Friday, February 1, 2019

Growth slip into slow lane

Some food for thought
"If you know the enemy and know yourself you need not fear the results of a hundred battles."
—Sun Tzu (Chinese Philosopher, Ancient Times)
Word for the day
Divertissement (n)
A diversion or entertainment.
 
First thought this morning
Sun Tzu, a Chinese philosopher and military strategist during Zhou dynasty, is credited with one of the best treatise on war strategies, titled The Art of War.
A casual stroll through social media timelines is sufficient to realize that on both the side of the border millions of war strategists have mushroomed. In fact not only in the subcontinents, the people sitting in faraway lands like USA, UK, Canada, Australia etc, are also kind enough to offer free expert advice to the people and forces on both the sides of the LoC.
Besides, the strategists, we have an army of cheerleaders and supporters. They are tirelessly cheering every threat, claim and action of their respective leaders and forces.
Overall, it is once in a decade period to feel proud of our nationality, valor of our forces, and grit of our leadership.
I strongly feel a flip through visit to Art of War, could be useful.
Sun Tzu said, the art of war is of vital importance to the State, because it is a matter of life and death, a road either to safety or to ruin. before engaging in any war, the leader therefore must be ensure that people are in complete accord with him, and they will follow him regardless of their lives, undismayed by any danger, night & day, in cold & heat and in times and seasons. The ruler must have standing by him, the commanders who are wise, sincere, benevolent, courageous and strict; and an army that is governed by method and discipline.
Before waging a war, it is important to note that:
In the operations of war, the ruler must account for the smallest expenditure at home and at the front, including small items such as glue and paint, and sums spent on soldiers and their armor. When you engage in actual fighting, and the campaign is protracted, the resources of the State will not be equal to the strain. If victory is long in coming, then weapons will grow dull and soldiers' ardor will be damped and you will exhaust your strength.
When your weapons are dulled, your ardor damped, your strength exhausted and your treasure spent, then no man, however wise, will be able to avert the consequences that must ensue. Thus, though we have heard of stupid haste in war, cleverness has never been seen associated with long delays. There is no instance of a country having benefited from prolonged warfare.
It is only one who is thoroughly acquainted with the evils of war that can thoroughly understand the profitable way of carrying it on.
Contributing to maintain an army at a distance causes the people to be impoverished. On the other hand, the proximity of an army causes prices to go up; and high prices cause the people's substance to be drained away. When their substance is drained away, the peasantry will be afflicted by heavy exactions.
As per Tzu, "there are five essentials for victory: (1) He will win who knows when to fight and when not to fight. (2) He will win who knows how to handle both superior and inferior forces. (3) He will win whose army is animated by the same spirit throughout all its ranks. (4) He will win who, prepared himself, waits to take the enemy unprepared. (5) He will win who has military capacity and is not interfered with by the sovereign. (You can read The Art of War here)
 

Growth slip into slow lane

Confirming the worst fears, the Indian economy has taken the slow lane in 3QFY19. As per the data released yesterday evening, the GDP grew at a slower pace of 6.6% (yoy) in the quarter ended December 2018. The growth has climbed down sharply from 8% in 1QFY19 to below 7% in 3Q.
The CSO growth estimates for the full year FY19 have been reduced to 7% from 7.2% earlier, making it the slowest growth in past 5years. This implies an estimated growth of 6.4% (yoy) in the current quarter (4QFY19). (see here)
The estimates for the nominal GDP growth (current prices) have also been substantially scaled down. Nominal GDP for FY19 is now expected to grow at 11.5% (yoy). For 3Q the nominal growth has been recorded at 11% (yoy). The full year latest estimate of nominal growth is now 11.5% (yoy) implying a nominal growth of 10.8% for 4QFY19.
Consumer spending growth, which accounts for near 60% of the economy, slowed to an 8.4% rise annually in the December quarter, compared to 9.9% rise in the previous quarter.
Gross fixed capital formation - which include spending on roads, ports, airports and power plants - rose 10.6% compared with 10.2% annual increase in the previous quarter.
The manufacturing sector grew at 6.7% annually, while services, including construction, grew at 7.6% from a year ago period.
While agriculture is estimated to grow at 2.7%, manufacturing is expected to accelerate to 8.1% in 2018-19. However, trade, hotel and transportation sector is expected to decelerate to 6.8% during the year.
As I have been highlighting, the long term growth trend in India is stable around these levels, and no acceleration should be accepted in near term. The risk may actually be on the downside should the global economy witness a material slowdown in next 3-5qtr as many economists expect.
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