Bright Future for Indian Agriculture But Reforms Imminent

 

Future is bright for Indian Agriculture – But Reforms Imminent.

B. Yerram Raju*

Agriculture is one sector that takes all the four factors of production – land, labour, capital, and organisation/management - in full measure, and consumes the scarcest resource water additionally. Several limitations surround the future of agriculture. Land is limited and there are several claims from dwellers to industrialists. So is water and capital. Management depends on the absorption of the latest technologies.

India has only 4 percent of world’s wate resources. Its present population of around 1.39bn is likely to escalate to 1.69bn according to population experts. Improving (a) water resources’ optimization, (b) productivity of the small holdings that constitute 50 percent of the arable land, (c) technologies unique to the production systems of India, (d) integrating all types of agricultural activities and (e) resilience to climate change, is imperative.

India’s agricultural growth (1950-2020) can be seen in many areas: the second largest horticultural production in the world; the highest milk production in the world, witnessing twelve-fold growth; the second largest fish production in the world. It is now a net exporter and its agricultural production is 44 percent higher than that of the US. According to Praveen Rao, Vice Chancellor, PJTS Agricultural University, Hyderabad, India’s agricultural GDP rose from US$ 15bn in 1960 to US$101bn in 2000. During the next sixteen years, the growth was 350 percent more than that registered during the preceding thirty years.    

A.K. Singh, Director, Indian Agricultural Research Institute of ICAR, in his most recent J. Raghotham Reddy memorial lecture at Hyderabad, highlighted that despite 32.7 percent increase in the area during 1951-2021, the production increased by almost six times, and productivity increased by 4.5 times during the same period, maintaining the food security. The period did not saw pestilence and famines in the country. Market-assisted Selection (MAS) is now an integral part of the cultivar development programmes at the ICAR institutions and several agricultural universities, developing 74 crop cultivars in seven different crops -rice, wheat, pearl millet, chickpea, soybean, groundnut, and maize. This still leaves the challenge of India producing 333mt of food grains to feed its projected 1.64bn population by 2050.

As per the NSSO (2014), about 232 million persons are employed still in agriculture (49 per cent of the workforce), contributing about 17 per cent of the GDP. The number seems to have come down to about 219 million in 2015, which is still a very significant number (Kapoor, 2017). A NITI Aayog study estimated the agricultural labour productivity is one-third of the non-agricultural sectors. There is severe shortage of farm labour either to cut the sugarcane crop or cotton picking – the two largest labour-absorbing crops.

Telangana State is the first state to commence growing single-pick cotton from this year, thanks to the intense research by the PJTSAU under the specific directive of the farmer-Chief Minister, K. Chandrasekhar Rao. Farmers are eagerly looking for assured yields of this variety to save the labour costs.

Farming has been the focus and not the farmer of all the research that no doubt yielded excellent results. Doubling of farmers’ income by 2025 is still a dream, because reforms in agriculture sector were just ignored for the last three decades. Small farmer and tenant farmers realised that they have to turn as entrepreneurs for sustainable growth. Several start-ups in farm field have lately come up. Still, aggregators at the farm gate, marketing reforms and easy access to credit beg attention of the policy maker, more so, when we look at the technological innovations that A. K. Singh spoke off:  1. Molecular breeding, 2. Crop biofortification, 3. Microbial technologies, 4. Climate change and mitigation strategies, 5. Satellite remote-sensing technology, 6. Precision agriculture, and 7. Improving irrigation efficiency.

In addition to speed breeding, genome breeding, and use of remote sensing techniques, drone technology for smart agriculture is making deep inroads. A. Drone Sensing for mapping and discrimination of crops, monitoring crop stress – biotic and abiotic, yield damage assessment, soil fertility, and for agri-input applications are some of the drone-based technologies.

While it is true that a century beyond will see the disruptive technologies shaping agriculture growth, the way forward would be in investing in human resources and infrastructure for disruptive innovations (at least 1.4 percent of GDP in agriculture), like Internet of technologies (IoT), AI, ML, Block Chain leading climate, smart, regenerative and remunerative agriculture, adoption of management practices integrating small farm holdings, and mainstreaming the biofortified crops and nutrition literacy.

