Such economic conditions hurt the poorer segments of society much more than the wealthy. It also means a very tough economic environment for policymakers,” according to Japanese brokerage Nomura economist Sonal Varma…
There is such a thing as the Misery Index, and India is having a rough ride on it. Japanese brokerage Nomura has calculated India’s misery by looking at the difference between consumer price index inflation and industrial production. Nomura says this is the first time since 1991, when the Government enacted major economic reforms, that India’s misery index has persisted at such a high level. On the misery index, high means miserable.
“It should come as no surprise that economic misery is rising in India,” Nomura economist Sonal Varma said in a note. “In the current stagflation-type scenario of high CPI inflation and negative industrial output growth, the misery index is at an elevated level,” Ms. Varma said. India’s CPI has edged down to single-digit territory but remains uncomfortably high, at 9.64 per cent in July, Government figures showed recently. Other data released recently showed industrial output in June was down 2.2 per cent from a year earlier, while for the April-June quarter it was off 1.1 per cent.
Industrial output has been hit by the slowing economy, falling demand, delays in project approvals and high borrowing costs. Last fiscal year, India’s economic growth slowed to a decade-low of 5.0 per cent. And the misery is set to continue, Ms. Varma says. “Such economic conditions hurt the poorer segments of society much more than the wealthy. It also means a very tough economic environment for policymakers,” she said.
“Taming inflation or the currency may require policies that result in increasing the economic misery for people in the near term. Unfortunately, we see no short cuts,” she added. The rupee hit a record low recently.
The misery index is typically calculated as the sum of the unemployment rate and the inflation rate, Nomura said. But for this index on India, Nomura used the difference between CPI inflation and industrial production as unemployment figures weren’t available, it said. – WSJ