Excerpts From Recent Literature. Inflation, Unemployment

Excerpts from recent literature
1. Inflation biggest concern of 2022-23: India Inc

- Economic Times, Feb 03, 2022
Increasing prices, reducing grammage and packaging layers, using alternate lower-priced raw
materials, and improving supply chain efficiency are some of the measures companies have
prioritised to deal with rising costs, executives said. ..
India Inc chiefs across consumer categories such as daily household goods, apparel and
lifestyle products, and electronics have flagged inflation as the biggest concern for the
upcoming fiscal, more crucial than even spurring demand.
2. M. Suresh Babu, “Durable Growth Revival: Changes in Income Distribution and

Widening of Inequality Are a Major Hurdle”, Economic and Political Weekly,
March 5, 2022
… Consumption demand, which is 55% of the GDP, is estimated to remain sluggish,

below the pre-Covid-19 year (2019–20) levels. The government final consumption
expenditure is expected to be at 7.6% higher than FY 2021 & 10.7% higher
than FY 2020. The lingering impact of the COVID-19 pandemic is still visible in the private
final consumption expenditure (PFCE), a proxy for private spending. The PFCE is expe-
cted to growth at 6.8%; but in absolute terms, it will be 80.80 lakh crore for FY 2022, which
is lower than the pre-pandemic level of `83.21 lakh crore. This indicates that
consumption is down economy-wide. This decline in private consumption could be
attributed to the changes in income distribution. The lockdown and associated job losses
have resulted in a shifting of income from higher consumption sections of the population
to higher saving section in the population. This results in lower consumption coexisting
with high-income growth along with increased savings. Data on change in stocks, which
reflects inventories held by producers, also point to this as there is a higher part of
production, which is not getting sold. These are clear signs of changes in income
distribution and widening of inequality.
…
Employment and Distribution
The Central Statistics Office’s growth projections have to be seen in light of two important
indicators to assess its quality and durability. First, is the important indicator of employment
generation in the economy, and second, the state of distribution. These two indicators would
give us the plausible direction and magnitude of demand, savings, and investments.
When we examine the employment rate, which is the ratio of the employed to the total
working age population, India’s performance is low. According to the World Bank, while the
global rate was 55% in 2020 and 58% in 2019, India recorded a low of 43%. Only the Middle
East and North Africa by the World Bank classification have a lower employment rate than
India. …
According to the Centre for Monitoring Indian Economy (CMIE) data with an unemployment
rate of 7.9%, as many as 35 million people were without jobs in December 2021. These
people were not employed and they were actively looking for employment. Further, there is
another important challenge of providing employment to an additional 17 million who were
also not employed and were willing to work if work was available, although they were not
actively looking for work. …
It is appropriate to assume that they do feel the need to work, but they are not motivated to
actively look for jobs. This points to the creation of a large pool of discouraged workers. As
the young potential workers seeking for jobs feel discouraged from actively looking for work,
the indication is clear that there is a lack of adequate jobs being available for them.
The outcome of modest GDP growth and sluggish employment growth is reflected in the
levels of inequality. According to the latest World Inequality Report 2022, India stands as a
“poor and very unequal country, with an affluent elite,” where the top 10% holds 57% of the
total national income, while the bottom 50% share is just 13% in 2021. The report also states
that the top 10% and top 1% hold 57% and 22%, respectively, of the total national income,
while the bottom 50% share has gone down to 13%. …
Conclusions
The recent growth recovery has been uneven, as is visible across different sectors of the
economy and different segments of the population. This unevenness is hurting the
consumption of lower-income households and preventing a sustained in crease in private
investments, which are vital for maintaining the durability of growth. Though, there has been
a growth recovery after the damage caused by the second wave of COVID-19 in the middle
of 2021, it still remains below the pre-pandemic trend. More importantly, a further recovery
has been hampered by supply-side bottlenecks. Higher inflation and wider current account
deficit, have emerged as the side effects of the policies adopted to push growth during the
pandemic. This would force the RBI to adopt a different policy stance that would further
prevent durable growth. Current growth trends are a part of a short-term cycle and not an
indication of the long-term trend as mixed growth, high inflation, and wider twin deficits
would pull the economy below its potential growth curve.
A more durable growth recovery requires a vibrant manufacturing sector supported by
infrastructure development. This is also crucial for reaping the demographic dividends by
gainfully employing large sections of the youth population and for improving labour pro-
ductivity and providing ample additional employment opportunities. Sustained increase in
capital formation, from both public and private investments, holds the key in this endeavour.
Falling interest rates, benign commodity prices, and government’s rhetoric about improving
the business climate are not arousing much enthusiasm among investors as is visible from the
low levels of private investments. For the global investors India remains an attractive
investment destination due to the current global economic sluggishness. The hesitation to
invest by the private sector can be allayed only if the government can match its rhetoric with
action and demonstrate its ability to provide stable and supportive policies, by focusing on
economically feasible projects. These have to be complemented by abandoning a passive
policy approach towards social infrastructure, especially with regard to education and by
making sure that the masses have decent food and shelter. Such an inclusive growth can only
be sustainable and durable in the long term.

Excerpts From Recent Literature. Inflation, Unemployment

Uploaded by

Copyright:

Available Formats

Excerpts From Recent Literature. Inflation, Unemployment

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Excerpts From Recent Literature. Inflation, Unemployment

Uploaded by

Copyright:

Available Formats

Excerpts from recent literature

1. Inflation biggest concern of 2022-23: India Inc

2. M. Suresh Babu, “Durable Growth Revival: Changes in Income Distribution and

… Consumption demand, which is 55% of the GDP, is estimated to remain sluggish,

You might also like