The downturn isn’t a leveller, it’s a discriminator



If the Indian economy were an airplane in mid-flight, it is facing the equivalent of a frightful turbulence. The rough patch has spooked some passengers more, in this case, India’s vast, toiling middle-class.

However, those at the bottom of the income ladder, disadvantaged groups, and ethnic, religious and other minorities, such as Muslims and migrants, could be worse off.

There is evidence that economic crisis have impacted educational inclusiveness in sub-Saharan Africa.  The global economic crisis: Setbacks to the Educational Agenda for the Minority in Sub-Saharan Africa

Research in the US has pointed to the higher impact of the downturn on the Blacks and Hispanics. The Economic Crisis Isn’t Colorblind

There is little if credible data on how high prices and slow wages tend to impact laggard social groups, such as Dalits and Muslims, in India.

Often, while slower growth results in the same set of conditions, disadvantaged groups suffer the most because their capacity to mitigate the conditions is lower.

Here’s how India’s economic flight went. Just as super-strong air currents rock an aircraft from side to side, slowing it down considerably, a fast-growing India ran into recession headwinds. Luckily, it recovered quickly enough.

The government pumped lots of money into the system, as was necessary to steady things, raising consumption levels — or normal buy-and-sell transactions — back to 8% annually between 2009-10 and 2011-12.

These routine emergency steps by a government piloting the economy through tough times, however, caused inflation to rise uncontrollably.

It created a classic textbook situation where too much money chases too few goods, heightening a demand-supply mismatch. High retail prices, of above 10%, have now become entrenched in food prices.

Costlier food has shaved off precious domestic savings, hurtling India’s households — Uttar Pradesh’s alone is nearly equal to that of entire Brazil – into a silent crisis.

The Reserve Bank fought back, raising interest rates, making less money available for borrowing and spending, which in turn slowed investments and growth.

Is India stuck in a rut? India’s annual Economic Survey has painted a “cautiously optimistic picture” of the economy during 2013-14, according to Sonal Varma, an economist with Japanese investment bank, Nomura Holdings. “The downturn is more or less over,” the survey has said, predicting growth to exceed 6%.

To shore up its finances, India has been raising domestic diesel and LPG prices steadily. Nothing fans inflation more than a fuel-price hike. Some analysts point to a “stagflation”, where growth stagnates, while inflation keeps rising.

When expenses go up, the first thing people notice is food prices, the single biggest slab of their monthly expenditure. A critical impact has been on household savings.

Indians traditionally save good amounts in bank deposits, a key driver of prosperity. Savings are now rapidly falling.

Financial savings accounted for 55% of total household savings during the 1990s. This share fell to 36% in 2011-12. The current shortfall is nearly by Rs 90,000 crore.

Worryingly, food inflation is rising due to higher cereals, such as wheat, rather than protein items, such as meat, as in previous years. This shift has affected the diets of low-income families more.

This time around, prices have been fuelled by a scarcity of grains in the open markets, ironically, because the government has been cornering large quantities from farmers for distribution to the poor.

The government has been offering higher and higher minimum support prices (MSPs) to farmers. Higher MSPs boost farm income and encourage farmers to grow more because they get a guaranteed price, but these have now emerged as a key inflation risk.

According to an RBI study, a 10% MSP hike raises short-term wholesale inflation by 1 percentage point.

In his official report, India’s chief economic advisor Raghuram G. Rajan has suggested looking beyond higher MSPs as farm incentives.

N.R. Bhanumurthy, an economist with the state-owned National Institute of Public Finance and Policy, sums it up aptly: “High (inflation) has become the new normal.”

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  • dimple mehrotra

    I find the title of your blog a little or maybe grossly communal.

    Is the agenda for Muslims supposed to be different from that of Hindus or Christians? Anyway if it is different, I hope it is about uplifting the veil and getting Muslim girls to fight against gender discrimination along with us, that is other INdian girls.

    Are you suggesting that the economic downturn is going to hit the disadvantaged more, if so you are right. Put you would be acting communal if you say that Muslims alone would be hit. but let us also face it that this downturn has only come in becasue too much has been spent on social welfare without first earning it.