Investment should come either from the farmer’s equity or his ability to raise the debt. Debt markets in India are deeply suspicious of the farmer and small entrepreneur. Therefore, there is need for a cultural shift in lending to the farm sector. Second, all the above technologies still carry the risk of adverse weather and climate. They are also subject to the cyclones, tsunamis, floods, and holocausts. While crop related technologies are of short term nature, rest are all medium to long term capital investments. Agri-entrepreneurs should look to investments from angel funds, patient capital investors and social capital entrepreneurs. Green House Gas reduction from the climate-resilient agricultural practices have the potential to earn carbon credits (CC) up to 5CC/ha and 1 carbon credit is equal to US$37. 15000 hectares have this potential, according to A. K. Singh.

Further, integrated farming on small farm holdings – crop, horticulture, household dairy, backyard poultry, small pond-culture, and home-grown ducks – will cross-hold risks and pave the way for farmer doubling his income erelong. Sustainability of agricultural growth is assured thus through heavy capital investments in climate resistant technologies, cashing in carbon credits sooner than later, change in the mind-set of lenders and farmers to accelerate lending, and appropriate insurance mechanisms that are farmer-friendly.

*This article is based largely on a couple of lectures: 1. V. Praveen Rao, at the Fifth International Agronomy Congress and A.K. Singh, at the Farm and Rural Science Foundation’s J. Raghotham Reddy Memorial Lecture. The views expressed are mine.

Future is bright for Indian Agriculture – But Reforms Imminent.

B. Yerram Raju*

Agriculture is one sector that takes all the four factors of production – land, labour, capital, and organisation/management - in full measure, and consumes the scarcest resource water additionally. Several limitations surround the future of agriculture. Land is limited and there are several claims from dwellers to industrialists. So is water and capital. Management depends on the absorption of the latest technologies.

India has only 4 percent of world’s wate resources. Its present population of around 1.39bn is likely to escalate to 1.69bn according to population experts. Improving (a) water resources’ optimization, (b) productivity of the small holdings that constitute 50 percent of the arable land, (c) technologies unique to the production systems of India, (d) integrating all types of agricultural activities and (e) resilience to climate change, is imperative.

India’s agricultural growth (1950-2020) can be seen in many areas: the second largest horticultural production in the world; the highest milk production in the world, witnessing twelve-fold growth; the second largest fish production in the world. It is now a net exporter and its agricultural production is 44 percent higher than that of the US. According to Praveen Rao, Vice Chancellor, PJTS Agricultural University, Hyderabad, India’s agricultural GDP rose from US$ 15bn in 1960 to US$101bn in 2000. During the next sixteen years, the growth was 350 percent more than that registered during the preceding thirty years.    

A.K. Singh, Director, Indian Agricultural Research Institute of ICAR, in his most recent J. Raghotham Reddy memorial lecture at Hyderabad, highlighted that despite 32.7 percent increase in the area during 1951-2021, the production increased by almost six times, and productivity increased by 4.5 times during the same period, maintaining the food security. The period did not saw pestilence and famines in the country. Market-assisted Selection (MAS) is now an integral part of the cultivar development programmes at the ICAR institutions and several agricultural universities, developing 74 crop cultivars in seven different crops -rice, wheat, pearl millet, chickpea, soybean, groundnut, and maize. This still leaves the challenge of India producing 333mt of food grains to feed its projected 1.64bn population by 2050.

As per the NSSO (2014), about 232 million persons are employed still in agriculture (49 per cent of the workforce), contributing about 17 per cent of the GDP. The number seems to have come down to about 219 million in 2015, which is still a very significant number (Kapoor, 2017). A NITI Aayog study estimated the agricultural labour productivity is one-third of the non-agricultural sectors. There is severe shortage of farm labour either to cut the sugarcane crop or cotton picking – the two largest labour-absorbing crops.

Telangana State is the first state to commence growing single-pick cotton from this year, thanks to the intense research by the PJTSAU under the specific directive of the farmer-Chief Minister, K. Chandrasekhar Rao. Farmers are eagerly looking for assured yields of this variety to save the labour costs.

