INSUBCONTINENT EXCLUSIVE:
By Andy MukherjeeA long-held belief of analysts in India is that the economy is supply-constrained
In October, inflation quickened more than expected to 4.62% because of, yes, an onion shortage
Yet core inflation, which strips out volatile commodity prices, slumped to 3.4%, the lowest since the current price series began in 2012
One explanation is that people have less money to spend on other things after buying vegetables
Yet, as Mark Williams, chief Asia economist at Capital Economics puts it, a 1.1 percentage point drop in core inflation over three months is
Until about 2012, temporary supply shocks dominated
The starting point of production and transport is hydrocarbons, and India needs to import most of its crude oil
The government also has to pay farmers to feed 1.3 billion people
Because of the outsize dominance of food and fuel in consumption, price stability is ephemeral: A few months of high inflation could
Any gap between (runaway) headline and (soft) core inflation would typically close with the core moving toward the main indicator
But something has changed
The supply-dominated headline number is now more likely to shift toward the demand-led core figure, JPMorgan Chase &-Co
that the economy is deflation-bound
Whether the five rate reductions this year will lift demand is a different story
The input missing from the production process is trust
Meanwhile, state-run banks are dogged by $200 billion-plus in bad corporate loans, no matter how generously a cash-strapped government tries
In her estimate, GDP expansion may have slowed further to 4.2% in the September quarter from a six-year low of 5% in the previous three
The potential growth rate, she says, is around 6.5%
The longer the deleveraging cycle lasts, the bigger the risk that this potential could ebb further
Consumer spending fell in real terms in 2017-18, its first decline in four decades, the TheIndianSubcontinent reported Friday, citing an
unreleased official survey
As Rathin Roy of the New Delhi-based National Institute of Public Finance and Policy has been arguing, the economy grows by producing what
150 million of the top income earners consume
compete against China in making everyday things
Make things well enough for a swelling home market, and eventually India will supply them to the world
Satisfying the needs at the vast bottom of the socioeconomic pyramid will reduce slack
In an emerging market, confidence of entrepreneurs comes not from killer innovation but from knowing that producers can sell what they make
An undemanding India hurts everyone
