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Strap: Rather than confronting tough structural challenges, there’s a preference for the easier route of monetary stimulus, and the result is rampant inflation, according to noted economist William White

April 30, 2022 / 01:16 PM IST
Representational Image.

Representational Image.

Dear Reader,

How high can you build on shaky foundations? Those weak foundations are what Nikhil Gupta, chief economist at Motilal Oswal, recently chronicled in a series of remarkable research studies. His thesis: Much of the economic recovery in India is confined to the listed corporates, central government finances and well-off households.

What are the implications of this top-heavy recovery? Nikhil says a strong economic recovery is not possible without the participation of the unlisted corporate sector, state governments, medium and small firms and the self-employed. By way of example, he points out that while the central government’s capex has increased to a 14-year high in the first nine months of FY22, state governments’ capex has fallen to an 18-year low.

The impact on consumption is very clear. My colleague Ravi Ananthanarayanan says unambiguously of the HUL results, “High inflation leading to rising product prices is seeing consumers cut back on consumption.” CMIE’s analysis of the first batch of non-financial corporate results for the March quarter shows a sharp fall in inflation-adjusted sales growth.