Latest news with #S.MahendraDev
Mint
a day ago
- Business
- Mint
‘India Inc must make fresh investments instead of sitting on cash'
New Delhi: Indian companies need to make fresh investments instead of holding cash, since their profits have improved and have healthy balance sheets, chairman of the economic advisory council to the prime minister (EAC-PM) S. Mahendra Dev said in an interview with Mint. To be sure, private investments are showing early signs of growth, and will likely accelerate once global uncertainties subside, he said, before conceding that government capital expenditure remains central to short-term economic stimulus. He emphasised that investment-led growth is the most effective strategy for India, hoping that rural and urban demand gathering pace will catalyse increased private investments. US president Donald Trump has unleashed a disruptive tariff war against the world, causing a great deal of trade uncertainty and prompting companies to hold off on fresh investments. Dev emphasised that India's economy has the capacity to grow on a sustainable basis at rates needed for becoming a developed-country over the next 25 years—some estimates project a requirement of nominal growth of 11% to 12% and 7% to 8%, adjusted for inflation. However, states have to make more efforts to attract investments, both domestic and foreign, Dev said. India's economy expanded at 6.5% in FY25, with the nation's central bank projecting a same growth rate in FY26. Above-normal monsoon augurs well for higher farm output growth in FY26, Dev said in the email interview. While Central programmes are improving agricultural productivity and cash transfers are helping to raise credit and investment, states should continue reforms in the sector for faster growth and improved farmer incomes, he said. Artificial intelligence use offers both challenges and opportunities but is likely to have an overall positive impact on jobs in India, Dev said, citing studies on the subject. Dev emphasised the point that private investment growth needs to gain momentum given that there is no dearth of capital availability. 'There are some green shoots on private capex. Many state governments are also attracting domestic and foreign private investment. Corporate sector and banks are having more profits now and their balance sheets are in good shape. So, there is no problem of capital availability. Industry is positive about India's growth story. Corporate sector is probably holding investing in capacity expansion due to global uncertainties and overcapacity in some countries like China,' said Dev. 'Increase in rural and urban demand will facilitate more private investment. Many firms turned debt-free and doubled their cash on the books. India Inc has to make new investments instead of keeping the cash,' Dev said. To achieve this, there is a need for more progress on 'ease of doing business' at the state level, Dev added, citing the case for deregulation made in Economic Survey 2024-25. 'Hopefully, private capex will be more once the domestic demand increases further and global uncertainties are reduced. Once the tariff concerns are over, there will be more opportunity for Indian industry to invest. Factors such as ease of doing business, availability of land and other infrastructure, logistics, and needed manpower attract investment to states. States have to make more effort to invite foreign direct investment and domestic private investment,' he said. Dev also called for maintaining the thrust on government's capital expenditure in the meantime. 'It is generally argued that India's growth strategy should be driven by encouraging consumption. However, a study by C. Rangarajan and D.K. Srivastava indicate that an investment-led growth strategy is the best choice and that government expenditure still holds the key for stabilisation or short-term stimulation. Investment-led consumption is more sustainable,' Dev said, quoting from the study published earlier this month in the Economic and Political Weekly. Private final consumption expenditure, or household spending, the biggest component in India's national income, on the other hand, expanded faster at 7.2% in FY25 compared to a 5.6% growth in FY24, Dev said. 'Rural consumption played an important role in this growth. The India Meteorological Department (IMD) expects above normal monsoon this year and it augurs well for higher agricultural growth, rural consumption and lower inflation. Therefore, we can expect that rural economy will do well in FY26 as well,' Dev added. Although there is volatility in agriculture growth, resilience of agriculture to monsoon has increased over time due to increase in irrigation coverage and other measures. Agriculture output grew at an average annual rate of 4.6% during the last eight years--2017-18 to 2024-25, Dev said, adding that FY25 also recorded a growth rate of 4.6%, contributing significantly to gross value added (GVA) growth of 6.4% last fiscal. The Indian economy is resilient and continues to be the fastest-growing country among large economies, Dev said, adding that some estimates have projected a requirement of nominal GDP growth of 11-12% and real growth rates of 7-8% to achieve the goal of becoming a developed country by 2047. 