Archives  >  2019  >  August  >  16th

India, Going Down

1. What’s the story?

India’s economy is in dire straits, and no one seems to know how to get out of this mess. The Indian rupee became Asia’s worst performing currency last Wednesday, the automobile industry continued to be in trouble, and even fast moving consumer goods (FMCG) reported lower sales across the nation. Rural India, especially the Northern states, seems to be the worst hit.
 
Tell me more.
The rupee is in trouble.

“The Indian rupee has now become Asia’s worst performing currency this month, as it battles pressures from China’s yuan, an unresolved global trade war and fleeing foreign funds. The local unit has slumped 3.49 percent against the U.S. dollar so far in August, setting it up for its second-worst monthly loss in four years.”

Rupee’s worsening performance has also given rise to the fear of losses for offshore investors.

“A sharp drop in the rupee may wipe out most of the profits for offshore investors … Even amid all the risks “there are very few countries like India with such high-interest rates that make them attractive carry trade destinations. If the panic spreads, foreigners have to pull funds out of India or will have to hedge their exposures which will eat into returns …”

The automobile industry also reported its worst performance in 19 years as high ownership costs, a worsening economy, and floods in some states led to a 31% drop in sales last month. This has also had a domino effect in the employment sector as automobile giants have been forced to close plants. Last month, Tata Motors Ltd shut down its Jamshedpur and Pune plants for more than 12 days. Maruti halted productions as well.

“The automobile industry supports the steel, chemicals, textiles and other sectors as well, and any slowdown will impact the broader economy. Demand in the rural market has also declined significantly and the double-digit drop in motorcycle sales is an indication of the demand situation in rural areas.”

Even FMCG companies have reported a dip in sales. This has mostly been attributed to declining wage growth across rural and urban areas – especially in the North.

“This demand-led slowdown has been attributed to a possible reduction in household savings – a result of declining urban and rural wage growth. “We find that for the Indian economy there are clearly a host of structural factors that are holding back current consumption. A substantial decline in wage growth (both rural and urban wages) in recent times resulting in lower household savings (a result of conscious policy decisions to correct macro imbalances) has possibly slowed down the growth in real per capita income that is holding back demand,” a study by SBI noted.”
 
So, what now?
All eyes are on the Government and the Reserve Bank of India. According to most experts, a Government handout is must at this stage to jumpstart the stalling economy. We’ll keep you posted.



2. Where else should I be looking at?

Kashmir, that’s where. The state is still under Internet lockdown, curfews are still in place, and there may be a shortage of medicines and essential goods in the near future. In the midst of all this, the state also celebrated Independence Day – albeit in a low-key manner.

“After unfurling the flag, Malik inspected the parade of para-military forces and Jammu and Kashmir Police led by SSP Manzoor Ahmed Dalal.
Prominent mainstream leaders were not present at the Independence Day function as they have been detained as a precautionary measure. Second-rung BJP leaders, however, were among those sitting in the stands during Malik’s address.

Unprecedented security arrangements were made in the city. All roads leading to the stadium were sealed but people with special passes were allowed to proceed to the venue. This year, no school contingents took part in the Independence Day parade or the cultural programme that followed it.
A group of people visiting Kashmir shouted “Vande Matram” and “Bharat Mata Ki Jai” at the stadium. Malik said the government has a zero-tolerance policy towards terrorism and sustained efforts by armed forces have ensured the defeat of terrorists.”

According to some, though, not all Kashmiris were impressed with the lofty speeches.



3. What more?

Five Indian high-schoolers are ready for Silicon Valley – with an app that is expected to fight depression among members of two marginalized groups.

“The Indian team comprising five … created an app, Maitri, that connects children at orphanages to senior citizens in old-age homes, allowing them to spend time together. The goal is to fight loneliness and depression in both groups, thereby improving their social and mental well-being.

This year, over 19,000 kids participated in the tech competition and 170 teams from across 38 countries made it to the semifinals. Now, the top 12 will present their pitches to companies such as Google, Adobe and Uber and pitch their mobile app solution to a panel of judges, who will then assess social impact, business viability and creativity.”



4. Anything else?

The world economy is not doing so good. Apart from India, countries like the US, Germany, and Brazil may also be in trouble.

Japan faces a recession, and it’s recently entered into a nasty trade dispute with South Korea. The turmoil over Brexit has partly led the UK’s economy to shrink in the second quarter.

Growth has essentially stopped in Italy, and a political crisis there doesn’t inspire much confidence that a rebound will happen soon. Germany’s economy declined in the three months before June, according to new numbers, a troubling sign for the world’s fourth-largest market.

And there’s more: Months of protests in Hong Kong have brought the financial hub’s economy to a standstill, and the looming threat of a possible Chinese military intervention to quell the unrest isn’t making the situation any better.

Singapore, another Asian economic engine, is also on the brink of recession. Argentina just went through one of the worst stock market crashes in decades after an allegedly corrupt politician nears power once more. Brazil and Mexico, two leaders of Central and South America’s economies, are expected to perform weakly this year.

On top of it all, China’s growth rate has slowed due in large part to the trade war launched by President Donald Trump.”



5. Is that all?

India celebrated its seventy-third Independence Day on Thursday. To mark the occasion, here’s a look at a few women freedom fighters lost in the pages of history.



6. Before you leave …

Take a look at the absurd history of Sealand — a micronation on a metal platform off the UK shores.

“On Christmas Eve of 1966, Paddy Roy Bates, a retired British army major, drove a small boat with an outboard motor seven miles off the coast of England into the North Sea. He had sneaked out of his house in the middle of the night, inspired with a nutty idea for a perfect gift for his wife, Joan.
Using a grappling hook and rope, he clambered onto an abandoned anti-aircraft platform and declared it conquered. He later named it Sealand and deemed it Joan’s.”



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