In this discussion, special correspondent Vishav throwing light on what is happening in the economy right now and are we heading towards a recession.
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00:00 The Modi government has completed 100 days of its working and now many leaders from the
00:04 BJP are travelling across the nation to tell what the government has done so far.
00:08 And in order to pull out the economy from the gloom, Finance Minister Nirmala Sitharaman
00:13 has introduced several measures, from bank merger to the capital infusion.
00:18 But the pertinent question here is to ask whether amidst all the poorly performing indicators,
00:22 can we achieve the dream of a $5 trillion economy?
00:26 So to talk more about it, we are joined in by our special correspondent Vishwesh.
00:30 So we will get more insights about what is happening all around in the economy.
00:34 Thanks Vish for joining us.
00:35 So the first question that I would like to ask you is that seeing the 100 days of the
00:40 Modi government on the economic front, what's your viewpoint on that?
00:45 See economy has been on kind of a downward slide for the last few quarters and it is
00:51 continuing.
00:52 So that means we can't measure it just in terms of 100 days or 200 days.
00:57 We have to see how it goes.
00:58 So right now it is on a downward slide and it has been happening even before these 100
01:03 days and this has been continuing.
01:05 So 100 days would roughly be around one quarter, around three months.
01:09 So in those three months, the performance has not been great but we can't say that
01:13 it is because of measures taken in these 100 days.
01:16 So measures taken in these 100 days, they will show the results in coming future.
01:19 So let's see how it turns out.
01:21 The second question I would like to ask you is that from time and again, Imran Khan has
01:25 come out with several measures from banking merger to capital inclusion and a lot more.
01:30 How do you see, are these measures enough to tackle the slowdown in the economy?
01:36 See when we talk about capital inclusion, so that has been on the cards, it has been
01:41 proposed in the budget also.
01:42 So nothing new has been announced.
01:44 So it is just that what had been announced in the budget, she has just said that after
01:50 the bank merger, how it will happen.
01:53 And when we talk about the bank merger, I don't know how it can pick up the economy
01:56 immediately because over the long term, it may be a very good structural reform.
02:03 But in the short term, I think it won't have a lot of positive impact on the economy
02:09 because the focus of the banks will shift into creating the synergy between the new
02:15 bank after the merger that has emerged.
02:18 So that will take some time and I think for immediate future, I don't think that will
02:21 yield positive results.
02:22 In the long term, it will be good.
02:25 But what it can do is and it did initially when the merger was announced was give a positive
02:32 sentiment to the market.
02:34 So that will always be there.
02:36 Every measure will be focused on creating positive sentiment in the market.
02:40 The results will show over time.
02:43 Many are saying that India is staring at a possibility of heading into a recession.
02:49 What's your comment on that?
02:51 I think that would be kind of an exaggeration.
02:56 I don't see recession.
02:57 Recession is when the growth is not happening at all.
03:00 In fact, it is negative growth.
03:01 So the economy is shrinking.
03:03 I don't see India heading there right now.
03:06 The growth has slowed down.
03:07 That is a very major concern.
03:09 Government is taking action and more action may be needed.
03:12 Some reforms may be needed.
03:13 But saying that we are heading into a recession, I don't think we are there yet.
03:18 But of course, I mean we should not be complacent also.
03:20 So we should, the government has to take action.
03:23 If it does not take enough action, then you cannot rule out the possibility of a recession.
03:27 But we are not there yet.
03:28 We are still growing at a growth rate of 5% in the last quarter and I think it will pick
03:34 up going in future also.
03:37 So recession is not a major concern for the Indian economy per se.
03:41 There have also been talks about the US economy going into recession and if that happens,
03:46 then the impact of the recession in the US economy will be more in India compared to
03:51 what happened in 2008.
03:52 So that is a concern.
03:54 But Indian growth is actually going into the negative territory, I don't think that is
03:57 a major concern.
03:58 And the major interviews were done in NRC, Karamal, that reducing the number of public
04:02 sector banks from 27 to 12 and merging 10 banks into 4 entities.
04:06 Do you see this rationale of merging the banks to kick start the lending in the economy?
04:11 Is this a prudent move?
04:13 See, this is a prudent move, no doubt about that.
04:16 In fact, the question should be how can we reduce the number of banks even further from
04:23 12 banks.
04:24 But yeah, it is a step in that direction.
04:25 We are now going to have 12 public sector banks, which may also be too much, but yeah,
04:30 that is for future.
04:32 With the question that whether this will improve sentiment or improve liquidity in
04:39 the near term, I doubt it because these are banks which are already facing some or the
04:46 other problems.
04:47 When they are joined, their problems won't just go away in one moment as soon as the
04:51 merger happens.
04:52 So that will take time.
