Structural or Cyclic - an Irrelevant Question


December 2019
Structural or Cyclic - an Irrelevant Question

With the reported GDP growth of 4.5 per cent in Q2 of current year, we now have six consecutive quarters of slippage in economic growth. It is a different matter that some experts are of the firm opinion that this reported growth of 4.5 per cent is actually a paltry 2 per cent only, and that the GDP growth is being consistently over reported. Another eminent economist was on record stating that our growth would be already negative if we were to include the unorganised sector. But we can leave that discussion aside for another day.

What matters here and now is that we have a consistent and persistent drop in growth numbers over a fairly long period of time, and what is interesting and funny in this context is that we are engaged in an intense debate as to whether this phenomenon of slowdown is due to cyclic factors or due to structural issues in the economy. As if that debate was not enough, there is another ongoing discussion which is desperately trying to prove that we are not in a slowdown at all, and everything is in kind of "All is well" mode. While the first debate is somewhat technical and economic in nature, the second one can be called out as a pure political positioning rather than reasoning. Contrast this with what noted economist Prof Arunkumar said: India is not facing a slowdown, but is in recession!

Some of the underlying statistics are way more revealing. The output of the core sector industries has contracted by 6 per cent in October, and this bad news comes after two previous months of lack-lustre performance by the eight industries that form our core, including cement. This month, cement despatch growth fell by 8 per cent, and if we may jog your memories, cement growth fell successively by 2 per cent and 5 per cent in the previous two months as well. The unfolding story so far is a negative one, and by all accounts, the immediate future looks rather bleak.

It does not take even an armchair economist to confirm that the fundamentals of our economy remains strong, or to prophesy that in the long term, India is poised to grow (no arguments there), but how long is the long term? This is where the analysis about the slowdown being cyclic or structural has some relevance.

But purely from a lay citizen's perspective we can argue that such in-depth and hair-splitting economic analyses are rather irrelevant and may I say irreverent as well, in the face of our woes, and our simple expectations of stimulus interventions or other effective turnaround measures from the government for short-term improvements.

In summary, we have to get our growth going again. Every month, and every year that we revert to the so called "Hindu" rates of growth, our window of opportunity to bring our people out of poverty narrows or shrinks. Indian economy has to fire on all cylinders here and now, when we can leverage the demographic strength of our working age population.

With such a significant potential of lost opportunity confronting us, and time ticking away, we must act urgently and firmly instead of indulging in irrelevant arguments. We have to empower the consumers to spend and prop up the demand side. Surely, cement companies will love that.

Related Posts