India’s latest GDP Numbers: Five things you must know

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Growth has slowed down: Asia’s third largest economy grew at 7.1% in quarter ended June 2016. This is the slowest in five quarters, and much lower compared to 7.9% recorded in the preceding three months.

Manufacturing picks up, but corporate investment still down: Manufacturing registered 9.1% growth in first quarter of current fiscal, as compared to 7.3% in same quarter last year. So this alone contributed one-fifth of India’s GDP growth.
However, corporate investment dipped by 3% (or by Rs 21,009 crore as measured in 2011-12 prices).
What does this say? Demand might have picked up resulting in higher manufacturing output. But not enough for the companies to see the invest in additional capacity.
When Indian economy was growing at 9% plus for five years in 2000-10, investment demand accounted for nearly half of the growth.

Government spending spurts: Nearly a fifth of GDP growth in latest quarter is due to government spending. This is clearly not sustainable as it would lead to widening fiscal deficit. Higher fiscal deficit will increase cost of borrowing for all others in the economy.

Exports finally showing growth: After many quarters of decline, exports reported a 3% increase. This is a positive as many export oriented industries are manpower-intensive sectors. This will create more jobs.

Mining, hotel, construction industries have slowed down

 

The positives: stable private consumption, growth in exports, pick up in manufacturing output.

The negatives: higher government spending not sustainable, key industries like mining and construction still sluggish, and corporate investment yet to pick up.

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News in Numbers, August 9, 2016: Impact of diesel ban on Toyota, single-teacher schools…

Rs 1,700 crore

What is it? The total business Toyota Kirloskar Motors claims it has lost due to the ban on diesel vehicles in the Delhi-NCR region since last December.

Why is it important? The company says it has lost business of around 8,500 units of Innova and the Fortuner and that the ban has halted the company’s future investments in the country. The Supreme Court had banned the registration of 2,000 cc and above diesel vehicles in Delhi on December 2016 as a measure to curb the high pollution levels in the city. This comes at a time when the government is aggressively trying to promote its ‘Make in India’ campaign, which is aimed at attracting foreign companies to help convert the country into a global design and manufacturing hub.

Tell me more: Mercedes-Benz, another auto firm hit by this ban, has moved the Supreme Court and has asked for it to be lifted. It has said it is ready to pay 1% environmental cess on the sale of diesel cars.

 

6.5%

What is it? The stake the promoters of Max Financial would get in the merged entity approved by the boards of HDFC Life Insurance Company and Max Life Insurance Company in addition to a Rs 850 crore non-compete fee, subject to approval of public shareholders.

Why is it important? With this deal, the merged entity would have Rs 1.1 lakh crore in assets and overtake ICICI Prudential Life Insurance Company and become India’s largest private life insurer and the second biggest life insurer after Life Insurance Corporation of India. After the merger, the entity would have a 10.8% market share. This could also signal the beginning of consolidation in the insurance sector.

Tell me more: The merger involves a three-step process: Max Life would be merged with its parent Max Financial Services, after which the insurance unit would be demerged from this entity to be combined with HDFC Life and the non-insurance businesses of Max Financial would be merged with group company Max India.

 

Rs 5,000 crore

What is it? The additional amount India’s flagship rural employment guarantee scheme would get in 2016-17, taking the total to Rs 43,500 crore.

Why is it important? This is likely to aid many in the rural areas affected by two consecutive years of drought in 2014-15 and 2015-16. Ten states had declared drought last year. However, since the current year is expected to be an above-normal monsoon one, there are concerns about inflationary pressures due to an increase in the budget. The increased budget overlay reportedly lays to rest doubts about whether the scheme would be continued or not.

Tell me more: Under the scheme, jobs to 48.2 million families were provided in 2015-16.

 

105,630

What is it? The number of government elementary and secondary schools in India which are run by a single teacher, according to a report tabled in the Parliament on Monday.

Why is it important? Indicates the extent of paucity of teachers in the country, especially in state-run schools and partially explains the clamour for private ones, despite the huge difference in fees. According to the Right to Education rules, the recommended student-teacher ratio is 30:1 for primary classes and 35:1 for upper primary classes.

Tell me more: Madhya Pradesh has the highest number of single-teacher schools followed by Uttar Pradesh and together, these two states account for a third of such schools. The next three worst states in this regard – Rajasthan, Andhra Pradesh and Jharkhand – account for nearly 29% of single-teacher schools.

 

$52.7 billion

What is it? India’s trade deficit with China in 2015-16.

Why is it important? The deficit might widen further if India cuts its tariff on Chinese imports in line with tariff reductions for other members in Regional Comprehensive Economic Partnership (RCEP). So far, India has been favouring a three-tier system for tariff reductions – offering more cuts to some countries, and less to others including China. Now, it has changed its approach. This is likely to benefit China more with whom India does not have a free trade agreement (FTA). It remains to be seen what India is offered in return for agreeing to such a deal.

Tell me more: The RCEP is a proposed FTA between the 10 members of the Southeast Asian Nations or ASEAN and the six countries with which the ASEAN has existing FTAs.

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Does a 20% cut in healthcare spending hurt India?

This piece originally appeared on Livemint.com

 

The government slashed its 2014-15 budgetary allocation for health by about 20%, Reuters reported on Tuesday, citing unnamed health ministry officials.

Although that’s a significant cutback in allocation for a country with poor health indicators, it remains to be seen if its effect on the ground will be felt proportionately, because actual health spending in the past three years actually fell short of budgetary allocation—overall and in each of the four departments under which health governance in India is organized at the top.

Yet, given that India is a low-income country and has an abysmal healthcare system, the case remains for higher public spending on health, accompanied by full utilization of allocations and better outcomes.

Although health budgets are under-utilized at the overall level…

 

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…as well as in each of the four health departments…

 

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…there remains a case for higher public spending in health, and better outcomes

 

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