9 January 2017
The slowing economy
That India’s economic momentum has slowed down is now beyond doubt. Advance GDP estimates and gross value added (GVA) for the current fiscal year from the Central Statistics Office clearly reveal the extent of the slowdown. While GDP growth is now pegged at 7.1 per cent, compared with a 7.6 per cent pace in 2015-16, GVA is forecast to expand at 7 per cent this year, easing from the 7.2 per cent posted 12 months earlier. And as the Chief Statistician emphasised, these projections were based solely on data from the first seven months through October and do not factor in the impact from the withdrawal of high-value banknotes and the consequent cash crunch. A closer look at the sectoral GVA projections throws into relief the areas of concern: Mining and quarrying is estimated to shrink 1.8 per cent this year after expanding 7.4 per cent a year earlier, while electricity, gas, water supply and other utility services — collectively an indicator of broader economic activity — is slowing to 6.5 per cent from 6.6 per cent. More worryingly, the seven-month numbers establish that two key engines of the economy, manufacturing and services, are losing momentum faster than was anticipated, and this could spell trouble for the coming quarters. This is especially so when seen in the backdrop of demonetisation and what the Reserve Bank of India referred to as the “short-run disruptions in economic activity in cash-intensive sectors such as retail trade, hotels & restaurants and transportation, and in the unorganised sector” and “aggregate demand compression associated with adverse wealth effects”.
There is a silver lining in the CSO data, though. Finance Minister Arun Jaitley in April projected that growth could accelerate this year to 8 per cent to 8.5 per cent subject to a ‘normal’ monsoon. The improvement in rainfall has manifested both in the CSO’s projection for the ‘agriculture, forestry and fishing’ sector, which is estimated to expand 4.1 per cent this fiscal compared with the previous period’s 1.2 per cent, and in rabi sowing data from the Ministry of Agriculture. Preliminary reports from the States show the total area sown under the rabi crop as on January 6 stood at 602.75 lakh ha, up 6.5 per cent from last year. If farmers countrywide can tide over the acute cash shortage resulting from demonetisation and ensure that the sowing translates to strong growth in output, we could see rural consumption provide some cushioning from the slowdown. Nonetheless, in the Union budget due next month, the Centre will have to work in a substantial fiscal fillip to help rekindle economic momentum.
Unclogging the cities
The move to make New Delhi’s iconic Connaught Place a pedestrian zone from February, and keep out cars and other vehicles from its middle and inner circle roads, during a three-month trial programme is an inspiring attempt to reconquer public space. Urban design in India is the preserve of State governments and local bodies, which have failed spectacularly to provide a safe, comfortable and accessible experience for walkers. The pilot project in the national capital represents a refreshing change, taking a leaf out of the book of global cities that have pedestrianised their landmarks, often in the face of conservative opposition. Prominent examples are Times Square in New York and the route along the Seine in Paris, and the curbs on cars in central avenue in Madrid. Contrary to apprehensions that restrictions affect commercial activity, the experience around the world has been quite the opposite: better walking and public transport infrastructure and availability of food plazas attract more people, improving the local economy. In America, pedestrian injuries decreased after vehicles were removed from Times Square, beginning seven years ago. Globally this has been the trend too when cities curb car use and clean up the air. Such examples should convince the Ministry of Urban Development that it is moving in the right direction, and if anything, this needs to be extended to other cities.
Keeping powered vehicles out of core areas, expanding pavements for pedestrians and facilitating the use of bicycles is today a high-priority goal for mayors and urban governments the world over. In the intermediate phase, many cities find it rewarding to levy a stiff congestion charge on personal vehicles entering designated areas. This is a mature idea and needs to be trialled in India, under its ongoing smart cities programme. It should be mandated by law that all proceeds would go towards funding walking, bicycling and emissions-free public transport infrastructure. The importance of such a levy is evident from a study by Transport for London in 2014-15, that found the British capital losing £5.5 billion a year in financial costs arising from congestion. Measures to unclog cities are often posed, wrongly, as detrimental to the economy and efficiency. While cars will continue to remain relevant for longer-distance travel, dense urban areas need relief from excessive motorisation. Union Minister for Urban Development M. Venkaiah Naidu has favoured people-centric ideas for Connaught Place, including aesthetic features such as water fountains and areas for relaxation. These are not expensive to put in, and State governments must extend the template to all cities and towns, acknowledging the wider social benefits.