'India has the potential to achieve these growth rates. The country is on its way to becoming the fourth-largest economy in the world at the end of FY26. It has also shown considerable progress towards nearly eliminating extreme poverty and reducing consumption inequality,' added Dev. Some increase in investment rate, including domestic and foreign private investment, efficiency in capital use and enhancement of total factor productivity will boost India's growth, he said. 'Rise in savings in the economy is important for higher investments. Structural transformation of economy in output and employment from agriculture to manufacturing and services is also important for higher growth. India is doing well in service exports. There are significant opportunities for manufacturing exports in spite of global uncertainties on trade. Some other sources of growth are India's fast growing young work force, rise in human capital and technology, fast growing digital technology including artificial intelligence (AI),' Dev said. A youth population with a median age of around 28 years, compared to the ageing population of developed countries, is another key driver of economic growth for India. Increasing urbanisation will need more city infrastructure and it will improve growth. Reduction in global uncertainties in future will add to higher growth. Increasing women empowerment will raise India's GDP. The 2047 goals also include inclusive growth and sustainability objectives,' added Dev. 'In achieving higher growth rate for India, states play an important role. It is a healthy sign that states are competing by announcing goals on GDP and GDP per capita. Many studies have shown that improving 'state capacity' and governance is important in raising incomes of people and delivering public services like education and health. Similarly, decentralization of resources to Panchayats and Municipal Councils is needed, added Dev.
The Wire
08-07-2025
- Business
- The Wire
The Hoax of Decline in Poverty in India
Rangarajan and S. Mahendra Dev have estimated poverty in India using the all India Consumption Expenditure Survey data from the 2022-23 and 2023-24 surveys. Their concept of poverty was the one recommended by the Rangarajan Committee on Estimating Poverty in India. Their paper shows that extreme poverty in India has declined significantly from 29.5% in 2011-12 to 9.5% in 2022-23 and to 4.9% in 2023-24. The decline is fairly rapid: 2.05 percentage point decline per year between the year 2011-12 and 2023-24. The World Bank also shows in its recent paper that at the poverty line of USD 2.15 (at 2017 PPP) per day, India's extreme poverty has declined from 16.2% in 2011-12 to 2.3% in 2022-23. That means about 170 million people have been lifted above the extreme poverty line in India during this period. The depth of poverty analysis by Rangarajan and Dev's paper also show that 50% of the poor lie between the 3rd and 4th quarter of the poverty line, both in 2011-12 and 2023-24. This means, most of the poor are concentrated around the poverty line. As regards the causes of this decline, the paper observes that this is due to rapid economic growth and safety nets, including free food grains to 81.35 crore people. However, they also observe that economic growth is important in this decline in poverty between 2022-23 (9.5%) and 2023-24 (4.9%) as there is no significant change in the welfare expenditure of the government during this period. It is too early to call this last decline a trend, with data for only two years. Concepts of poverty line The concepts of poverty used by both the sources are different. The Rangarajan Committee has defined the poverty line as simultaneous satisfaction of all three nutrient-norms, namely, a full range of policies and programmes for child nutrition support, public provisioning of a range of public goods and services aimed at the amelioration of the disease environment facing the population. The committee also preferred NSSO's estimates and decided not to use the NAS estimates and price relatives derived from the Consumer Price Indices. According to the committee (2014), the poverty line was Rs 972 for rural areas and Rs 1,407 for urban areas. The poverty lines computed as per capita monthly consumption expenditure for 2023-24 are Rs 1,940 for rural areas and Rs 2,736 for urban areas. This comes to Rs 64.66 per capita per day consumption expenditure for rural areas and Rs. 91.2 for urban areas. The concept of extreme poverty of the World Bank is defined slightly differently. The World Bank defines extreme poverty as 'deprivation in