Small steps, wise planning key to economy's 'achche din'

  • Chanakya, Hindustan Times
  • Updated: Sep 07, 2014 11:10 IST

How do you spot an economic turnaround without poring over the statistics put out by the official number crunchers? It is not all that difficult. Just take a look around you. Are your neighbours dining out more often; is your colleague getting his car to office more frequently, shunning his usual car pool; is the class prima donna sporting the season’s latest fashion; does your friend extol the virtues of a new yet-to-be-launched smart gizmo?

If the answers to these are yes, and you are going green with envy, these are probably early signs of the onset of an economy-wide revival.

The first and most clear indication would be in the job market.

If you are looking for a job, you are likely to be pounding the pavements even as I write this. But, with the economy slowly turning the corner, as seems to be happening now, then chances are that you may find an offer or two in your mail box soon. The most visible signs can be seen in the IT services industry, which is back in the job market as a hot and happening recruiter.

Take a look at this. TCS, the largest in the club, plans to recruit 55,000 more people; new Infosys CEO Vishal Sikka has reached out to former employees in an apparent attempt to woo them back to their alma mater; Cognizant has steadily increased its headcount over the last two quarters. HCL Tech, Wipro, Tech Mahindra have also laid out the welcome mat.

I reckon the IT industry alone will hire an additional 170,000-180,000 people in 2014-15. And, these are all fresh from the oven.

You must be bombarded with online e-commerce platforms hawking everything from furnishings to weight loss pills at a discount. Keep in mind that your home and waistline will probably help create 50,000 jobs in the next two years.

If we want to keep waltzing down this merry path, then we need to drum up some 100 million jobs over the next decade or so. If we can do this, we will enter the league of developed nations. But gloom and doom will visit us if we fail to provide employment to our burgeoning youth.

Companies hire more and hasten capacity expansion plans to meet growing demand for their goods and services. But the demand for goods and services, on the other hand, has a direct correlation with people’s wallets. It is quite simple, the more you earn, the more you will spend.

Let’s now look at what the official numbers are saying.

The economy expanded at its fastest pace in two and a half years in April-June amid signs that companies are producing, investing and hiring more. This was pushed along by the government’s measures to help the economy recover from a quarter-century slump.

India’s gross domestic product (GDP ) — the value of goods and services produced in the country — grew at 5.7% during April-June 2014, from 4.6% in the previous quarter.

Capital goods output, a proxy to measure investment activity, grew 13.9% in April-June, compared to a contraction of 3.7% in the same period of the previous year, in what could be signs that companies are adding new capacities.

The slide in the services sector, which accounts for more than two-thirds of the economy, seems to have been stopped in its tracks. Besides, a slew of data show that the good times could well roll in the months to come.

If domestic passenger vehicles sales rolled forward for the fourth month in succession in August, it only shows that people are buying more cars because their incomes have grown, or at least, they expect their earnings to rise.

The burden of the BJP’s song has been that it has inherited an economy that was scrapping the bottom of the barrel due to the Congress-led UPA’s mismanagement. But it has tried to be all things to all people and effect a quick recovery.

Finance minister Arun Jaitley, tasked with the responsibility of shepherding the economy out of its deepest slump in a quarter of a century, said last weekend that the government had prioritised people’s welfare through measures aimed at spinning jobs, multiplying income and help families deal with ballooning home budgets.

Yet, despite Jaitley’s good intentions and will to match, growing household expenses are proving to be the most difficult component to fix.

Retail inflation, a measure of rise in shop-end prices,was 7.96% in July, up from 7.46% in June. Consumer food price inflation, an index to gauge how costly the food platter has become, galloped to the worrisome double-digit mark at 9.36% in July from the previous month’s 8.05%.

The devil of the fresh price indices lay in its detail.

Year-on-year, vegetable prices grew 16.88%, while fruit prices recorded the sharpest increase at 22.48%.

Prepared meals’ prices — a proxy for restaurant meal rates — rose 7.77%, primarily because of soaring vegetable prices and high rental costs.

A lot depends on this year’s summer harvest, which has been hit by patchy rains in the main cereal-growing states. The unrest in Iraq —India’s second-largest crude oil supplier — can fan inflation by pushing up fuel prices. The US economy’s imminent expansion spurred by strong industrial growth, rising confidence and an end to the fiscal drag could prompt funds to move dollars back to the US on higher yields.

The green shoots of hope could well wither on the vine unless the government presses on with its commitment to come roaring in from behind. So, do hold off that new household makeover for now. Just change the sofa covers and keep a few pennies in the bank.

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