Headwinds to growth

This refers to ‘Still in the woods’ (June 1). Broadly in line with expectations, the Indian economy grew by 4.1 per cent in the fourth quarter (January-March) of the last financial year (2021-22), as per the latest data released by the National Statistical Office. For the full year, the economy is now estimated to have grown by 8.7 per cent, marginally lower than the earlier estimate of 8.9 per cent released at the end of February. However, the latest estimates imply that at the end of 2021-22, the economy is only 1.5 per cent higher than its pre-pandemic level, as both private consumption and investment — the two major drivers of growth — continue to be subdued.

Worryingly, private consumption has continued to remain muted, growing by just under 2 per cent in the fourth quarter. And while gross fixed capital formation, which connotes investment activity in the economy, saw a marginal uptick in the quarter just ended, it has grown by under 4 per cent in the second half of last year.

Leading economic indicators suggest the momentum of economic activity in the weeks and months thereafter has remained healthy. Growth is also likely to be aided by a low base effect. However, the recovery is neither broad-based nor fully entrenched. Moreover, the combination of slower global growth and higher commodity prices, especially crude oil, will act as headwinds.

N Sadhasiva Reddy

Bengaluru

Positive triggers

Though there are challenges ahead in 2023, some good tidings are seen on the horizon. The supposedly good monsoon (prediction in excess of103 per cent of normal rainfall) is a cause for cheer, notwithstanding the flip-flop by the IMD. A bounteous rainfall sure will be a boon to agriculture insofar as it reduces the farm distress and boosts rural demand. However, a more pointed spending on MGNREGS should be in order.

The cost-push inflation could be tamed to some extent. One hopes that the crude prices do not go beyond $110 per barrel. The wage increases are taking place in the organised sector only, accounting for hardly 10 per cent of the workforce. These wage increases are, however, welcome as they increase consumption.

At the risk of the fiscal deficit, the government should also slash the retail diesel/petrol prices. The government should keep the 2021 FRMB target of 6.5 per cent and not unduly worry about bringing it to 4.2 per cent. The government needs to continue both food and fertiliser subsidies in view of the current situation. With the increase in government spending, probably the demand could be revived and the challenges of 2023 met

PSS Murthy

Hyderabad

Domestic gas prices

Apropos ‘ATF price cut by 1.3 per cent, commercial LPG rate reduced by ₹135’ (June 1), it is welcome move by the Centre, owing to the softening of international crude oil rates. However, how come the prices of domestic LPG have remained unchanged at around ₹1,000 per 14.2-kg cylinder. One genuinely hopes that the government provides much needed relief for domestic LPG users too.

SK Gupta

New Delhi

Dollar sitting pretty

This refers to ‘Dollar and RNB will drive world economy’ (June 1). The Ukraine stand-off may feed the angst to tame the dollar’s hegemony as a world currency. Admittedly, on many counts, the US could no longer claim to be the bastion of international financial security that it was. Its foreign currency reserves just cover two weeks of imports and its national debt is projected to touch 250 per cent of GDP by 2035. Its profligacy is compounded in being the printer of the dollar.

The euro has been unsteady and the Chinese renminbi, a credible alternative, lacks free and full convertibility and the depth, spread and transparency of the US stock market. And it would take a cataclysmic turn in China’s politics and economics and leadership, to bring it into serious contest. The once favoured alternative, the Special Drawing Rights, has no free market for exchange and hence is no currency. For a long while, the dollar will have no competitors backed by a $22 trillion economy and a mighty military machine.

R Narayanan

Navi Mumbai

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