wellbeing'. The poor is one who does not have enough income or consumption, or who is below some adequate minimum threshold. According to the UN Guiding Principles on 'extreme poverty', extreme poverty is characterised by social exclusion and by an accumulation of insecurities in many areas of life, such as lack of identity papers, unsafe housing, insufficient food and lack of access to health care and to education. However, the World Bank also adds that it is extremely difficult to measure poverty in a rigorous way, and every country sets its own standards for what is necessary for basic living. This definition is translated into different amounts at different levels of development. For low income countries, the World Bank sets the extreme poverty line at USD 2.15 PPP, while it is USD 3.65 PPP for lower middle income level countries and USD 6.85 PPP for upper middle income countries. Some critical questions The World Bank has used USD 2.15 PPP while computing the extreme poverty in India, and based on it, it observed that 170 million people have crossed the poverty line. This is surprising because India is a lower middle income country, and its extreme poverty line is USD 3.65 PPP. If this poverty line was used, the number of people crossing it would be much less. Again, the poverty line of Rs. 64.4 (rural areas) and 91.1 (urban areas) computed by the Rangarajan-Dev paper also appears to be too low. No poverty can be measured by such low poverty lines. How can anyone live on these poverty lines at these consumption expenditures? Despite more than 806 million people getting free food grains, India's rank in global hunger index is at 105 out of 127 countries and the value of the hunger index is 27.3. This is declared as an 'alarming condition' by the Global Hunger Report, 2024. Again, when about 13.7% of the population in India is clearly undernourished and not getting minimum nourishment, how can the incidence of poverty be just 4.9, as suggested by the Rangarajan-Dev paper? How can 35.5% children under 5 years be stunted and 18.7% wasted if the poverty is just 4.9%? The latest NFHS survey-5 (National Health and Family Survey) also supports this data. Again, as per the latest data (PLFS 2023-24), about 20% of the Indian population is illiterate, and about 45% of the population has studied barely up to the Class 5, and here, there are serious problems about the quality of education. Consequently, more than 90% of the labour force is found in the informal economy getting low wages and poor social protection. To conclude, though India's GDP is growing at a 6-7% rate, people's vulnerability is declining extremely slowly. The incidence of poverty at 4.9% just does not match with the vulnerability of the Indian population. It appears that India should now totally discard this concept of '(extreme) poverty line' presented by the earlier committee. Indira Hirway is Director and Professor of Economics, Centre for Development Alternatives (CFDA), Ahmedabad. 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Mint
05-06-2025
- Business
- Mint
Economist S. Mahendra Dev appointed EAC-PM chairman
Economist S. Mahendra Dev has been appointed the new chairman of the Economic Advisory Council to the Prime Minister (EAC-PM), a person informed about the development said. Dev, till Thursday an independent director with Axis Bank, will take charge of the position on Friday, said the person, who spoke on condition of not being named. Earlier in the day, Axis Bank informed stock exchanges that Dev had resigned from its board owing to his appointment as chairman of the EAC-PM, which is a full-time position. EAC-PM did not have a full-time chairman since last November, when its first chairman Bibek Debroy passed away. NITI Aayog vice chairman Suman Bery has been holding the additional charge of EAC-PM since then. The new appointment comes at a time the Narendra Modi government is busy dealing with the tariff war triggered by the US administration and its global macroeconomic implications, while also striving to step up and sustain economic growth rate in order to realize the government's goal of making India a developed country by 2047. Besides advising the Prime Minister on economic and related issues, EAC-PM analyses key issues requiring the attention of policy makers at the highest level. Business Standard reported on Thursday that Dev's appointment is for a period of two years, and that new part-time members of the council include Soumya Kanti Ghosh, K.V. Raju, Chetan Ghate, Pami Dua, Pulak Ghosh and Gourav Vallabh. Mint could not independently verify this. Dev had previously served on several government panels and in the working groups for ninth, tenth and eleventh Five Year Plans. He had also served as the chairman of the Commission for Agricultural Costs and Prices. He received his Ph.D. from the Delhi School of Economics and did his post-doctoral research at the Yale University.
