How healthy is the Indian economy, Tripathi ji?

Dear Col. (Retd) Anil Tripathiji,

In the run-up to the General Election 2024, hardly a few weeks away, any statistical data-backed released by the party in power would raise eyebrows.

On January 15, 2024, when the Press Information Bureau (PIB) — yes, the government-owned media arm — put out a one-pager detailing a slew of numbers, I sat up.

Here’s what the data revealed:

24.82 crore Indians have escaped multidimensional poverty in the last nine years.

Uttar Pradesh, Bihar, and Madhya Pradesh recorded the largest decline in MPI poor between 2013–14 and 2022–23.

Poorer states record a faster decline in poverty, indicating reduced disparities.

India will likely achieve SDG target 1.2 (reducing MPI by at least half) ahead of 2030.

Okay. Okay.

Tripathiji, one cannot ignore numbers. There ought to be some truth in it. Yet, it may not go uncontested. After all, India is a democratic country; let us not forget that it is election eve.

Let me not list the umpteen programs announced and delivered over the period under discussion because we are familiar with them. Day in, Day out. Courtesy elections in one state or another force the Opposition and the Treasury Benches to keep harping on their weaknesses and strengths, respectively, to regain (for the Opposition) or retain (for the ruling party) power.

The talk about Bihar, Madhya Pradesh, Uttar Pradesh, and Rajasthan was significant. If you recall, Tripathiji, these states formed the core of the derisively called BIMARU states with no economic development to boast of vis-a-vis the rest of India.

Of these four states, barring Bihar, the ruling party at the center is the ruling party in these states, too. In Bihar, it was jointly in the saddle until the alliance broke and got ejected. In UP, it is a double engine. Madhya Pradesh, too. Rajasthan is back in the saddle after a five-year gap.

Leave aside the Hindutva wave sweeping the country, which critics of this government would harp upon.

People are NOT that stupid. They would not be carried away by such a notion alone. For these underprivileged or most deprived classes, survival matters. Daily.

It would be too far-fetched to surmise that their interests have been taken care of to a certain extent. Otherwise, they would not returned to the ruling party in UP, and the MP would have asked the incumbent rulers to continue in the saddle. Similarly, if they were happy with the previous regime in Rajasthan, the party that lost at the hustings would be ruling, which is not the case. It conceded defeat, enabling the central ruling party to engineer another double-engine governance.

Tripathiji, for a moment, let us leave the government report for a while. Take a look at this news item in the pink papers,

Rural demand for passenger cars in the calendar year 2023 was phenomenal, surpassing automakers’ urban sales figures. Maruti Suzuki rural sales shot 45%, Hyundai 17%, Tata Motors and Mahindra 40%.

Hang on. The rich in the rural areas bought, right? Agreed. What brought about this surge in sales?

Listen to Hyundai Motors Chief Operating Officer Tarun Garg: “Rural demand for cars continues to be strong. The government’s focus on developing road infrastructure, higher minimum support prices for crops, and decent monsoons have put more money in the hands of the consumers, which is driving sales of cars.”

Who does the minimum support price (MSP) go to? Farmers. Road infrastructure is facilitating farm produce’s reach to the marketplace near and far away. By the way, 45% of the Indian workforce depends on agriculture, contributing 18% of GDP.

Tripathiji, given your preoccupation with the transportation/logistics segment, post your VRS from the Indian Armed Forces, these numbers mean a lot to you.

Why it should be? Because the farm produce, be it for domestic consumption or exports, has to be moved from farm gates to consumption centers. Are these items carried in bullock carts? Or freight trains? By road, Colonel saab!

For a moment, keep aside the farm produce. What about the non-farm items? Industrial machinery, including spare parts, fuel, etc. They also have to move from production points to everywhere. It does not matter whether a certain village or town produces that item; people living in those areas also need essentials and non-essentials.

Tripathiji, you would have noticed the mushrooming growth of logistics service providers (LSPs) lending shoulders for the Indian industry to build/manage warehouses at remote locations to service demanding customers as quickly as possible.

Not to be forgotten the export trade to the rest of the world. Except for coastal states, the rest of them have no seacoast. Yet, they manufacture for global markets. How do they move? By Road. By rail. These create jobs. Jobs mean money. Money means the ability to spend.

