#Everydayquiz Welcomes you. #Read Daily #Financial Express
THE FINANCIAL EXPRESS: Drawing lessons from the China trouble
THE FINANCIAL EXPRESS: Drawing lessons from the China trouble
The current global economic situation hinges क़ब्ज़ा around what happens in
China. While, according to the IMF, in 2016 the main growth impetus प्रोत्साहन is to emerge उभरना
from the developed nations, the China factor will continue to dominate हावी the financial
landscape
परिदृश्य for
some time.
Discussions do surround the issue of whether or not India can fill
in the gap left by China, which may border around hubris अभिमान, as there are similar
underlying
आधारभूतfactors that lie in the economic stratosphere
समताप मण्डल which we should guard रखवाली against.
The Chinese model of growth, which took the world by
storm by promising more, was based on the premise that heavy investment,
especially in infrastructure, can be the road to sustained निरंतर prosperity समृद्धि. As
long as it happened, it was good for everybody. The Chinese economy grew very
well and the double-digit growth rate became the norm. Chinese goods based on
cheap labour flooded the market, which was good for importing countries. China
became the largest consumer of materials, especially natural resources, which
meant that the exporters of minerals and crude were happy.
As China consumed larger quantities, a chain had been
built that dragged
घसीटा along all other nations. At the same time, China’s tryst वास्ता
घसीटा along all other nations. At the same time, China’s tryst वास्ता
with growth became
an obsession जुनून as
the yuan became an increasingly important currency—to the extent of entering
the Special Drawing Rights (SDR) basket last year. Across the world, investors
in both stocks and commodities gained from this meteoric बहुत चमकीला rise of China. The
so-called decoupling
किसी अंक को दस से गुणा करना theory held after 2008, where the growth waves emanated निर्गत होना from the Forbidden निषिद्ध Kingdom.
किसी अंक को दस से गुणा करना theory held after 2008, where the growth waves emanated निर्गत होना from the Forbidden निषिद्ध Kingdom.
The flaw दोष in this model was known but not accepted, as it was
assumed that gravity would keep this chain never-ending. The chink झनझन in the armour कवच was that growth cannot be
sustained without consumption. An investment-based model works only up to an
extent, and China revelled आनंद लेना in the infrastructure boom with roads, super highways,
trains, ports, airports, etc, which added substantial delta to the GDP. But
there are limits to this kind of growth, and unless there are more people to
use the same structures that have been created, the momentum गति
cannot be
sustained.
A second fallout विवाद of this route was that
growth was financed by the institutions at state-controlled interest rates,
with dictates हुक्म
from above. This resulted in a weak banking system, and while the NPL levels
are low, there could be a lot hidden in the books. Third, growth has not been
inclusive सम्मिलित and
it is only the higher echelons विभाग which have gained in this model. The percolation
रसना has
not taken place, and with the one-child norm being pursued अपनाई as policy and substantial
migration प्रवास to
the US and Europe of the skilled youth, the country is to run against the wall
of shortage in skilled labour, which will only get exacerbated
तीव्र करना as more people join the retired gentry सभ्य लोग.
तीव्र करना as more people join the retired gentry सभ्य लोग.
Fourth, in a move to prop up संभालना the economy, the government
is pursuing a dual path of pushing up investment by lowering interest rates as
well as letting the currency fall to edge up exports. Both these moves could be
counterproductive अनुत्पादक, since higher investment may not be the need
of the hour and, by doing so, one may just be creating another set of bad
assets in the absence of consumer demand. The decline in the currency has not
been taken too positively by other emerging markets and a series of competitive
depreciations can be witnessed where, at the end of the day, there could be no
winners.
The China syndrome रोग में अनेक लक्षणों का समावेश will continue to play out
and go on distorting विकृत करना the global markets; what was seen in the currency market
to begin with has percolated रसना to the stock markets where tremors
भूकंप के झटके on the Shanghai exchange are felt in New York and Mumbai.
भूकंप के झटके on the Shanghai exchange are felt in New York and Mumbai.
Are there any lessons for us in India?
We have not yet fully optimised the investment-route
model and, hence, with the existence of spare capacity there is room to
leverage शक्ति the
same while filling in the lacunae खामियों. But the problem of
consumption remains for us too. Over the last three years, it has been observed
that household consumption has also come down on two scores.
One, incomes at the lower levels have not increased,
where the population is large in number. Therefore, purchasing power has been
limited to a fixed class which is not expanding का विस्तार at
the desired rate. This section typically is satiated
तृप्त and, with the exception of replacement demand, would only find use for new goods in the market. Two, high food inflation has dented अंदर ठूंसना the consumption power of households, leading to less demand for non-food items.
तृप्त and, with the exception of replacement demand, would only find use for new goods in the market. Two, high food inflation has dented अंदर ठूंसना the consumption power of households, leading to less demand for non-food items.
Clearly, we have to improve the income distribution of
the country to ensure that consumption keeps increasing, or else we would
encounter
सामना the same issues and challenges as China.India too has
been trying to follow the investment route to growth, but has been constrained विवश by the availability of
funds; this is not so in China, which has also managed to attract large doses
of FDI with an enabling environment. However, it has been observed that, in a
democratic set-up, an investment growth model will never be smooth due to a
plethora बहुतायत
of issues relating
to land and environment; this was not a limiting factor for China where the state
controlled all decisions. In addition, forced low interest rates can result in
higher NPAs when there is a downturn मोड़, which was the case between
FY12-15 when projects came to a halt विराम for a variety of reasons.
It is only appropriate that RBI while lowering interest rates is
continuously cautioning
सावधान
banks on the
quality of assets.Last, on labour force, while the challenge is not that acute विकट given our young population,
the challenge is really with skill development, which is what the government
has been focusing on. Having a large labour force can be counterproductive अनुत्पादक unless it is trained
in relevant skills, or else the demographic dividend can turn into a nightmare बुरा सपना.
Therefore, there are lessons to be learnt from the China
model and not focus just on investment but also consumption. For the latter to
happen, a lot has to be done to lower inequalities so that the
relatively-less-rich people enter the spending stream in a big way. Creation of
jobs and direct support from the central and state governments is pragmatic व्यावहारिक as we have reached a state
where tackling
से निपटने inequality is not a moral compulsion विवशता but an economic necessity.
से निपटने inequality is not a moral compulsion विवशता but an economic necessity.
It is, hence, quite appropriate that both the government
and RBI keep talking of inclusive growth in terms of income as well as access पहुंच to credit (धन) जमा करना.
link for Downloading our blog android App >>>Click here
No comments:
Post a Comment