“If you could look into the seeds of time, and say which grain will grow and which will not.”
—William Shakespeare (Macbeth)
This is the thought that will strike readers upon any conjecture on what will be in 2016. The year 2015 has not quite been eventful either ways, which is reassuring as there is no past baggage to carry forward into the new year. There are 10 questions that will be asked to economists and, quite expectedly, there will be several views. But frankly, it is hard to guess given that most conjectures have not quite worked out in 2015.
Will GDP growth be better? We normally assume that, since 2016 will be better than 2015, it has to be higher at 8%. But even in 2015, we started with 8+% and ended up weaker. It is just a case of adaptive expectations, where we are assuming that things get better. Various economists would hold a view that takes the number beyond the 2015 number of 7.5%. After all, everyone is doing their job as they are supposed to. ‘All the world’s a stage, and all the men and women are merely players.’ (As You Like It)
Will the investment cycle take off? In 2015, this has not quite happened. We have pinned our hopes on the government, which has been aggressive on roads and railways. But the numbers do not still show. After all, the government has a small part to play in this big game given the constraint on its resources, with several fiscal issues casting a shadow. But clearly, something has to be done, or else, we will continue to go down the cycle. ‘Delays have dangerous ends.’ (Henry VI)
What about the big projects that have been played up through the year? The Make-in-India, Digital India, Smart Cities, Swachh Bharat initiatives, etc, were all to be big game-changers, given the money involved. Do we have the money to back them up, as, ultimately, while creating an enabling environment is necessary, that by itself cannot turn things around. ‘Nothing will come of nothing.’ (King Lear)
What about the fiscal deficit for FY17? We had spoken of lowering it towards 3% in course of time from 3.8% targeted for FY16. But then things never go as planned and the best laid plans receive setbacks. Disinflation has pushed back growth in GDP, which makes it harder to achieve the 3.8% mark. Disinvestment remains a game for PSUs to play and while tax collections have been buoyant this year even though the base has not increased substantially, we cannot bank on being this lucky twice. It is hoped that we have a pragmatic budget which is realistic and formulated on such lines even if it means living with a higher fiscal deficit ratio. ‘This above all, to thine own self be true.’ (Hamlet)
Will the rupee be stable? This is anyone’s guess. Besides, do we want it to be strong or weak? A strong rupee impedes exports while a weak currency affects corporate profitability. Our fundamentals have been fairly robust but external conditions, like the expected Fed rate hike or the Yuan depreciation, have driven the rupee down. We like to take calls on the rupee and scale up when it falls and vice versa. ‘Confusion now hath made his masterpiece.’ (Macbeth)
How will the global environment be? The Fed action is no longer a surprise as the direction and quantum of change is known. It will not play a decisive role now. Nor will the ECB action as that has also been stated. The Bank of England or Japan will not matter, too. But the joker in the pack can be China which can keep devaluing its way out to keep exports ticking. This is something we will never know and, when it happens, there will be another round of turmoil. Somehow, the global community never has control over the dragon kingdom. ‘Fair is foul, and foul is fair.’ (Macbeth)
Will our interest rates come down? One hopes so but cannot be sure as it will depend on inflation. When rates go down, it is not that everyone is happy. Savers lose and borrowers gain. But when the latter happens, it does not necessarily lead to higher offtake and growth. So, frankly we do not know if it is good or bad. Therefore, we should not be carried away by the present trajectory of interest rates as all the pieces on the demand side must fall in place for these cuts to make sense. ‘All that glisters is not gold.’ (The Merchant of Venice)
Will the ghost of GST will keep haunting us? Everyone seems to be in agreement over it as all amendments have been made to placate interest groups. The rollout date has been getting rolled over every year, with political motivations stymieing discussion—a true manifestation of democracy. And everyone is pleading for it, but it all lies in the hands of the Opposition, which, despite its feeble strength, is big in stature now. ‘The fault, dear Brutus, is not in our stars, but in ourselves.’ (Julius Caesar)
What about agriculture? Well, that will be remembered when the monsoon fails. Till then, it is assumed that there is no problem. We normally never have two pulses shock and, hence, based on past experience, should not worry too much. True, no one speaks of this sector after the storm passes because, frankly, we do not care. It is not glamorous and attracts fewer people at seminars. ‘The miserable have no other medicine but only hope.’ (Measure for Measure)
Last, will our banking sector turn around? We have all been talking of lowering NPAs and increasing capital of PSBs. A lot of measures have been announced, like Indradhanush or the bankruptcy code. PSBs are waiting for these big changes to come through. But RBI data in the financial stability report, brought out just as the calendar year changes, is disturbing. What do we do about NPAs? The question will linger on in 2016. ‘Out damned spot, I say’ (Macbeth)
While there will be a plethora of models by various economists, analysts, banks, agencies, research houses on all these subjects, the last words would be—que sera, sera. Whatever will be, will be. The future’s not ours to see. Que sera, sera. Whatever will be, will be.
But we economists, as the ubiquitous stage players, will make our entries and exits with forecasts and expectations. So, better watch out.