Farming has been the focus and not the farmer of all the research that no doubt yielded excellent results. Doubling of farmers’ income by 2025 is still a dream, because reforms in agriculture sector were just ignored for the last three decades. Small farmer and tenant farmers realised that they have to turn as entrepreneurs for sustainable growth. Several start-ups in farm field have lately come up. Still, aggregators at the farm gate, marketing reforms and easy access to credit beg attention of the policy maker, more so, when we look at the technological innovations that A. K. Singh spoke off:  1. Molecular breeding, 2. Crop biofortification, 3. Microbial technologies, 4. Climate change and mitigation strategies, 5. Satellite remote-sensing technology, 6. Precision agriculture, and 7. Improving irrigation efficiency.

In addition to speed breeding, genome breeding, and use of remote sensing techniques, drone technology for smart agriculture is making deep inroads. A. Drone Sensing for mapping and discrimination of crops, monitoring crop stress – biotic and abiotic, yield damage assessment, soil fertility, and for agri-input applications are some of the drone-based technologies.

While it is true that a century beyond will see the disruptive technologies shaping agriculture growth, the way forward would be in investing in human resources and infrastructure for disruptive innovations (at least 1.4 percent of GDP in agriculture), like Internet of technologies (IoT), AI, ML, Block Chain leading climate, smart, regenerative and remunerative agriculture, adoption of management practices integrating small farm holdings, and mainstreaming the biofortified crops and nutrition literacy.

Investment should come either from the farmer’s equity or his ability to raise the debt. Debt markets in India are deeply suspicious of the farmer and small entrepreneur. Therefore, there is need for a cultural shift in lending to the farm sector. Second, all the above technologies still carry the risk of adverse weather and climate. They are also subject to the cyclones, tsunamis, floods, and holocausts. While crop related technologies are of short term nature, rest are all medium to long term capital investments. Agri-entrepreneurs should look to investments from angel funds, patient capital investors and social capital entrepreneurs. Green House Gas reduction from the climate-resilient agricultural practices have the potential to earn carbon credits (CC) up to 5CC/ha and 1 carbon credit is equal to US$37. 15000 hectares have this potential, according to A. K. Singh.

Further, integrated farming on small farm holdings – crop, horticulture, household dairy, backyard poultry, small pond-culture, and home-grown ducks – will cross-hold risks and pave the way for farmer doubling his income erelong. Sustainability of agricultural growth is assured thus through heavy capital investments in climate resistant technologies, cashing in carbon credits sooner than later, change in the mind-set of lenders and farmers to accelerate lending, and appropriate insurance mechanisms that are farmer-friendly.

*This article is based largely on a couple of lectures: 1. V. Praveen Rao, at the Fifth International Agronomy Congress and A.K. Singh, at the Farm and Rural Science Foundation’s J. Raghotham Reddy Memorial Lecture. The views expressed are mine.

 

 Future is bright for Indian Agriculture – But Reforms Imminent.

B. Yerram Raju*

Agriculture is one sector that takes all the four factors of production – land, labour, capital, and organisation/management - in full measure, and consumes the scarcest resource water additionally. Several limitations surround the future of agriculture. Land is limited and there are several claims from dwellers to industrialists. So is water and capital. Management depends on the absorption of the latest technologies.

India has only 4 percent of world’s wate resources. Its present population of around 1.39bn is likely to escalate to 1.69bn according to population experts. Improving (a) water resources’ optimization, (b) productivity of the small holdings that constitute 50 percent of the arable land, (c) technologies unique to the production systems of India, (d) integrating all types of agricultural activities and (e) resilience to climate change, is imperative.

India’s agricultural growth (1950-2020) can be seen in many areas: the second largest horticultural production in the world; the highest milk production in the world, witnessing twelve-fold growth; the second largest fish production in the world. It is now a net exporter and its agricultural production is 44 percent higher than that of the US. According to Praveen Rao, Vice Chancellor, PJTS Agricultural University, Hyderabad, India’s agricultural GDP rose from US$ 15bn in 1960 to US$101bn in 2000. During the next sixteen years, the growth was 350 percent more than that registered during the preceding thirty years.    

