Daily English Vocab
The High Economic Costs of India’s Demonetization
Most economists might hazard (जोखिम/संकट) a guess that voiding the bulk of a country’s currency overnight would dent its immediate growth prospects. On November 8th India took this abstruse (जटिल/कठिन/दुर्बोधीय) thought experiment into the real world, scrapping two banknotes which made up 86% of all rupees in circulation. Predictably, the economy appears indeed to have been hobbled (लड़खड़ाना) by the sudden “demonetisation”. Evidence of the measure’s costs is mounting, while the benefits look ever more uncertain.
At least the new year has brought a semblance (आकार/झलक/दिखावा) of monetary normality. For seven weeks queues had snaked around banks, the main way for Indians to exchange their old notes for new ones or deposit them in their accounts. That is over, largely because the window to exchange money closed on December 30th. The number of fresh notes that can be withdrawn from ATMs or bank counters is still curtailed (कम करना/घटाना), but the acute cash shortage is abating, at least in big cities.
As data trickle through, so is evidence of the economic price paid for demonetisation. Consumers, companies and investors all wobbled (डाँवाडोल होना) in late 2016. Fast-moving consumer goods, usually a reliable growth sector, retrenched by 1-1.5% in November, according to Nielsen, a research group. Bigger-ticket items seem to have been hit harder. Year-on-year sales at Hero Motocorp, the biggest purveyor (पहुंचाने वाला/चौधरी) of two-wheelers, slid by more than a third in December.
A survey of purchasing managers in manufacturing plunged from relative optimism throughout 2016 to the expectation of mild contraction. Firms’ investment proposals fell from an average of 2.4trn rupees ($35bn) a quarter to just 1.25trn rupees in the one just ended, according to Centre for Monitoring Indian Economy, a data provider. As a result, corporate-credit growth, already anemic, has reached its lowest rate in at least 30 years (see chart).
All this amounts to “a significant but not catastrophic” impact, says Shilan Shah of Capital Economics, a consultancy. Annual GDP growth forecasts for the fiscal year ending in March have slipped by around half a percentage point, to under 7%, from an actual rate of 7.3% in the last full quarter before demonetisation. Other factors, such as the rise in the oil price and the surge in the value of the dollar after the election of Donald Trump, are also at play.
Whether the costs of the exercise justify the benefits depends, of course, on what those benefits are. In his speech announcing the measure, Narendra Modi, the prime minister, highlighted combating corruption and untaxed wealth. Gangsters and profiteers with suitcases full of money would be left stranded (फंसा हुआ/असहाय). But reports suggest that nearly 15trn rupees of the 15.4trn rupees taken out of circulation are now accounted for. So either the rich weren’t hoarding (छुपा लेना) as much “black money” as was supposed, or they have proved adept (निपुण/चालाक) at laundering it. The Indian press is full of tales of household staff paid months in advance in old notes, or of bankers agreeing to exchange vast sums illegally.
Fans of demonetisation point to three beneficial outcomes. First, banks, laden with fresh deposits, will lend this money out and so boost the economy. Big banks cut lending rates this week (quite possibly nudged by government, the largest shareholder of most of them). But their lending recently has not been constrained by a lack of deposits, so much as by insufficient shareholder capital to absorb potential losses, and by the over-borrowed balance-sheets of many industrial customers.
Second, Indians will move from living cash in hand into the taxed formal economy. Mr Modi has recently promoted the idea of a cashless, or “less-cash”, India (not something mentioned at the outset), as one reason for demonetisation. Progress towards getting Indians to pay for things electronically is indeed being made, but from an abysmally (निकृष्ट तरीके से/बेकार ढंग से) low base.
The third upshot is the most controversial. Now that the demonetised bank notes are worthless, the government is intent on in effect appropriating (सही ठहराना) the proceeds. The procedure requires trampling (उपेक्षा करना) on the credibility of the Reserve Bank of India (RBI), the central bank, which must first agree to dishonour the promise, on all banknotes, to “pay the bearer” the value. If it does so, “extinguishing” the notes and its liability for them, it can transfer an equivalent amount to the government budget.
With so much cash handed in at banks, the amount remitted (प्रेषित) to government by the RBI might amount to perhaps 0.2-0.3% of GDP. Proceeds from a tax-amnesty scheme for cash-hoarders may swell the figure. Even so, it will not be enough to justify the costs of demonetisation—or even, perhaps, the damage to the reputation of the RBI, which is already facing questions about its independence. But having imposed the costs, Mr Modi will be keen to trumpet (घोषित करना/ढिंढोरा पीटना) whatever benefits he can find.
Courtesy: The Economist (Economy)
1. Hazard (noun): A danger or risk. (जोखिम/संकट)
Example: The proper disposal of hazardous waste has always been a problem for nuclear power plants.
Verb forms: Hazard, Hazarded, Hazarded.
2. Abstruse (adjective): Difficult to understand. (जटिल/कठिन/दुर्बोधीय)
Example: Because I am not a computer programmer, I find most programming languages abstruse.
3. Semblance (noun): An outward appearance of something; an assumed appearance (आकार/झलक/दिखावा)
Example: Even though I was nervous during my presentation, I tried to project a semblance of calmness while speaking.
4. Curtail (verb): Reduce in extent or quantity (कम करना/घटाना)
Example: Until the celebrity’s stalker is caught, we will curtail her public appearances.
Verb forms: Curtail, Curtailed, Curtailed.
5. Hoard (verb): Stored up and often hid away (छुपा लेना/जमा करना)
Example: Rob loves to hoard money because he is a penny-pincher.
Verb Forms: Hoard, Hoarded, Hoarded.
6. Adept (adjective): Very skilled or proficient at something. (निपुण/चालाक)
Example: The salesman was adept at charming customers into spending more than they had planned.
7. Abysmal (adjective): Extremely bad; appalling. (निराशाजनक/बहुत ही ख़राब)
Example: There are millions of unemployed people in this abysmal job market.
8. Trample (verb): To treat other people's rights, wishes, or feelings as if they are worthless or not important./ to treat as if worthless or unimportant. (उपेक्षा करना)
Example: By forcing the policies that are irrelevant to company progress, the management is trampling on employees rights.
Verb forms: Trample, Trampled, Trampled.
9. Remit (verb): To send or convey (प्रेषित करना)
Example: If you do not remit the payment for your light bill within two days, your service will be disconnected.
Verb forms: Remit, Remitted, Remitted.
10. Trumpet (verb): Proclaim widely or loudly. (घोषित करना/ढिंढोरा पीटना)
Example: People do not respect those who like to trumpet their own achievements.
Verb forms: Trumpet, Trumpeted, Trumpeted.