In with the new: Indian Express 11th December 2024

 

Steering RBI through turbulent times: Business Line 11th December 2024

 

Maha Kumbh Mela Will Boost Economy Of Uttar Pradesh: Free Press Journal 7th December 2024

 

The Maha Kumbh Mela would be probably the biggest social extravaganza in the country in the ordinary course of activity. This is because it is a periodic event and is quite predictable. Unlike the IPL or any big sporting event, this festival brings people from across the country to one single location based on faith and belief. It is probably the largest congregation of people in the world which is expected to be around 400 mn over a period of 45 days starting on January 13 right through February 26. This festival has historically been an exposition of how good India is in planning such events which generally goes off very smoothly notwithstanding the numbers and logistics involved. Needless to say, it creates a temporary economy for this period of time covering a vast multitude of economic activity. Specifically it would provide a boost to the economies of Uttar Pradesh and hence India. Hence, going beyond faith, the event is very significant for the economy at large.

The Mahakumbh festival comes every 12 years while smaller gatherings take place periodically, with Haridwar, Nashik and Ujjain being the other centres. The economic impact can be gauged from the fact that over 400 million visitors including pilgrims would be visiting Prayagraj on this occasion. This is much higher than the 250 mn which visited in the last festival. In fact, the number would be higher than the overall population of Uttar Pradesh which is around 250-260 mn. The festival attracts a large number of overseas visitors and the accommodation that has been created aligns with the varied backgrounds of visitors.

 

Preparations for this festival from the government started from April onwards and has reached its peak in November. The first thought which will strike the reader is the amount of money that would be involved in this festival. As 400 million people would be visiting and coming from far and wide (besides the local population which would almost certainly be present), spending for travel and food (excluding stay) would mean a minimum expenditure of between Rs 20,000-30,000 crore assuming Rs 500-750 is spent on a per capita basis. This is so as there would be several families coming to engage in these celebrations. The amount spent could be much higher.

Let us look at the hospitality business which would witness a major boost. It has been reported that there would be over 2000 luxury tents set up in this area as well as over 25,000 public accommodation. Besides, these structures which would be put up, there would be several hotels in Prayagraj as well in its vicinity which would offer space for visitors and also include homestays which are registered for this purpose. The rates vary from as low as Rs 2500 to Rs 25,000 per night depending on the amenities that are provided. The overall business would vary between Rs 1500-2000 crore over this time period.

 

In terms of softer infrastructure, the preparations include nearly 70,000 additional street lights to facilitate movement from the river to the various tents/hotels/home stays. To ensure that security is tight around 23,000 CCTVs are to be installed. This will provide a major boost to the suppliers of these services/products. Over 7,000 roadways buses, 550 shuttle buses, and 3,000 trains would be plying during the course of the festival which can give an idea of the revenue to be generated by each of these facilities. It may be assumed that most of these vehicles would be rented and hence may not directly lead to purchases of vehicles. The hiring costs would work out to around Rs 500 crore for these 45 days. The railways would also simultaneously be generating revenue due to movement of pilgrims/visitors.

 

Intuitively it can be conjectured that the travel and tourism industry would be one of the biggest beneficiaries of this extravaganza as it would also mean ensuring the upkeep with a large retinue of staff which could be temporary. The authorities have spoken of erecting over 1.5 lakh toilets to cater to the requirements of the visitors which is a boost for the manufacturers of such facilities. There is also mention of over 10,000 staff being hired to maintain the hygiene in these toilets. Demand for these facilities would be on the rise providing a boost to the producers of these mobile toilets. The project for cleanliness has been valued at around Rs 240 crore.

Add to this the fact that another 25,000 craftsmen have been involved in doing up the decorations as well as statues/paintings that go along with such festivities, and one can get a feel of the high employment being generated by the event. This festival hence would be a very good platform for employment of gig workers in both the skilled and unskilled spaces. Besides, these specialists jobs, the government administration has put out advertisements for hiring specialists in areas of event coordination, customer support, logistics support etc. with these jobs being for a period of three months. An advertisement put out for recruitment of Kumbh fellows speaks of hiring qualified persons for specialist jobs with a remuneration of Rs 40,000 per month for 6 months.

The local authority has also focused on the catering requirement for this event. This has involved in getting all the street vendors together and educating them about the logistics involved as well as the hygienic conditions that have to be maintained all through the period. This will be a boost to the micro enterprises as most of them would be this category as there will be steady business during this period. In fact, other vendors of religious artefacts and emblems, toys, decorations etc. would flourish and would be in the realm of micro-shops.

The government on its part has been involved in cleaning up the city and upgrading the roads which would be used for travel to the river for these many tourists. Hence, this is another boost being provided to the Kumbh economy which will also address the issue of capex spending by the state government. The focus has been on constructing new roads and bridges through the breadth of Prayagraj which is essential to facilitate smooth movement of visitors. These are permanent structures and would add to the infrastructure wealth of the state.

