coffers have also been raided. The GST collections have fallen, the employment figures have skyrocketed to being the worst in over 45 years and now the govt has stopped releasing unemployment data, all the largest industries are in turmoil. Commercial vehicle sales have shown nearly a 60% dip. But the govt continues to spin stories of how things are just wonderful. Modi continues to fly on tax payer money to meet his overseas supporters and to hug Trump.