A.K. Singh, Director, Indian Agricultural Research Institute of ICAR, in his most recent J. Raghotham Reddy memorial lecture at Hyderabad, highlighted that despite 32.7 percent increase in the area during 1951-2021, the production increased by almost six times, and productivity increased by 4.5 times during the same period, maintaining the food security. The period did not saw pestilence and famines in the country. Market-assisted Selection (MAS) is now an integral part of the cultivar development programmes at the ICAR institutions and several agricultural universities, developing 74 crop cultivars in seven different crops -rice, wheat, pearl millet, chickpea, soybean, groundnut, and maize. This still leaves the challenge of India producing 333mt of food grains to feed its projected 1.64bn population by 2050.

As per the NSSO (2014), about 232 million persons are employed still in agriculture (49 per cent of the workforce), contributing about 17 per cent of the GDP. The number seems to have come down to about 219 million in 2015, which is still a very significant number (Kapoor, 2017). A NITI Aayog study estimated the agricultural labour productivity is one-third of the non-agricultural sectors. There is severe shortage of farm labour either to cut the sugarcane crop or cotton picking – the two largest labour-absorbing crops.

Telangana State is the first state to commence growing single-pick cotton from this year, thanks to the intense research by the PJTSAU under the specific directive of the farmer-Chief Minister, K. Chandrasekhar Rao. Farmers are eagerly looking for assured yields of this variety to save the labour costs.

Farming has been the focus and not the farmer of all the research that no doubt yielded excellent results. Doubling of farmers’ income by 2025 is still a dream, because reforms in agriculture sector were just ignored for the last three decades. Small farmer and tenant farmers realised that they have to turn as entrepreneurs for sustainable growth. Several start-ups in farm field have lately come up. Still, aggregators at the farm gate, marketing reforms and easy access to credit beg attention of the policy maker, more so, when we look at the technological innovations that A. K. Singh spoke off:  1. Molecular breeding, 2. Crop biofortification, 3. Microbial technologies, 4. Climate change and mitigation strategies, 5. Satellite remote-sensing technology, 6. Precision agriculture, and 7. Improving irrigation efficiency.

In addition to speed breeding, genome breeding, and use of remote sensing techniques, drone technology for smart agriculture is making deep inroads. A. Drone Sensing for mapping and discrimination of crops, monitoring crop stress – biotic and abiotic, yield damage assessment, soil fertility, and for agri-input applications are some of the drone-based technologies.

While it is true that a century beyond will see the disruptive technologies shaping agriculture growth, the way forward would be in investing in human resources and infrastructure for disruptive innovations (at least 1.4 percent of GDP in agriculture), like Internet of technologies (IoT), AI, ML, Block Chain leading climate, smart, regenerative and remunerative agriculture, adoption of management practices integrating small farm holdings, and mainstreaming the biofortified crops and nutrition literacy.

Investment should come either from the farmer’s equity or his ability to raise the debt. Debt markets in India are deeply suspicious of the farmer and small entrepreneur. Therefore, there is need for a cultural shift in lending to the farm sector. Second, all the above technologies still carry the risk of adverse weather and climate. They are also subject to the cyclones, tsunamis, floods, and holocausts. While crop related technologies are of short term nature, rest are all medium to long term capital investments. Agri-entrepreneurs should look to investments from angel funds, patient capital investors and social capital entrepreneurs. Green House Gas reduction from the climate-resilient agricultural practices have the potential to earn carbon credits (CC) up to 5CC/ha and 1 carbon credit is equal to US$37. 15000 hectares have this potential, according to A. K. Singh.

Further, integrated farming on small farm holdings – crop, horticulture, household dairy, backyard poultry, small pond-culture, and home-grown ducks – will cross-hold risks and pave the way for farmer doubling his income erelong. Sustainability of agricultural growth is assured thus through heavy capital investments in climate resistant technologies, cashing in carbon credits sooner than later, change in the mind-set of lenders and farmers to accelerate lending, and appropriate insurance mechanisms that are farmer-friendly.

