Indian govt's latest policies to boost consumption
For the week ended November 21, 2015:
The week witnessed the announcement of the 7th pay commission recommendations for government employees, which could boost consumption in the economy by increasing the level of disposable income.
The centre also announced the minimum support prices (MSPs) for the rabi crop for 2015-16, which shows an increase between 5% to 8% for various crops. This could further support overall spending in the economy.
Policy also continued to support the weak investment cycle, with approvals of INR 1,810 crore for FDI and a decision to divest 10% in Coal India. A new scheme has also been launched to support the use of clean and green technologies by India’s small and medium enterprises, which includes government funding support towards the end.
These policy actions come at a time when the real economy continues to remain weak. Foreign trade numbers for October continued to show a dismal trend, as both exports and imports of goods declined on a year on year (yoy) basis for the 11th consecutive month.
Indian corporates too, are still not borrowing with enthusiasm, as evident from a muted US$ 2.1bn foreign borrowing number in October, which is a decline from the corresponding period of the previous year.
The silver lining to the pessimistic data trends seen in the past year, however, is the subdued wholesale price index (WPI), which continued to show deflation for the 10th consecutive month, of 3.8%, on a broad based fall in prices across all three major categories.