The World Bank on Tuesday said that the Indian economy would grow at 6.6% in the coming financial year. Due to the adverse impact of the global slowdown the projected growth rate for India was revised down from the earlier 6.9%. In its Global Economic Prospects, the bank said global growth in 2023 might be the third weakest in nearly three decades. The world economy was “perilously close” to falling into recession. “Further negative shocks — such as higher inflation, even tighter policy, financial stress, deeper weaknesses in major economies, or rising geopolitical tensions — could push the global economy into recession. This would mark the first time in more than 80 years that two global recessions have occurred within the same decade.”
Global growth is projected to grow by 1.7% while the Euro area and the US are expected to grow at 0% and 0.5% respectively. China’s growth before the current wave of Covid deaths and disruptions was expected to be 4.3%. It could be lower than the projected estimate now because the impact of the pandemic. In the case of India the Bank noted that it had registered a robust 9.7% growth in the first half of the current financial year. Consumer inflation was above the Reserve Bank’s upper tolerance limit of 6%, leading the central bank to raise the policy rate by 2.25% between May and December. Trade deficit had more than doubled since 2019. It was a record $24 billion in November.
Government spending and a pick-up in private sector investment coupled with a healthy credit growth will help expand economic activity in the coming year, despite the global slowdown. Last week the National Statistical Office projected the GDP growth at 7% as against the RBI’s estimate of 6.8% and the World Bank’s 6.6%. Of course, all three are only estimates based on the data available. However, it will be safe to say that the economy will grow in 2023-24 at anything above 6%. Which under the prevailing circumstances, both domestic and global, is not bad. It is notable that the overall tax collections in the first nine months of the current year have exceeded the budget estimates. Only partly it may be due to conservative projections in the annual budget while the growth in revenues could be ascribed to both better tax compliance by individuals and corporates as well as a genuine spurt in economic activity in the aftermath of the general slowdown induced by the Covid pandemic.
One sector for worry is exports which, as the NSO data showed, have actually slowed down in the first nine months of 2022-23. The recession-like conditions in the US and the EU will make it harder for exports to register a tangible growth in the last quarter of the current financial year. Happily for the common man, consumer inflation has come down in recent weeks. This may persuade the central bank to go easy on a further rate hike.
Aping Trump in Brazil
Former US President Donald Trump is yet to be made accountable for his egregious instigation of the January 6, 2021 attack on the Capitol. This may have encouraged Brazil’s former president Jair Bolsonaro, who considers Mr Trump his role model, to direct his followers to follow suit on Sunday. About 5,000 Bolsonaro supporters ransacked the presidential palace, the Supreme Court and the Congress in the nation’s capital Brasilia, when President Luiz Inacio Lula da Silva was away on a foreign visit. Since his return over 1,500 insurrectionists, seeking to reverse the democratic verdict by force, have been arrested. A provincial Governor in cahoots with Mr Bolsonaro was sacked and the police and armed forces ordered to deal sternly with the law-breakers.
Not unlike Mr Trump, Mr Bolsonaro has not conceded defeat in last year’s election. The far-right populist leader had lost by a thin margin to the left-leaning Lula. But so sharp is the polarisation that even the police and the armed forces have not remained unaffected. How the heavily-guarded presidential palace could be stormed by a couple of hundred frenzied zealots without police complicity is hard to believe. Ideally, Mr Bolsonaro and his role model Mr Trump should be tried for treason so that other populists elsewhere can draw a salutary lesson. Sadly, we see no sign of such firmness.