*This article is based largely on a couple of lectures: 1. V. Praveen Rao, at the Fifth International Agronomy Congress and A.K. Singh, at the Farm and Rural Science Foundation’s J. Raghotham Reddy Memorial Lecture. The views expressed are mine.

https://timesofindia.indiatimes.com/blogs/fincorp/future-is-bright-for-indian-agriculture-but-reforms-imminent/

 

 

 

 

Farm Loan Waiver - No longer, the need.

 

                                  Courtesy: The Hindu

Farm Loan Waivers – No longer the need

B. Yerram Raju                                                                                   

From corporates to the individuals, irrespective of activity, want their loans to be waived. Who wants to live in debt? But can the economy giving such waivers live without debt? Simply put, a firm ‘No’. The rising public debt of the sovereign puts not just the present but the future citizen in debt for it is the next generation that has the responsibility to repay. Farm sector is not just exception, but the future is not just generation away but only a crop season away. This should clear the way for the argument against the loan waivers of any kind save very serious exceptions.

Politicians and farmers are good friends close to the elections and bad enemies to farm economics. Rahul Gandhi stirred the hornet’s nest at Warangal on the 6^th May while announcing that if Congress is elected to power in Telangana, it would waive off Rs.2lakhs for each farmer from his debt portfolio. Such slogans pre-elections are not new to the farmers, ever since V.P. Singh/Charan Singh duo indulged in crop loan write-off in 1990s. The scheme received the ire of Comptroller and Auditor General for its bad implementation. RBI repeatedly advised the political parties not to indulge in this luxury as the states do not have that much resource apart from encouraging bad borrower behaviour. But do all farmers look for such write-off? What exactly they need?

Doubling farm income remained a far-cry leading scores of farmers to double-up to Delhi to fight against what they considered as bad farm laws. The much-needed farm reforms that were bypassed during the first phase of reforms in the 1990s could have been triggered had there been political sagacity and cooperative federalism. Be that as it may, it has become difficult for governments to do what the farmers want, save the exception of government of Telangana, that I would explain latter. There are good number of farmers who took to mixed farming, organic farming, natural farming, and use of technologies intensely.

Farmer is generally short of cash at the beginning of the crop season. This leads him/her to go to the money lender who is wont to give credit on his own terms. The revenue from his previous crop would not be to hand at that moment as it would have been up for sale but not sold. If he had no dairy or poultry or allied activity to come to his rescue, even family would be on the brink of starvation despite his four or five acres of land!

Government of Telangana is the first government to think of giving Rs.10000 at the beginning of the season in cash. It also arranged for insurance against untoward calamity in the family while working on the farm -  may be a snakebite or an accident or loss in family up to Rs.5lakhs. Both these schemes are monitored by the Chief Minister to ensure that there is no slip up in the releases. The result is that farmer does not have to wait at the banker’s gate for a loan! On top, all the 789  Primary Agricultural Cooperative Societies in Telangana have been digitized and linked to core banking solutions of  around 298 DCCB -branches and State Cooperative Bank. This opened a reliable credit window for the farmers when credit is needed. Marketing paddy, the principal crop of the state is engaged in a street fight between the union and state. The result, however, is good as the farmers realized that they should go more for alternate crops that have better markets and yield better price. When asuras and devas churned the ocean, both milk and poison emerged and the churning is still on.

Illustratively, Saritha, a commerce postgraduate from Rapakapalle village in Hanumakonda district took to zero budget natural farming on her four-acre land. She collected rainwater to farm a fishpond; honeybee-keeping, polyhouse for vegetable cultivation and an acre of paddy cultivation. She established two retail outlets for her farm produce and multiplied her farm income. She is proud to say that she could hedge the risks of farming through mixed farming as one or the other agricultural activity gets her sustainable income year-long. She also influenced two thousand farmers in and around her village. There are many more of her ilk in Telangana.