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    ehgrich Reply:

    dimple nothing is possible till stomach is full.muslims are last to be hired and first to be fired.read vrious reports by committees appointed by goi u will find muslims in worst condition as compare to others.this is because of descrimination.

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    Abhi Reply:

    “u will find muslims in worst condition as compare to others”
    If, every terror attack in India is a Jehadi fight, muslims will stay in worst conditions.

    What we want to see, is for the muslim groups to fight these terror attacks and thus show that they stand shoulder to shoulder with the majority for the over all well being of India.

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    engrich Reply:

    not even a single muslim is jehadi in india.abhinav bharat was planting the bombs putting the blame on muslims.thanks god they are caught and having good time in jail.

    muslims are the golden gooze of indian economy most of the cities in india are known because of their handicraft works.

    Shiva Prasad Reply:

    Engrich, please dont give a muslim communal color to poverty. Poverty does not discriminate one against the other. Read many other research in India where muslims are richer than many other Hindu Indians in tribal areas and so on. So lets look at the facts rather than making it a muslim or a hindu problem. First, India was divided on 2 nations theory Hindu India and Muslim ****. **** went on to become Islamic but Hindu’s in India decided to make India secular. That was the largeness of Indian Hindus…which they dont have to. They could have conveneiently had Hindu India. Secondly, rich muslims migrated but poor uneducated muslims didnt migrate to Pakistan even though they were supposed to as part of Partition. Unfortunately, India has to deal with these muslims who were left behind in India and in a big number. Third, if India was bad why did these guys multiply from 7% to 20% of India’s population….more

    Shiva Prasad Reply:

    ….continued…
    Now, how do you expcet a single muslim to feed four wives and many children? Hence lets be practical and realistic. The reality is that by design muslim kids will have less to share if all other conditions remain same. It is the theory of probabilty. Now, Indians have made tremendous progress on all fronts but we are still backwards in many areas. So when it comes to progress also it has been widely achieved…if hindus and christians became rich so did muslims such as Ajimji Premji or the Bollywood personalities such as Khans…Shahrukh is rumored to be worth 5000 crores or more. In political life, muslims have more share than they should such as VP, FM, SC CJI, and many more. In some sectors they have traditionally been far advanced such as handicrafts like you said and in some sectors they have been backwards. If Muslims really want to grow in India they have to modernize, leave the madrassas system, have only 1 kid and only 1 wife. Then it is much easier t

  • bala srinivasan

    While this Blog is partly correct its remedial solution is non existant.Until INDIA FULLY embraces MARKET ECONOMY&STOP the HALF COOKED MEASURES the TROUBLE will not only prevail but exacerbate.We procrastinate first,pontificate next&finally offer HALF BAKED&HALF HEARTED SOLUTIONS leading to worsening CONDITION.UNTIL we become BOLD&CONFIDENT there is NO WAY OUT.

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  • Koki

    This is what happens when people are fed with unreasonable hope of doubling the return on their investment every year. Unrealistic euphoria,it it is called.

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  • http://www.facebook.com/deepakj Deepak Jain

    Hope the author realizes that the solution lies in empowering the downtrodden, instead of doling out money as has been the case. And please name the UPA when they deserve, the way you do with the BJP

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  • young bengal

    Folks INDIA IS GOING DOWN THE PAN.LIVING IN INDIA IS SAME AS LIVING IN A MORAL SEWER.Else how can you explain the scum NDTV brazenly inviting MANU ******** SINGHVI , day in day out in prime time tv.Indians who like to lecture the “west” on its moral decrepitude need to reflect how a man who tramples on marital fidelity and USES high office and the bartering of judge’s post for some nookie in his back office can go about as if nothing happened. Now it is possible the anchors in NDTV empathise for they may be fellow travellers..Next a russian hooker will be able siphon off stragetic secrets for a few shag.

    NO WONDER INDIA IS A BECOMING A LAND OF RAPISTS

    Next the ECONOMY. I have discussed this umpteen times in some other guise in these blogs.Let me reiterate.