Hence, the UP economy would be well positioned to register higher growth on account of the festival. Anecdotally, any extravaganza which attracts large audiences and creates new structures provides a boost to the local economy. The Olympics have been an example of adding significant growth impetus to the countries organising the same. As has been seen here, the Maha Kumbh Mela will provide the right push the economy which augurs well for the state and the nation.

 

pivot-wait-credit-policy-points-to-a-rate-cut-in-february-: Livemint 6th December 2024

 https://www.livemint.com/opinion/online-views/pivot-wait-credit-policy-points-to-a-rate-cut-in-february-rbi-monetary-cash-reserve-ratio-inflation-shaktikanta-das-11733408010166.html

Simplifying inflation isn't simple: Economic Times: 6th December 2024

 

Resolving the base year conundrum: Businessline 5th December 2024

 

Q2 GDP numbers have positive takeaways": Financial Express: 2nd December 2024

 The GDP numbers for Q2FY25 came as a major surprise as no forecaster predicted a figure close to 5.4%. But there are several positives when one looks closer. Sector-wise analysis shows that four of the eight did better than last year while one recorded high growth on a high base, though numerically lower.

Thus, higher growth can be expected in Q3, when the crop is harvested. Add to this the high reservoir levels, and this means that the rabi crop can be expected to be very good in the absence of any weather shocks in March-April. Hence, the rural story can only get better in H2, which is positive for consumption. This bodes well for fertilisers and other inputs on the supply side and two-wheelers, tractors, electronics, and consumer goods on the demand side.

Second, the services sector has posted higher growth rates this quarter. The trade, transport, hospitality, and communication segments grew by 6% over 4.5% last year. This is indicative of the spending seen this quarter, which will only accelerate in the coming months. There has been a major push in the “experience spending” by households this season, which will manifest in continued expansion. The Q2 numbers do not capture the festive spending, which has shown enhanced sales both in physical outlets as well as e-commerce sites.

The finance and real estate sector grew by 6.7% compared to 6.2% last year. It should be remembered that this was also the period of slower growth in bank deposits as savers migrated to capital markets, keeping growth subdued. This had been reversed subsequently, and higher growth can be expected in H2. Further, the economy is now in the conventional busy season, where demand for credit picks up. This can be seen in the rather stable growth in credit to large industry as of October. Therefore, higher growth in this segment may be expected in Q2.

The third component — public administration, personal services, and defence — recorded the highest growth rate of 9.2% across the sector over 7.7% last year. A significant component here is government expenditure, which was subdued in November. In fact, government spending was slow in the first few months of the year and has picked up quite sharply in the last couple of months. This means that the tempo of growth will be maintained as the different departments work to meet expenditure targets.

Therefore, the picture on two major segments — agriculture and services — is positive, with little apprehension. Then where has the problem been? The value added from construction was lower at 7.7%, which is impressive as it follows 13.6% growth from last year. Prospects here are linked with both road construction (in the government’s purview) as well as housing, which witnessed a lull in September but has since picked up during the festive season. This means that the underperformer has been industry, which includes mining, manufacturing, and electricity.

In case of mining and electricity, growth was 0.1% and 3.3% respectively. Here, the base effects were stark, at 11.5% and 11.1% respectively. While these segments did pull down overall growth in industry and GDP, the statistical base effect did play a role. These statistical effects are important insofar as future growth rates of segments in industry and services can be influenced by them, as the overall economic growth was high at 8.2% last year. 

In fact, electricity consumption was high in Q2 until mid-August due to extreme heat conditions in several states, pushing up demand, which does not get captured. Further, mining typically slows down during monsoon. It can be expected that production would get better in H2.

This leaves manufacturing, which has been the major under-performing sector. It has a weight of 17-18% in gross value added (GVA). Here, the performance has been K-shaped, with some sectors doing well and others lagging. This is revealed in the profit and loss accounts of companies for Q2. This has been the single most important factor for pulling down growth, as profitability has been low at the aggregate level. Sectors such as steel, refinery, chemicals, etc. have recorded lower growth in profits, which has affected value addition.

The government too has done some subsidy front-loading this quarter, as can be seen in the monthly budgetary accounts. This has created a negative wedge between GVA and GDP growth. Therefore, while the Q2 numbers are a negative surprise, the internals reveal stable growth in several segments. Consumption growth at 9.6% in nominal terms is higher than that of nominal GDP growth, which is a positive sign.

Based on farm prospects as well as the government’s aim to meet budgetary outlays, H2 growth would be higher. The risk factor would be corporates, also facing rising input costs. Besides, the base effects of high growth of 8.6% and 7.8% in H2FY24 will also affect the future growth numbers. Based on the buoyancy seen in services in particular and a possible rebound in industry to an extent, growth of around 7.5% in H2 cannot be ruled out. This can make the overall growth average around 6.6-6.8%, which, though lower than earlier projections of above 7%, would provide a base for stronger growth in FY26.