All is not well is the byword as Shaktikanta gives India ‘Panglossian’

Economy


RBI Governor Shaktikanta Das held forth on the current lean patch of the economy at a FICCI event today, in the process giving India a rarely used, Tharooresque term to talk about: Panglossian.

“Mood of doom and gloom is not going to help anyone. I am not saying we maintain a Panglossian outlook and smile at everything — I don’t expect people to smile away difficulty — but a mood of doom and gloom will not help anyone,” Das said.

According to the Merriam-Webster dictionary, Panglossian means someone “marked by the view that all is for the best in this best of possible worlds: excessively optimistic”.

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The term comes from Dr Pangloss, a pedantic old tutor in Candide, a satirical novel by Voltaire. The character depicted an incurable optimist, who remained an optimist even after experiencing great cruelty and suffering.

The name Pangloss is a combination of Greek pan, meaning “all”, and glossa, meaning “tongue,” suggesting glibness and talkativeness, the dictionary explains.

Das exhorted Indians to not just look at the problems but also at the opportunities that lie ahead, adding that sentiment is a very important factor for an economy.

The Governor, however, made no bones about the state of the economy — he said the general mood currently “ranges between existential angst and a positive outlook”. He acknowledged that the mood on TV channels and newspapers is nowhere close to being upbeat or optimistic, which he admitted was a pointer to the challenges the economy was facing.

Can India afford to be Panglossian?

That the Indian economy is losing steam has been confirmed by numbers from all key sectors.

Several reports have already said that the Indian economy won’t be able to meet the 7 per cent official GDP forecast for the fiscal, making FY20 the second consecutive year of below-7 per cent growth.

Exports, one of the four main engines of economic growth, has continued to misfire. India’s exports, averaging around $25 billion a month, have been flat between April 2011 and June 2019.

The share of manufacturing in India’s GDP, at 15%, has remained distressingly low for a long time. Auto, the sector that has the lion’s share in the country’s manufacturing basket, is seriously sputtering.

July auto sales came in at a 20-year low, SIAM data showed. At the current rate, total annual passenger car sales for this fiscal could fall to sales levels last seen in 2014-15.

The financial sector is still caught in the deep mess that started with the unravelling of IL&FS. The pockets of the common Indian — including the farmer — are empty, with the result that consumption, which is the mainstay of the country’s GDP, is firmly stuck in the slow lane.

Investment — both private and corporate — continues to be pedestrian and likely to remain so, cutting out the last hope for a quick, significant turnaround. Companies have delayed investment because of widespread business uncertainty, while the government can’t afford to double down on its part owing to fears over a spike in deficit.

The road back to growth

The governor acknowledged all these bottlenecks — he admitted that things like the NBFC crisis and the resultant lack of liquidity for critical sectors do affect businesses as well as the economy at large.

RBI is closely monitoring NBFCs and housing finance companies to make sure no other collapses happen, Das said.

He put into words all of RBI’s concerns over the steady fall in growth; he said a revival in growth was now the top priority that’s keeping every policymaker busy.

Das sought to reassure businesses by saying liquidity will not be a deterrent for growth. RBI’s endeavour is to ensure enough liquidity in the system so that the productive needs of the economy are met, he said.

So, from where does RBI see the economy getting the push it needs so badly? “Not just from monetary policy but also through transmission. So our expectation is that banks should move faster on rate cut transmission,” he said.



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