Simply put, there is nothing called an ideal peaceful state or nation. There will be ups and downs. Even the so-called developed countries have beggars on roads. Poverty. They can manage, given their population size. Some Indian cities’ populations may equal many countries outside India. India is so huge: 1.4 billion mouths to feed. Bodies to clothe. A Himalayan task: that many to take care of or relieve them from all stresses and strains of … hmmm. living.

Tripathiji, I rest my case.

Now I am waiting to hear from you,

Regards

Ramesh

Ref:

1. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1996271

2. Maruti, Hyundai, TaMo, Renault Post Record Rural Sales in 2023, The Economic Times, January 16, 2024

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COL. ANIL TRIPATHI responds:

Dear Ramesh ji,

It was a pleasure to hear from you.

In the absence of the official report of the Consumption Expenditure Survey (CES) conducted by the National Sample Survey Organisation (NSSO) and the nationwide Socio-Economic Caste Census (SECC) since 2011, if we take the Indian MPI index to be the accurate indicator of the economic growth of our nation, I agree with most of what you say though there may be some minor fluctuations in the numbers mentioned.

This official statistical data indeed paints a bright picture of the Indian economy since 2014. Even if detractors argue that data can be manipulated in favor of party in power, there can be no denying that India’s relevance in geopolitical scenario has increased exponentially in the past nine years which only goes to show that more and more countries find India a lucrative investment option.

The obvious conclusion that can be drawn here is that there has been an increase in the purchasing power of the average Indian. To maintain this trajectory, stability of governance is highly imperative and any change at this juncture, taking other available options into consideration, will prove to be an impediment to this momentum.

As per Economic Survey 2022–23, logistics costs have been in the range of 12–14% of GDP against the global benchmark of 8%. A major bright spot is that India has climbed six places to rank 38th out of 139 countries in the World Bank’s Logistics Performance Index for 2023.

Owing to increased State spending on the logistics infrastructure and improvements in road network, tax reforms and digitization of supply chains, the logistics costs including transportation, warehousing, insurance and administrative charges have come down slightly.

This significant difference in logistics costs creates a competitiveness gap for Indian businesses. As the growth of the logistics industry plays a significant role in the growth of Indian economy, the government should ensure that this sector keeps evolving rapidly by removing bureaucratic hurdles through further refinement and streamlining.

Simplifying documentation, reducing checkpoint wait times, and minimizing corporate hurdles like wait time for loading, wait time for unloading, etc., will help in streamlining processes across the Supply Chain Industry.

Developing logistics parks and warehouses, enhancing last-mile connectivity, and reducing dwell time at ports, plants and checkpoints can be successfully implemented with close coordination between various stakeholders, including the government, logistics providers, and industry associations.

Evolving government policies on taxation and regulation of service providers are going to play an important role in this process. Coordination across various government agencies and requirement of approval from multiple ministries is a road block for multi modal transport in India. Fragmented transportation networks & multiple small time players, reliance on manual paperwork, and insufficient infrastructure, all contribute to elevated operational costs.

These challenges not only impact businesses but also result in increased expenses for consumers. The logistics sector also faces a shortage of skilled manpower to leverage innovative logistics technologies fully. The Government should promote Logistics Skill Development courses to build a workforce proficient in data analytics, IoT, and AI for realizing the cost-saving potential of these innovations.

The Government’s prioritization of capital expenditures and raising the share of its expenditure towards highways, railways, and ports is likely to aid growth and help bring down logistics costs by bringing in more private investment.

Initiatives of Indian Railways to increase freight carrying capacity, improved speed of freight trains, reduce freight costs, creation of dedicated freight corridors, last-mile connectivity between railheads, roads and ports, PM Gati Shakti, industry status for logistics, multimodal connectivity, digital initiatives in logistics, City Logistics Plans, Multimodal Logistics Parks, and creation of storage infrastructure are further expected to reduce logistics costs.

With geopolitical fault lines looking to disrupt international trade and thereby result in steep rise in prices, the Indian Government’s best bet lies in strengthening its domestic logistics network and reducing domestic transportation costs through optimal utilization of technology, improving infrastructure, development of skilled manpower and facilitating conducive business environment to encourage entrepreneurship in the logistics field.

Rameshji, I believe we both are in agreement here with regards to the direction our country is inching gradually towards.

Sincere Regards,

Anil Tripathi