04:54 And the merger in the long run will increase productivity, will increase efficiency, but
04:58 in the short term, it will also lead to some kind of restructuring and some kind of adaptation
05:05 when more than one bank is being joined.
05:08 So that will take away some of the attention from maybe lending to creating a synergy between
05:15 these entries that are going to be joined.
05:18 So that may hamper prospects in the near term, but yeah, in the long term it will yield some
05:24 results.
05:25 We have seen that Prime Minister's dream movie on 15th August from the Rembarks of
05:29 Red Fort made it very clear that he wants to achieve this dream of 5 trillion dollar
05:34 economy.
05:35 And now the entire set up is working in that direction.
05:37 They are forming and achieving that dream.
05:39 So with poorly performing indicators all across the sector, do you think that this dream is
05:44 feasible and achieving it is quite easy at this stage?
05:47 See, India becoming a 5 trillion economy is inevitable.
05:53 It will become a 5 trillion economy, it will go on to become a 10 trillion economy also.
05:58 The question is how soon are we going to get there?
06:01 The government has decided, has set a deadline of 2024-2025.
06:06 Now I would say one year back or two years back, we were closer to achieving that goal
06:13 and today after these recent GDP numbers, we may not be as close as we were.
06:18 If you recall Morgan Stanley in 2017 had said that by 2025 India will become a 5 trillion
06:25 dollar economy.
06:26 That time it seemed inevitable.
06:27 Right now considering that our nominal growth rate which fell to 8% which is more than,
06:35 it has been almost one and half decades since that has happened.
06:39 So yeah, I mean with that kind of a number it may be a little difficult for getting there
06:47 because 11% nominal growth till 2024-2025 we need to achieve that.
06:52 So that seems a little unlikely so we may have to push the deadline by an year or two
06:56 unless we significantly pick up our pace of economic growth.
07:00 And as we are witnessing the kind of a slowdown impact within the automobile sector and massive
07:05 layoffs are going on all across the companies and the sectors and amidst all this Nisla
07:09 Sitaraman yesterday made a comment that the mindset of the millennials that booking Ola
07:14 and Uber is a contributing factor for an economic slowdown.
07:18 So what's your comment on that?
07:19 Do you think that this is a valid reason for an automobile slowdown?
07:24 I won't give too much significance to this particular factor.
07:28 It may have some role but I can't say that is responsible for this kind of a slowdown
07:33 because if you look at the numbers then it is not just the passenger vehicles whose sales
07:38 have declined.
07:39 It is also the commercial vehicles, it is also the two wheelers, tractor sales have
07:44 also declined.
07:45 And if we talk about Ola and Uber, it's not that in villages we have access to these
07:51 kind of apps and services.
07:54 Even in all the cities we don't have it, only in major cities we have these kind of
07:58 services.
07:59 So I won't say the crisis is, the problem is much deeper than just people switching
08:06 to Ola and Uber instead of cars.
08:08 And that may have some role to play but not a major one.
08:10 Whatever measures the government is introducing, from a bank merger to capital infusion, are
08:16 these measures enough to tackle the economic slowdown?
08:19 I don't think that is enough.
08:21 I mean we are seeing that so far like RBI has also been trying to reduce lending rates
08:27 that has not yielded desirable results.
08:30 Capital infusion may play some role but we have to understand that the problem in today's
08:36 crisis is on the demand side, not on the supply side.
08:39 So most of these measures that are taken, they may address the supply side constraints.
08:44 But to create demand, some more measures are needed which I am sure government will come
08:48 up with as we go forward.
08:50 And my last question is there are many divergent viewpoints on this.
08:53 Is this a cyclical slowdown or a structural slowdown?
08:56 And many economists have commented and they have a different version of their thoughts.
09:01 So what's your take on that?
09:02 Is this a structural or a cyclical slowdown?
09:05 You can't really say that it is either structural or cyclical.
09:09 It's a bit of both.
09:11 There are some factors which are cyclical in nature and then there are others which
09:15 are structural.
09:16 We have to admit that.
09:17 We have to accept that.
09:18 Only then we can design policies which not only address the cyclical issues but also
09:23 structural issues.
09:24 And I think we are ready for next wave of reforms.
09:27 Now it may be a setback, the growth rate that we have right now.
09:31 But overall we are ready for next set of structural reforms.
09:35 And I think that is really needed to address some of the structural issues.
09:40 And for cyclical issues, government and RBI both are taking necessary steps and I think
09:45 that will lead to solutions.
09:47 Thank you for your time.
09:49 Thank you for your time.
09:50 So that was all for today's discussion.
09:52 We will be back with yet another discussion, an enriching discussion next week.
09:56 Till then stay tuned to Outlook Mind.
09:58 [Music]