    Inflation is universal ,even I feel it in uk. though being a surgeon , doesn’t preclude me from going to watch Flamenco Festival , tickets costing the equivent of one way fare to resorts in spain.Only a year or two ago there were FOOD RIOTS in cairo. Though EU has GRAIN MOUNTAIN and WINE LAKES and butter mountain , but high fuel prices vis a vis transport cost as well PRINTING MONEY IN BILLIONS now euphemistically known as QUANTITATIVE EASING.has caused this inflation in uk.You dont need rocket

    science to explain the plight of greece and spain, though there the ONLY problem is UNEMPLOYMENT running at 25%.

    BUT INDIA’S PROBLEM IS FAR MORE FUNDAMENTAL

    1.India needs “Revolution in Agriculture”. Needs to come out of STONE AGE.

    All land holding coalesced into a CORPORATION with patta holders getting a share of the company as well as job in the corporation.

    TOTALLY MECHANISED FARMING with computer controlled irrigation and fertiliser use, and INTENSELY DENSE sowing of seeds by machines as is done in WEST, with a view to bring the productivity in line with the west.
    Currently the stasiticsis 3 india 8 west(per acre yield)

    COMPULSORY UNIVERSAL ENGLISH MEDIUM EDUCATION with 500 marks for vernacular. Establish a centre for comparative education to learn about the different methods in different country.
    MOST IMPORTANT OR THE IMPORTANT
    DIGITALISE EDUCATION with virtual teachers
    this will ensure UNIFORM HIGH STANDARD , ZERO TEACHER ABSENTISM
    all you need is a television studio and bandwith.
    instead of teachers there should be LIFE COACHES in classes with mandatory qualification in child and adoloscent psychology

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    Anonymous Reply:

    You would quote Nirad choaudhry as if he were God. Now the news has come out that Nirad was a British spy !! And he got UK citizenship for it. What do you have to say to that?

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    young bengal Reply:

    vinoo have you heard of any indian spying for pakistan hanging the portrait of jinnah in his home. same here , nirad dick head did not make any bones about his mesmerisation with the racist scum churchill and in his book “the continent of circe , he unashamedly claims to have redidcovered his european roots through his aryan ancestry. So there you have it. after reading Madhushree Mukherjee’s book i now rate nirad as a buffoon, then nirad moron was a history graduate , and madhushree is a phd in physics form newyork uni, and used to be on the editorial board of Scientific American. It is like comparing nirad ambassador car with madhushree porsche carrera

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  • Abhi

    “disadvantaged groups, and ethnic, religious and other minorities, such as Muslims and migrants, could be worse off.”
    If, in the words of our prime minister, the resources of the nation belong “First to the Muslims”, since when are the muslims the “disadvantaged” group in India?

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  • Faulitics

    This author even frames a common problem of poverty in communal terms as if not being Muslim means you are living it up.he looks at everything through a communal colored prism. Sign of an arabized mind which is trained to look at everything as us and the them.

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    GUEST Reply:

    hindu haijehan gareebi hai wahan.they dont share their wealth with poors.they share it with bhagwans.

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    Faulitics Reply:

    Maybe your Arab masters will share their wealth with you because you bend over five times a day towards their lands and not your own to confirm that you are their slave.

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  • Anonymous

    The muslims are not poor. Most of the money they have is BLACK thru criminal activities.

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  • Zia Chutiya

    Zia, go back and take some classes in economics. Then go to some villages and drink some milk. Then change your surname to Ghandi. Now, you are ready….you are Roul the Chutiya who can talk about economics like you currently do Zia….you have no clue what you are talking about. Go back and just handle news….you have no background or even any common sense on what it means when it comes to India’s stagnation. It is because our current government opened up the economy without thinking, more manufacturing jobs have left India and not as many service jobs came, our import bill is higher than exports, no incentive to exports, and then we sold our country to China, Walmart, and IKEA’s of the world. As long as we borrow to pay for our appetite for oil, gold, and other imports, as long as we waste money on NREGA (1 lac crore every year…SOnia’s dream but then Rajiv said only 10% reaches the masses so 90% reaches Sonia’s pockets)….we will never come out of this rot.

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