Happy New Year!
—William Shakespeare (Macbeth)
This is the thought that will strike readers upon any conjecture on what will be in 2016. The year 2015 has not quite been eventful either ways, which is reassuring as there is no past baggage to carry forward into the new year. There are 10 questions that will be asked to economists and, quite expectedly, there will be several views. But frankly, it is hard to guess given that most conjectures have not quite worked out in 2015.
Will GDP growth be better? We normally assume that, since 2016 will be better than 2015, it has to be higher at 8%. But even in 2015, we started with 8+% and ended up weaker. It is just a case of adaptive expectations, where we are assuming that things get better. Various economists would hold a view that takes the number beyond the 2015 number of 7.5%. After all, everyone is doing their job as they are supposed to. ‘All the world’s a stage, and all the men and women are merely players.’ (As You Like It)
Will the investment cycle take off? In 2015, this has not quite happened. We have pinned our hopes on the government, which has been aggressive on roads and railways. But the numbers do not still show. After all, the government has a small part to play in this big game given the constraint on its resources, with several fiscal issues casting a shadow. But clearly, something has to be done, or else, we will continue to go down the cycle. ‘Delays have dangerous ends.’ (Henry VI)
What about the big projects that have been played up through the year? The Make-in-India, Digital India, Smart Cities, Swachh Bharat initiatives, etc, were all to be big game-changers, given the money involved. Do we have the money to back them up, as, ultimately, while creating an enabling environment is necessary, that by itself cannot turn things around. ‘Nothing will come of nothing.’ (King Lear)
What about the fiscal deficit for FY17? We had spoken of lowering it towards 3% in course of time from 3.8% targeted for FY16. But then things never go as planned and the best laid plans receive setbacks. Disinflation has pushed back growth in GDP, which makes it harder to achieve the 3.8% mark. Disinvestment remains a game for PSUs to play and while tax collections have been buoyant this year even though the base has not increased substantially, we cannot bank on being this lucky twice. It is hoped that we have a pragmatic budget which is realistic and formulated on such lines even if it means living with a higher fiscal deficit ratio. ‘This above all, to thine own self be true.’ (Hamlet)
Will the rupee be stable? This is anyone’s guess. Besides, do we want it to be strong or weak? A strong rupee impedes exports while a weak currency affects corporate profitability. Our fundamentals have been fairly robust but external conditions, like the expected Fed rate hike or the Yuan depreciation, have driven the rupee down. We like to take calls on the rupee and scale up when it falls and vice versa. ‘Confusion now hath made his masterpiece.’ (Macbeth)
How will the global environment be? The Fed action is no longer a surprise as the direction and quantum of change is known. It will not play a decisive role now. Nor will the ECB action as that has also been stated. The Bank of England or Japan will not matter, too. But the joker in the pack can be China which can keep devaluing its way out to keep exports ticking. This is something we will never know and, when it happens, there will be another round of turmoil. Somehow, the global community never has control over the dragon kingdom. ‘Fair is foul, and foul is fair.’ (Macbeth)
Will our interest rates come down? One hopes so but cannot be sure as it will depend on inflation. When rates go down, it is not that everyone is happy. Savers lose and borrowers gain. But when the latter happens, it does not necessarily lead to higher offtake and growth. So, frankly we do not know if it is good or bad. Therefore, we should not be carried away by the present trajectory of interest rates as all the pieces on the demand side must fall in place for these cuts to make sense. ‘All that glisters is not gold.’ (The Merchant of Venice)
Will the ghost of GST will keep haunting us? Everyone seems to be in agreement over it as all amendments have been made to placate interest groups. The rollout date has been getting rolled over every year, with political motivations stymieing discussion—a true manifestation of democracy. And everyone is pleading for it, but it all lies in the hands of the Opposition, which, despite its feeble strength, is big in stature now. ‘The fault, dear Brutus, is not in our stars, but in ourselves.’ (Julius Caesar)
What about agriculture? Well, that will be remembered when the monsoon fails. Till then, it is assumed that there is no problem. We normally never have two pulses shock and, hence, based on past experience, should not worry too much. True, no one speaks of this sector after the storm passes because, frankly, we do not care. It is not glamorous and attracts fewer people at seminars. ‘The miserable have no other medicine but only hope.’ (Measure for Measure)
Last, will our banking sector turn around? We have all been talking of lowering NPAs and increasing capital of PSBs. A lot of measures have been announced, like Indradhanush or the bankruptcy code. PSBs are waiting for these big changes to come through. But RBI data in the financial stability report, brought out just as the calendar year changes, is disturbing. What do we do about NPAs? The question will linger on in 2016. ‘Out damned spot, I say’ (Macbeth)
While there will be a plethora of models by various economists, analysts, banks, agencies, research houses on all these subjects, the last words would be—que sera, sera. Whatever will be, will be. The future’s not ours to see. Que sera, sera. Whatever will be, will be.
But we economists, as the ubiquitous stage players, will make our entries and exits with forecasts and expectations. So, better watch out.
Happy New Year!
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