Credit for farming is a necessary but not sufficient condition for sustainability because farmer’s liquidity is always locked up either in soil or silo. As long as farmer’s credit requirement is viewed in exclusion for production purposes alone, the empty valet of farmer stares at the banker. In spite of nearly five decades of engagement of banks with farmers, bankers have no trust in them. Similarly, farmers also lack confidence in banks that they would meet their genuine requirements in time. It will be interesting to see from the RBI data that the banks lent to farming mostly in irrigated tracts – nearly 83% of lending took place in just twelve states. National Bank for Agriculture and Rural Development (NABARD) took up watershed programme on a mission mode that helped many water-starved tracts could get crop-relevant water using latest technologies. Kisan Credit Card has become a fancy instrument that did not give credit comfort to the farmer. Revisiting this instrument and modifying its delivery mechanism is more imminent now than ever.

The banks’ concerns are equity and discipline while the farmers’ concerns are adequacy, timeliness, and multipurpose credit – production, consumption, and marketing. Farming unlike any other activity is prone to risks arising from natural calamities and each calamity is different in nature and dimension.

Chanakya in his magnum opus Artha Sastra clearly mentions that if a natural calamity like cyclone, holocaust, continuous drought for over two years, repeated floods, tsunami etc., it is the responsibility of the state to bail out the farmers by relieving him from all the debt and give cash to him for sustenance. He never advocated loan write-off as it would debilitate the farmer of his own capacities and creates trust-deficit with his lender. Strengthen the insurance mechanism for farming sector. Make available lending to farmer at no more than four percent per annum. Announce the produce price well ahead of the season. Interest reimbursement is a budget game and put an end to it.

It has become a fashion for all the political parties to announce loan write-off from the state exchequer. It is difficult to imagine that they are ignorant of the consequences. But they indulge in this political ploy. A responsible democracy like ours shall refrain from such sloganeering and Election Commission should impose a ban on such announcements.

The views are author’s own.

https://timesofindia.indiatimes.com/blogs/fincorp/farm-loan-waivers-no-longer-the-need/

 

 

 

Recession - Far and yet Near.

 Opinion: On edge with recession fears https://telanganatoday.com/opinion-on-edge-with-recession-fears

Recession? Near and yet Far.

B. Yerram Raju

Several economists, in the wake of Russia-Ukraine war and the rise of global inflation index, have been talking of recession. It is important to understand the meaning of recession. It occurs when there is contraction of demand for goods and services consecutively for two quarters; employment falls precipitously; consumption declines; both exports and imports fall; credit markets shrink and finally, the GDP declines. This means that all the macro-economic indicators show an alarming trend.

In layman’s language, when your neighbour loses his job, it is recession, while depression is, when you lose your job. Before going into the macro-economic indicators that prompted such prediction, the discussion is timely because price stability is viewed as necessary precondition for growth by the authors of the Currency and Finance Report (RBI), 2021-22. This is the wake up call to the Monetary Policy Committee meeting on May 2 and 4 calling for a rate hike close to the rate hike in Fed-US.

Impact of global recession is seen in the backdrop of Covid-19 variants making aggressive re-entry unnerving many economies. Externalities like Russia-Ukraine war, collapse of Sri Lanka in our immediate neighbourhood, strained global value chains added fuel to fire. Fuel prices are not likely to relent in the short term and edible oil prices are touching the roof.

A bit of History

Unprecedented banking crises in the past triggered recession both in advanced economies and emerging economies. Advanced economies: Herstatt crisis in Germany, Japan in 90s, Norway in 1988-92, Spain in 1985, Sweden in 1985, UK in 1995, USA in 1980s to early 90s, and emerging economies: Brazil 1994, East Asian Crisis in 1997 hitting Korea, Thailand, Malaysia, Vietnam, and the subprime crisis of 2006 hitting the whole world are examples of recession if we leave 1930 recession way behind. The Economist, London in its special report of May 16,2009 said: ‘the dirty secret of the golden age of finance was that it was obscenely easy to make money.” Interest rates rose and housing prices fell.

Rate Hike:

Latest hike in the basic rates announced by Governor Shaktikant in a huddle on May 5,2022 shocked the stock markets. Lenders, rating agencies, and investors commented that this hike is just the beginning in the wake of unrelenting inflation for the past three quarters in a row.

