Indian business over-invoicing to shift money abroad, expects rupee to sharply fall: Top US-based economist

By A Representative
Prof Kaushik Basu, who has worked as chief economist of the World Bank, has said that, given the Indian economy’s massive size and extensive global linkages, “its growth slowdown is a source of serious concern not just domestically, but around the world”, adding gone are the days when India was considered “a poster child for political stability and economic growth among emerging economies.”
Professor of economics at Cornell University and nonresident senior fellow at the Brookings Institution, Basu, in a strongly-worded commentary, says, “Though the country had a long way to go to eradicate poverty and extreme inequality, when it came to steady GDP growth, it was among the world’s strongest and most consistent performers. Not anymore.”
Even as pointing towards how, in the second quarter of 2017, India’s growth rate fell to 5.7%, which is a “tie” with Pakistan, and “behind” China, Malaysia, and the Philippines, even Bangladesh, Basu raises the alarm that there is another potential danger looming large over the economy – sharp rise in imports.
According to the top economist, this is coming in the form of people “over-invoicing, in order to shift money abroad”, adding, “This could indicate that big traders expect a correction in the rupee’s exchange rate, at which point they plan to sell the dollars that they are now accumulating for a larger sum of rupees.”
Noting that “annual export growth has fallen in recent years to just 3%, compared to 17.8% in 2003-2008, India’s rapid-growth phase”, Basu says, this “is partly a result of a stronger rupee, which has raised the price of Indian goods in foreign markets”.
He adds, “Imports have risen sharply as well, as the rupee’s appreciation lowers the relative price of foreign goods: in the first half of this year, nominal merchandise imports grew by 28%.”
Advising Reserve Bank of India (RBI) to “lower interest rates further, thereby aligning India’s monetary policy more closely with that of the world’s other major economies”, Basu says, “While the current tendency toward very low interest rates is not ideal from a global perspective, the fact is that as long as India remains an outlier, it will encourage the so-called carry trade, which artificially drives up the rupee’s value.”
Insisting that in the short term policymakers “must address declining demand for Indian products, both among domestic consumers and in export markets”, Basu says, “All signs point to falling consumer and business spending in India. India’s index of industrial production grew by a meager 1.2% in July, compared to 4.5% a year earlier. Output of consumer durables fell by 1.3%; a year earlier, it grew by 0.2%.”
Basu believes, the “bigger challenge facing India will be to nurture and sustain rapid growth in the long run”, but regrets, “India’s investment-to-GDP ratio is now slipping, from over 35% in the last eight years to below 30% today. This can be explained partly by an increase in risk aversion among banks, which are concerned about non-performing assets. Falling business confidence may also be a factor.”
Asking the policy makers to lay “the groundwork” for long-term performance, Basu says, “Once investment picks up, India will be able to recapture its past rapid growth – and sustain it in the coming years. That outcome would benefit not just India, but the entire global economy.”

Comments

Plastic burning in homes threatens food, water and air across Global South: Study

By Jag Jivan In a groundbreaking study spanning 26 countries across the Global South , researchers have uncovered the widespread and concerning practice of households burning plastic waste as a fuel for cooking, heating, and other domestic needs. The research, published in Nature Communications , reveals that this hazardous method of managing both waste and energy poverty is driven by systemic failures in municipal services and the unaffordability of clean alternatives, posing severe risks to human health and the environment.

Economic superpower’s social failure? Inequality, malnutrition and crisis of India's democracy

By Vikas Meshram India may be celebrated as one of the world’s fastest-growing economies, but a closer look at who benefits from that growth tells a starkly different story. The recently released World Inequality Report 2026 lays bare a country sharply divided by wealth, privilege and power. According to the report, nearly 65 percent of India’s total wealth is owned by the richest 10 percent of its population, while the bottom half of the country controls barely 6.4 percent. The top one percent—around 14 million people—holds more than 40 percent, the highest concentration since 1961. Meanwhile, the female labour force participation rate is a dismal 15.7 percent.

The greatest threat to our food system: The aggressive push for GM crops

By Bharat Dogra Thanks to the courageous resistance of several leading scientists who continue to speak the truth despite increasing pressures from the powerful GM crop and GM food lobby , the many-sided and in some contexts irreversible environmental and health impacts of GM foods and crops, as well as the highly disruptive effects of this technology on farmers, are widely known today.

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

Stands 'exposed': Cavalier attitude towards rushed construction of Char Dham project

By Bharat Dogra* The nation heaved a big sigh of relief when the 41 workers trapped in the under-construction Silkyara-Barkot tunnel (Uttarkashi district of Uttarakhand) were finally rescued on November 28 after a 17-day rescue effort. All those involved in the rescue effort deserve a big thanks of the entire country. The government deserves appreciation for providing all-round support.

'Restructuring' Sahitya Akademi: Is the ‘Gujarat model’ reaching Delhi?

By Prakash N. Shah* A fortnight and a few days have slipped past that grim event. It was as if the wedding preparations were complete and the groom’s face was about to be unveiled behind the ceremonial tinsel. At 3 PM on December 18, a press conference was poised to announce the Sahitya Akademi Awards .

The war on junk food: Why India must adopt global warning labels

By Jag Jivan The global health landscape is witnessing a decisive shift toward aggressive regulation of the food industry, a movement highlighted by two significant policy developments shared by Dr. Arun Gupta of the Nutrition Advocacy for Public Interest (NAPi).

The illusion of nuclear abundance: Why NTPC’s expansion demands public scrutiny

By Shankar Sharma* The recent news that NTPC is scouting 30 potential sites across India for a massive nuclear power expansion should be a wake-up call for every citizen. While the state-owned utility frames this as a bold stride toward a 100,000 MW nuclear capacity by 2047, a cold look at India’s nuclear saga over the last few decades suggests this ambition may be more illusory than achievable. More importantly, it carries implications that could fundamentally alter the safety, environment, and economic health of our communities.

Madhav Gadgil: The ecologist who taught India to listen to nature

By Raj Kumar Sinha* Among the exceptional individuals who laid the intellectual and scientific foundations of environmental conservation in India—and challenged the dominant development discourse—Professor Madhav Dhondo Keshav Gadgil stands as a towering figure. He was not only a pioneering ecologist, but also among the first to view environmental protection through the lens of democracy, local communities and social justice.

Search This Blog