http:\/\/money.cnn.com\/2017\/10\/04\/news\/economy\/india-economy-modi-slowdown\/index.html<\/p>\n
India’s economy, once hailed as a global bright spot, is down in the dumps.
\nGrowth in the South Asian nation fell during the first six months of 2017 from 7% to 5.7%, its
\nslowest pace in three years, and analysts say the road to recovery is steep.
\n“We’re on a downward spiral,” said Mohan Guruswamy, head of the Center for Policy Alternatives
\nin Delhi, and a former ocial
\nat India’s finance ministry.
\nPrime Minister Narendra Modi swept into power in 2014,
\npromising to take India’s economy to new heights. But
\nmany reforms have yet to materialize and some changes
\nthat have been enacted are hurting growth.
\nModi defended his performance in a speech Wednesday,
\nclaiming his government had helped several industries.
\n“It is true that there has been a reduction in growth, but it
\nis also true that the government is fully committed to
\nreversing this trend,” he said. “Our fundamentals are
\nstrong.”
\nA double whammy
\nIndia is still reeling from two shocks within 12 months —
\n– Modi’s sudden ban last November of 86% of the
\ncountry’s cash, and a sweeping overhaul of the tax
\nsystem aimed at turning the country’s 29 states into a
\nsingle market.
\nThe cash ban “was a massive blow, just when the
\neconomy looked at a point of inflection last year and the
\ndecline had started leveling o,”
\nGuruswamy said.
\nModi’s signature reform — a national goods and services
\ntax implemented in July — has been widely hailed as a
\npositive step because it should simplify business in the
\nlong run. But the implementation caused major
\ndisruption.
\n“My fear was that if people didn’t understand how to do
\nthe tax system, then they would stop doing business with
\none another,” said Shailesh Kumar, South Asia analyst at
\nthe Eurasia Group. “You did see some of that…as
\ncompanies didn’t really know what to do.”
\nThe government has said it expected a growth
\nslowdown, but appears to have been blindsided by the
\nsharp drop.
\nTop financial institutions are worried that the economy
\nwill struggle to regain its momentum in the near term.
\nThe central bank has just slashed its growth forecast for the current fiscal year to 6.7% from
\n7.3%.
\n“The implementation of the [tax reform] appears to have rendered short-term prospects
\nuncertain,” Reserve Bank of India Governor Urjit Patel told reporters.
\nThe State Bank of India, which is owned by the government, was more blunt. The slowdown, it
\nsaid in a report last month, is “not short term in nature or even transient.”
\nModi’s not delivering
\nAnalysts, business leaders and even members of Modi’s own party are now questioning his
\nstewardship of the economy, not just because of the upheaval his changes have caused but also
\nover reforms that aren’t happening.
\n“High on the list of priorities is pushing through measures to ease land acquisition laws and
\nliberalize the labor market,” analysts at Capital Economics wrote in a recent note. “But there is
\nno clear indication yet that Prime Minister Modi actually has the conviction to push ahead with
\nnecessary but unpopular reforms.”
\nThere have also been calls for an overhaul of the banking system. About 12% of total loans have
\ngone bad, according to ocial
\ndata.
\nYashwant Sinha, a former finance minister and senior member of Modi’s party, wrote an opinion
\narticle slamming the “mess” that the Indian economy is in. “A hard landing appears inevitable,”
\nSinha said.
\nBeef and beer bans
\nRising Hindu nationalism, stoked by Modi’s right-wing party, is also hurting some parts of the
\neconomy.
\nIn May, the government banned the sale of cows — an animal considered sacred by the
\ncountry’s Hindu majority — for slaughter, sending the meat industry into a frenzy.
\nWhile the ban was suspended by India’s Supreme Court in July, the policy confusion has had a
\nchilling eect.
\nIndia exports vast quantities of bualo
\nmeat. Those exports have declined this
\nyear, according to local media.
\nCattle that once provided a vital source of additional income for millions of India’s rural poor have
\nnow become liabilities because farmers fear they will be unable to sell them to the meat and
\nleather industry, Guruswamy said.
\nHindu nationalists have “completely unleashed a reign of terror as far as cattle are concerned,”
\nhe added.
\nIndia’s Supreme Court dealt the economy another blow in April, banning the sale of alcohol
\nwithin 500 meters (546 yards) of national highways. Some estimates put the hospitality
\nindustry’s potential losses at $10 billion.
\nThe court eased the restrictions in August, but many within the industry said they had already
\nlost millions. Diageo ( ), the company behind brands like Johnnie Walker and Smirno,
\nsaid
\nthe India ban would dent sales growth.
\nSome of India’s top trading partners are taking note.
\n“The space for civil society in India continues to shrink as Hindu nationalism rises,” Sen. Bob
\nCorker, chairman of the U.S. Senate Committee on Foreign Relations, said on Tuesday.
\nCorker, who was speaking during a hearing to nominate a new U.S. ambassador to India, also
\nexpressed disappointment at the state of the economy.
\n“In particular, I remain frustrated by the slow pace of Indian reforms in the economic sphere,” he
\nsaid.
\nMillions of new jobs needed
\nModi faces an uphill struggle to steady the ship. The most pressing challenge, experts say, is to
\ncreate the jobs he promised India’s large young population.
\nAround 12 million Indians enter the workforce every year, but struggle to find employment.
\n“Poor quality data makes it dicult
\nto put a number on the job woes, but the available data is
\ngrim and news stories about jobs losses abound,” Ruchir Sharma, chief global strategist at
\nMorgan Stanley, wrote in the Times of India newspaper on Wednesday.
\nOver 1.5 million Indians lost their jobs in the first half of 2017, according to a study by the Centre
\nfor Monitoring Indian Economy, and unemployment is on the rise.<\/p>\n","protected":false},"excerpt":{"rendered":"
http:\/\/money.cnn.com\/2017\/10\/04\/news\/economy\/india-economy-modi-slowdown\/index.html India’s economy, once hailed as a global bright spot, is down in the dumps. Growth in the South Asian nation fell during the first six months of 2017 from 7% to 5.7%, its slowest pace in three years, and analysts say the road to recovery is steep. “We’re on a downward spiral,” said Mohan Guruswamy, head of the Center… Read more »<\/a><\/p>\n","protected":false},"author":46,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-798","post","type-post","status-publish","format-standard","hentry","category-article"],"_links":{"self":[{"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/posts\/798","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/users\/46"}],"replies":[{"embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/comments?post=798"}],"version-history":[{"count":1,"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/posts\/798\/revisions"}],"predecessor-version":[{"id":801,"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/posts\/798\/revisions\/801"}],"wp:attachment":[{"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/media?parent=798"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/categories?post=798"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/eastasiaandoceaniablog\/wp-json\/wp\/v2\/tags?post=798"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}