Gross Domestic Product:

The most important macroeconomic factor is decline in GDP {[C+I+G+(x-m)], where C= consumption; I=investment; G=Government spending; x= exports and m=imports} . Total goods and services produced in the economy declines. Currency and Finance Report (CFR 21-22), mentioned that economic growth slowed down since the second half of 2016, taking the average of GDP growth between 2017-20 fiscal to 5.7 percent. There is understandable decline post 2020 due to Covid-19 that saw irrecoverable loans in all segments, rents prohibited for more than a year in several states in 2020-21, unoccupied hotels and unmoved airbuses hitting tourism and aviation industry, several drivers losing their jobs and cabs parked in sheds with a steep fall in fuel consumption.

Inflation:

One must begin with inflation. Data released four days after the MPC's April 8 decision showed Consumer Price Index (CPI) inflation saw a seventeen-month high of 6.95 percent in March. Wholesale inflation index rose to a four-month high of 14.55 percent the same month.  This data was in the RBI’s pages even three weeks before. Should it be behind the curve in announcing the rate hike for so long? A question that would have few answers from the powers that be. Money Control, a financial blog, vents its disappointment over the RBI Governor’s statement:” CPI inflation has been above the medium-term target of 4 percent for exactly two-and-half years. In these 30 months, CPI inflation has been above 5 percent 27 times and above the 6 percent upper bound of the RBI's flexible inflation target 16 times. So, to state now — after not saying anything in the last two years — that inflation expectations could get unanchored is a tad disconcerting.”

Unemployment:

CMIE data released almost simultaneously reveals that urban unemployment rate was 9.22 percent, and rural unemployment rate was at 7.18 percent.

International Trade

Trade balances were hit badly all over the world. Thanks to seizing the right opportunities, India’s trade balances moved to $400bn in April 2022. Several measures taken under Atma Nirbhar Bharat Abhiyan (self-reliant India) started yielding results. Startups swelled to encouraging levels. Thanks to agriculture and pharmaceutical sectors, the economy looked up during the covid time. There were no deaths due to hunger. More than 4.58crore population had been vaccinated – first, second, and precautionary and child vaccines together. To keep the export markets diversified, PM Modi is on Europe tour. This may also signal export markets that India is keen to see that the war between Russia and Ukraine ends sooner than later.

India’s consumption, growing at 12 percent pre-pandemic, nose-dived during the pandemic. But it recovered fast and is at 17 percent with a likely 10 percent annual growth in the next decade, according to Managing Partner, Boston Consulting Group. E-commerce is on the rise. It is likely to reach US $130bn by 2026.

For recession to set in there are certain conditions: Foreign capital should flee; people’s confidence should evaporate; stock markets should take a deep dive continuously; melt-down of global markets; tumbling currencies; flight of assets to safety; financial institutions blowing cold on credit; increasing government interventions in every sphere; federal politics on hostile note; and trust deficit in the governments. Banks will be on the nervous hook. Banks have always been on a weak wicket because of their inherent mismatch between the assets and liabilities. After digitalization, the risks went beyond their normal reach and added to that are the crypto currencies and cybercrimes.

Government asserts that and the RBI reinforces its argument in that growth is here to stay as banks, corporate enterprises and agriculture are all looking up. Credit from institutions for the second month in a row saw a rising trend. But unlike in 2006 crisis, Indian financial system is not a closeted financial system but exposed to global value chains.

Globally, forex markets nose-dived. Commodity markets are on continuous decline. Industrial production everywhere wears a disappointing look due to the war and continuing Covid-19 variants making economies nervous. Volatility exists in all the stock markets. Several FIIs are keen to pull back their investments.

It is this backdrop that still makes economists nervous to feel that recession is very likely.  India is far and yet near. It’s export thrust in the wake of volatile forex markets is enough cause for worry. Further, the freebies, rising public debt, indiscrete valuations of public assets put to sale, large official haircuts in official IBC resolutions need rethinking if India would escape recession. Next two months in a row, we may witness rate hikes to contain the galloping inflation.

The views expressed are author’s own.