GDP Count Down- Can the Nation afford to pay its Jawans?

Normally, a 7.1% growth forecast in India’s gross domestic product (GDP), as suggested by the Prime Minister’s Economic Advisory Council for 2008-09, would have scarcely raised an eyebrow. After all, the country has lived through five years of 8.8% average GDP growth, and recorded saving and investment rates of 37.7% and 39.1%, respectively, in 2007-08.

But we are not living in normal times and the impact of the global financial turmoil seems to have had a far greater impact than what policymakers had anticipated; first in the financial sector, and then slowly in the real sector. And with lakhs of people losing jobs in textiles, leather, gems and jewellery, the government’s decoupling theory lies in tatters today.

Hazy prospects
That leaves the country with domestic consumption, the next big driver of growth in the country. Although the situation may be slightly better because of a good agriculture growth (expected to touch the 4% mark), the farm debt waiver, the two fiscal stimuli packages and the Sixth Pay Commission arrears, it is unlikely to balance out a weakening growth in private sector consumption. So, private consumption growth is likely to fall from 8.3%, last year to 6.8% this financial and to 5.5% in the next financial year.

But the real danger in the current downturn is that despite the RBI releasing about Rs 3,88,000 crore into the market between September and January and the government borrowing Rs 2,50,000 crore—Rs 1,50,000 crore more than the budgeted amount (raising the combined fiscal deficit of states and the Centre to 11% of GDP)—there’s little respite in sight. And with things likely to get only worse in the first quarter of 2009, even 7% GDP growth seems a little distant.
GDP: Counting down

Sixth Central Pay Commission Impact
The impact of the impending Sixth Pay Commission recommendations is expected to be within 0.4 per cent of Gross Domestic Product (GDP), according to Finance Secretary D Subbarao.
The fifth Pay Commission award of 1996 had translated into an impact of 0.4 per cent of GDP then. “I do not expect it to be higher than that level this time,” Subbarao told Business Standard.
Given that the Budget has projected GDP at Rs 53,03,770 crore in 2008-09, the impact of the award may well be Rs 21,215 crore.
Subbarao added he expects the economy to grow faster than the government’s ballpark estimates of a real GDP growth rate of 8.5 per cent, and annual inflation rate to be 4.5 per cent, in 2008-09.
On the question of off-Budget liabilities, the finance secretary said the Budget had acknowledged them for the first time, bringing greater transparency to the numbers.
On his part, Revenue Secretary P V Bhide said it was not possible to simultaneously increase the income tax exemption limit as well as the deduction limit under section 80C. “We cannot satisfy everyone”, he said.
Bhide also said that despite the higher exemption limit, it would not take much time for those people who go out of the tax net to come back into the net, as salaries are rising 15 to 20 per cent annually. “If not this year, they will come back again as they cross the threshold limit,” he said.
Source : Business Standard
SCPC: impact may top 20,000 crores

Comment: The Nation can afford an additional 1500 crores (one time) and yearly incremental of Rs 600 crores to implement the "One Rank One Pension", for the derseving Jawans who sacrifice their lives for the security of the Nation. The Nation spends 2% of the GDP on Defence and the additional expenditure for OROP works out to mere 0.8% of Defence budget or 0.0016% of the GDP truly an insignificant amount.

Balancing Military Spending and Economic Crisis

Indian policy and military decision makers are facing a real quandary. On the one hand the country’s economy is suffering greatly, as consumer markets across the world shrink - a direct challenge to the double digit growth of Indian defense budgets over the last decade; on the other hand, perceived and real vulnerability to external and internal threats, both conventional and asymmetric, appear to be growing rapidly. Indian defense officials complain that the country’s chief potential rivals, Pakistan and China are spending about 4% of their GDP on defense, while India’s defense budget rises to a mere 2% of the country’s GDP. With that in mind, India’s defense budget is set to rise to about $40 billion next year (about 3% of GDP), bucking economic trends and no doubt raising eyebrows and maybe even real protest. India’s weapons imports have also seen a huge growth spur over the last decade, and are set to grow even more in the coming years, reaching more than $10 billion in 2012.

With the economic crisis set to continue for at least another year, and with countries around the world getting used to the idea that the impact of this crisis will continue to effect their economies for several years to come, it is reasonable to assume that defense budgets will stagnate, if not shrink over the next several years, unless the economic crisis slides into a military crisis, in which case all bets are off. Either way, it seems like all of us, proponents and opponents of military spending are doomed to live the Chinese proverb: “May You Live in Interesting Times”.
Read the full article at:
Balancing Military Spending and Economic Crisis
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PM urges India Inc to be sensitive in turbulent times

New Delhi: Prime Minister Manmohan Singh Saturday asked India's top industrialists to be sensitive to the adverse impact of the current economic crisis on the weaker sections of the society and sought their help in meeting the challenges.

"I have great faith and confidence in India's entrepreneurs and particularly in the wisdom and experiences of captains of industry assembled here today to meet the challenges confronting our economy," he told a meeting with them at his official residence here.

"We need to be particularly sensitive to the impact of slowdown on the weakest in the organised as well as unorganised sectors. We must meet the challenge of job losses caused by the slowdown," the prime minister added.

Manmohan Singh had invited some 25 leading industrialists to hear their views on some of the key issues concerning the domestic and global economy and to help frame India's position ahead of his participation at the G20 summit in London April 2, 2009.
PM urges India Inc to be sensitive in turbulent times
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