Home' Trinidad and Tobago Guardian : February 2nd 2017 Contents FEBRUARY 2 • 2017 guardian.co.tt BUSINESS GUARDIAN
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to emerge from
Oil prices continue to waver above US$50 a barrel,
improving prospects for Russia's economic recovery
Russia's economy ministry on Monday said that
GDP growth fell by one per cent in December from
the same time last year.
In October, the economy contracted by 0.6 per
cent but grew in November by a revised 0.9 per cent.
For 2016 as a whole, GDP fell 0.6 per cent from 2015.
According to forecasts by the World Bank, Inter-
national Monetary Fund and the UN, Russia's econo-
my has beaten the effects of US and European Union
sanctions over the Ukraine crisis.
In 2017, GDP growth is expected between one and
1.5 per cent.
Russian Economic Development Minister Maxim
Oreshkin last week told reporters that the growth rate
could go as high as two per cent in 2017.
In the face of sanctions, Russia has moved to diver-
sify its economy, pursuing investments in different
sectors and with different European, Chinese and
Japanese firms, to name a few.
"We are working with all investment sources. Such
an approach gives us the best possible opportunity
to achieve results. We are hopeful that the growth
rate will continue to rise," Oreshkin previously said.
The near-stabilisation of oil prices above the US$50
mark has also helped boost revenues as most economic
policy was designed with oil prices at $40. BRIC Post India budget 2017:
Spending to get
out of trouble
India's government is trying to
spend its way out of the trouble
caused by last year's decision to
ban high value notes in a crack-
down on corruption, writes col-
umnist Vivek Kaul.
Increased government spending will be re-
sponsible for one-third of the increase in the
country's Gross Domestic Product (GDP) in
2016-2017, latest government figures show.
What this essentially means is that the
government will primarily drive economic
growth in the current financial year.
This is likely to continue in 2017-2018 as
well. The annual budget presented by Fi-
nance Minister Arun Jaitley on Wednesday
seems to suggest as much.
The government has allocated 480bn
rupees ($7.1bn; £5.6bn) to a scheme which
guarantees every rural household 100 days of
work each year. This is the highest allocation
ever made to the programme.
rupee ban blow
The increased spending on the programme
is intended to alleviate the negative impact
of the government decision to ban high value
notes in rural and semi-rural areas of India. A
majority of transactions in these areas hap-
pen in cash, which has been in short supply
since the rupee ban in November last year.
The jobs guarantee programme is also in-
tended to alleviate the impact of the rupee
ban on the informal manufacturing sector
which operates in cash and tends to employ
many semi-skilled and unskilled people who
migrate to cities from rural India.
The government has also increased the
allocation to an affordable housing scheme
by more than 50 per cent to 230bn rupees
which is also expected to create some em-
ployment in rural India. Close to half of In-
dia's population is engaged in agriculture
which contributes only around 18 per cent
The allocation to 29 schemes sponsored
by the central government has gone up by
21.6 per cent and the allocation to the infra-
structure sector has gone up by 13.5 per cent.
Over and above this, the government has
increased the lending target to a scheme that
gives loans at low interest rates to micro-fi-
nance institutions and non-banking finance
These, in turn, lend money to micro and
small business entities engaged in manu-
facturing, trading and services activities.
To cut a long story short, the Modi gov-
ernment is trying to spend its way out of
trouble, but it is not going overboard with it.
A part of this pump-priming became nec-
essary because of the government's rupee
ban self-goal, which is expected to pull down
economic growth in 2016-2017.
The Economic Survey for 2016-2017 re-
leased on Tuesday, projected GDP growth
at between 6.5-6.75 per cent in 2016-2017,
down from 7.9 per cent in 2015-2016. The
question is what economic growth could
have been without the rupee ban.
Too many schemes
When pushed in to a corner, most govern-
ments try to spend their way out of trouble.
Nevertheless, government spending is not
always as effective as private spending. In
the Indian case, a major reason is massive
leakage. This means that a large portion of
government spending does not reach those
it is meant for and is instead, siphoned off
by the bureaucracy expected to distribute it.
One way to tackle this is for the gov-
ernment to concentrate on running a few
important schemes on which it can spend
the bulk of its money and focus its time and
The Economic Survey points out that "the
Budget for 2016-17 indicates that there are
about 950 central sector and centrally spon-
sored sub-schemes in India."
One negative impact of running so many
schemes is that "in many cases, the poorest
districts are the ones grappling with inade-
quate funds. This is evidence of acute mis-
A very important part of economic reform
in India would be to bring down the number
of these schemes. But that, as they always
say, is easier said than done.
And as always, this budget missed out on
this opportunity as well.
shows continued growth
The manufacturing sector has expanded for the
sixth month in a row, new data has shown China's
economy is stabilising as its manufacturing sector
continues to show expansion for the sixth consecutive
month, the National Bureau of Statistics (NBS) said
While it dropped by 0.1 from December, the man-
ufacturing Purchasing Managers' Index (PMI) was
51.3 in January.
The government survey tracks the health of some
3,000 large and state-owned companies.
The reading is above the neutral 50-point level,
signalling an expansion in the manufacturing sector,
according to the NBS.
The NBS also showed that non-manufacturing PMI
was up by 0.1 to 54.6, mostly due to robust growth
in the financial, insurance and Internet and software
information technology sectors.
However, it said that industrial output growth
slowed for the year, down to 6 per cent from 6.1 per
cent in 2015 and that there was a retreat in the con-
struction sector due to the cooling of the once-hot
real estate market.
Earlier this week, the International Monetary Fund
(IMF) released its Global Economic Outlook report
and said that GDP growth in China in 2016 would
come at 6.7 per cent. BRIC Post
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