Archives  >  2019  >  August  >  23rd

India’s Money Woes

1. What’s the story?

This might be getting repititive, but there’s no getting away from it. India’s economy is on its way down – with no sign of recovery anytime soon. It has now been revealed that corporate investments were down by almost 60% the year of demonetization – something from which the economy never fully recovered. The fast moving consumer goods (FMCG) sector has also been badly hit, with the iconic Parle-G set to lay off thousands.
Tell me more.

Demonetization happened back in 2016, but its effects can be felt even today. Investments declared by companies that year declined by almost 60%, a new report now claims.

“A report submitted last year by a panel set up to propose new direct tax laws found that investments disclosed by companies declined nearly 60% in the year of demonetisation, an article in The Hindu on Thursday said. As a percentage of the country’s Gross Domestic Product, corporate investments were merely 2.7% in 2016-’17, as compared to 7.5% in the preceding year.

According to Arbind Modi’s report, investments by companies were 15% of the GDP in 2010-’11, followed by 10.5%, 10.2%, 9.8%, 9% and 7.5% in subsequent years. They fell to 2.7% of the GDP in 2016-’17.”

The FMCG sector – one of the most resilient of industrial sectors – is also feeling the pinch. Hardy products like Britannia and Parle-G’s low-price biscuits are showing a sharp drop in sales.

“The tepid quarter results of biscuit-maker Britannia clearly shows that the economic slowdown has hit categories as basic as biscuits. Varun Berry, managing director, Brittania, pointed out that consumers are not willing to buy even a Rs-5 pack of biscuits. Now, Parle Products, makers of the iconic Parle-G biscuits, says that Parle-G is the worst hit. The country’s most favourite biscuit has been de-growing and if it continues, the company would be forced to lay off as many as 10,000 people working across its various factories.”

According to Mayank Shah, category head of Parle products, this can be directly traced back to the woes of GST. [Quick recap: The Goods and Service Tax (GST) is an indirect tax levied on the supply of goods and services. This law has replaced many indirect tax laws that previously existed in India. It came into effect from 1st July 2017.]

“Biscuits are divided into two categories – there are biscuits above Rs 100 per kg and biscuits below Rs 100 per kg. The ones below Rs 100 were earlier exempted from excise duty, there was lower tax (Parle-G, Marie etc fall in that bracket). In the GST era, they clubbed both the categories together, and imposed 18 per cent tax, which is not fair. The government had promised that it would correct it but unfortunately nothing has happened. We were forced to take a price hike, as a result of which the demand dipped…” he said.
So, what now?

According to experts, going back to a manufacturing economy may be the only way out of this mess. India’s gradual shift to a mostly service-based economy may have hurt job creation more than earlier realized.

“It’s naïve to assume the current slowdown is a cyclical one. Instead, it is more structural in nature and therefore needs a radical policy shift, or else the problem will only get worse in future.

India, despite being a developing economy, has adopted a service-led growth strategy by bypassing the industrialisation effort, with the share of services at 54 percent of the economy.

Economists call this phenomenon the ‘missing middle’ – a scenario where growth in manufacturing and industry with their ability to absorb large scale labour is missing, and jobs tend to be concentrated in either highly skilled service-driven industries like IT or financial services or in farms with very low productivity.

This has left India incapable of coping with an impending demographic wave, increasing the risk of the economy falling into a low income trap with scores of jobless youth. This is already beginning to hurt us and the current slowdown is partially attributable to this phenomenon.”

Keep your eyes on this space. We’ll keep you posted.

2. Where else should I be looking at?

The moon, that’s where! India’s ambitious mission to the moon is on track to successfully touch down on the lunar surface. On Wednesday, it even shot a stunning image of the moon that Indian Space Research Organisation (ISRO) then released. Touch down day is 2nd September, and so far, so good y’all. *Fingers crossed*
“Chandrayaan-2 has shot an image of the Moon from a height of over 2,000 kilometres as it flies around the satellite, preparing to land a rover on the lunar surface. The photo of the Moon was shot by Vikram, which is Chandrayaan-2’s lander.

The photo was released by Indian Space Research Organisation (Isro) on Twitter. The image was shot on August 21 and was taken from a height of 2,650 kiometres, Isro said.”

(6 Things had earlier covered India’s moon mission here.)

3. What more?

In Mumbai, a single family has planted more than 6000 trees inside the incredibly green Aarey Milk Colony – also regarded as Mumbai’s green lung. Now, the Athalye family wants other Mumbaikars to follow suit.

“It all started when Sandeep’s father, Vinay Athalye, who used to take regular leisurely walks at Aarey, decided to plant around 100 saplings in 2,000. Driven by passion and support from his fellow walkers and family, the elder Athalye managed to plant around 5,500 saplings in Aarey over 15 years.

But it isn’t just any kind of tree saplings that he planted. Based on traditional knowledge, Athalye purposefully planted five native tree species: peepal or sacred fig/Ficus religiosa, vad or banyan/Ficus benghalensis, amla or Indian gooseberry/Phyllanthus emblica, bael or Aegle marmelos and ashoka or Saraca asoca that are collectively called panchavati – grove of five trees. Through the years, he also added 550 saplings of these native trees to a patch of land that grew into a densely wooded area and was later publicly known as Panchavati as well.”

4. Anything else?

Kashmir is still on edge. Even as the Government officially maintains that the Valley is peaceful, news trickling out from the region suggests things may not be so rosy.

“The father of Osaib Altaf – Kashmir’s first casualty after the dilution of Article 370 – speaks … about the death of his son, alleging he was ‘cornered by the security forces’ on August 5 and drowned after he jumped into a lake to try and escape.”

Here is some compelling photographic evidence of the chaos in the Valley.

5. Is that all?

In continuing climate crisis across the world, the Amazon rainforest is up in literal flames. So much so, that the smoke can be seen from space. The alarming rate of fires has led Brazil to declare a state of emergency. According to climate scientists, things will only get worse.

“So far this year, almost 73,000 fires have been detected by Brazil’s space research center, INPE. That marks an 83% increase from 2018 and the highest number on record since 2013, according to Reuters. 

Satellite images show fires in the Brazilian states of Amazonas, Rondonia, Para and Mato Grosso. The state of Amazonas is most affected, according to Euronews. On Tuesday, Eric Holthaus, a meteorologist, tweeted data showing smoke from the first covering about half of Brazil. 

“We are in a climate emergency,” he said in his post

Effects of damage to the Amazon go far beyond Brazil and its neighbors. The area’s rainforest generates more than 20% of the world’s oxygen and 10% of the world’s known biodiversity. The Amazon is referred to as the “lungs of the planet” and plays a major role in regulating the climate. The world would drastically change if the rainforest were to disappear, impacting everything from farms to drinking water.”

6. Before you leave…

Take a look at how Facebook wants a “do-over” on news. And this time around, the company would rather you focus on humans.”

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