In 2015, IndiaSpend wrote about five things that should worry India in 2016 – slow growth in agriculture, climate change and the danger of drought, malnutrition, illiteracy, and reduced growth and trade forecasts. As 2016 comes to a close, we analysed the status of these five problems and challenges that will continue in 2017.
1. Agriculture Recovers, But Benefits Uncertain After Demonetisation
Over the fiscal year 2016-17, agriculture – which employs more than 700 million people – will grow by 4%, estimated CRISIL, a research agency.
Recovering from two – and in some places, even three – consecutive drought years, agriculture, for the first time since 2013, saw a growth of above 3% in the second quarter of 2016-17, over the same period in 2015-16.
Record summer crop production of rice, at 93.8 million tonnes, and pulses, at 8.7 million tonnes, is estimated in 2016-17, according to advance estimates by the agriculture ministry.
But the withdrawal of old Rs 500 and Rs 1,000 notes in November 2016 has been a setback to the rural economy – on which 800 million people, or 65% of India’s population, depends – largely driven by cash.
Vehicles entering a rural market yard in Maharashtra dropped, onion prices halved in the biggest onion market in the country, the fishing economy in Goa faced roadblocks, and flower farmers in Madhya Pradesh lost business, as IndiaSpend’s visit to these regions revealed.
Similar reports from Uttar Pradesh, Odisha and other parts of the country appear to have dampened the bright agricultural prospects of 2016. But there is hope that cash pressures will ease in the long term, and the rural economy will be back to normal, according to a Livemint report.
2. India Signs Climate Change Agreement, But Has Half of the World’s 20 Cities With the Most Toxic Air
From a severe drought in 11 states in June just before the arrival of the monsoon, India – barring Punjab, Haryana, Gujarat and Kerala – received normal rains in 2016. Rajasthan, Madhya Pradesh and Maharashtra received 20% more rain than normal.
In 2016, India ratified the Paris Agreement, under which countries agreed to take steps to limit the rise of the earth’s temperature to under two degrees Celsius by the year 2100.
India also signed a legally binding international agreement, starting 2028, to phase down the production and consumption of hydrofluorocarbons (HFCs) – gases that can have global warming potential up to 12,000 times more than carbon dioxide (CO2) – as IndiaSpend reported in October 2016.
Still, India will have to do more to prepare itself for the effects of climate change in the future. Between 2030 and 2050, a study, conducted by University of Oxford, projected 1,36,000 climate-related deaths in India, according to an answer given by the Environment Ministry in the Lok Sabha.
Between 2011 and 2015, in a comparison of megacities with a population above 14 million, Delhi’s ambient air-pollution levels was worse than Beijing and Shanghai, according to an IndiaSpend analysis of 2016 WHO data. Indian cities make up half of the world’s 20 most toxic cities, according to data from the WHO.
3. India Still Home to 40 Million Stunted Children, Largest Number in the World
Even with declining child undernourishment rates, India is home to over 40 million stunted children under five, more than any other country in the world, IndiaSpend reported in January 2016. Stunting refers to low height for age.
India ranks 120 out of 130 countries in prevalence of wasting (15.1%), or low weight for height, according to the 2016 Global Nutrition Report, which ranks countries from lowest to highest prevalence.
(Source: Global Nutrition Report 2016)
At current rates of decline in malnutrition, India – currently lagging behind several poorer African countries – will achieve the current stunting rates of Ghana or Togo by 2030, and that of China by 2055, stated the report.
India also does poorly on indicators that could help reduce malnutrition.
For instance, improved sanitation impacts the health of children, as seen in the state of Mizoram, which reported a 13% decline in wasting prevalence and 5% decline in underweight children in ten years, when there was a 10% improvement in household access to a toilet, IndiaSpend reported in January 2016. Still, there are 93.1 million households in rural India without access to a toilet.
4. Education Budget Rose 4.8%, but Millions Are Dropping out Before Secondary School
Last year, we wrote about how India had reduced its education budget, even though the country has 282 million illiterate people and 18% of those who went to school were unable to complete secondary school.
For the financial year 2016-17, the central government budgeted Rs 72,394 crore on school education, higher education and adult literacy programmes – a rise of 4.8% over 2015-16.
Further, challenges of retaining students in school remain, putting India’s large working population – 860 million by 2020 – at risk, IndiaSpend reported in May 2016.
Net enrolment in primary education, the number of primary age school children enrolled in school, as a proportion of the total primary school age population, remained constant: 87.3% in 2015-16 compared to 87.4% in 2014-15, according to District Information System for Education data.
Enrolment in secondary schools stands at 48.5% in 2014-2015 and 51.3% in 2015-2016, which suggests that many students drop out before secondary school – that is, grade nine. However, a slight rise in the secondary school enrolments can be seen in the two years.
Even fewer – 32.3% – enrolled in higher secondary – class 11 or its equivalent – in 2015-16.
5. Growth Likely to Be Muted; Opinion Divided
Trade and growth forecasts for 2016 were lower than that of 2015, while declining wholesale inflation was not being passed to consumers, IndiaSpend had reported in December 2015.
The move to demonetise Rs 500 and Rs 1,000 notes, announced by Prime Minister Narendra Modi, on November 8, 2016, is likely to slow down economic activity in 2017, but some experts say claims are exaggerated.
Gross value added (GVA) growth for the financial year 2016-17 has been revised to 7.1% from the earlier estimate of 7.6% due to demonetisation by the Reserve Bank of India (RBI). Demonetisation is expected to affect cash-intensive sectors such as retail and transportation and reduce demand due to adverse wealth effects.
Ambit Capital, a financial services firm, slashed its growth projection for the current year by 330 basis points to 3.5, BloombergQuint reported on 19 December 2016.
Now here’s the other side: “Economists are talking nonsense on GDP decline,” Aditya Puri, managing director of HDFC Bank, told Business Standard on 30 November 2016.
Consumer inflation is expected to remain in single digits (5% in December 2016-March 2017 quarter), but there is a risk it could increase, the RBI said, due to volatility in global crude oil prices, increased turbulence in financial markets and the effects of demonetisation.
(This article has been slightly edited for length.)
(Published in an arrangement with IndiaSpend.)
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