The influential American economist of Indian origin said it was possible for India to have a long period of strong growth and become a developed economy, while many developed nations are vulnerable to geopolitical turmoil.

“We will definitely make it. In contrast, many of the developed economies are not sound at all, as they are more affected by geopolitical stress points like the Russia-Ukraine conflict. They are also going to get involved in what happens with China in the Far East. So, we can no longer count on the western powers to remain ahead.” 

Also read | Prudent for global biz to diversify supply chains: FM

“We, on the other hand, are not involved in such events at the moment. Therefore, if we keep up where we are now in terms of our current outstanding rate of growth and everything that finance minister Nirmala Sitharaman and Prime Minister Narendra Modi talked about, if that keeps up, we will be way ahead of the West,” Bhagwati said.

“So I am optimistic on that ground.”

Bhagwati was referring to Modi’s pledge last week to carry out structural reforms and inclusive growth, where he emphasized that the first three months of the National Democratic Alliance government’s third term in office was marked by a strong commitment to jobs and skills, sustainable growth, innovation, infrastructure building, quality of life and rapid growth.

Sitharaman has also expressed confidence that there would be “the steepest rise” in living standards in India in coming days.

The finance ministry had in its monthly economic review for August noted that trends indicated a strong foundation of macroeconomic stability in the country with steady growth, investment, employment and inflation trends, but flagged continued uncertainty in global economic prospects and advised monitoring of trends like the buildup of automobile inventory and slowing of fast-moving consumer goods in urban areas in the June quarter. Policymakers also are keeping an eye on fears of a recession in advanced economies.

Also read | ‘R&D support can deepen India’s share in global supply chains’

Bhagwati believes India should act fast and get a bigger share in global supply chains.

“With the global supply chain involving China getting broken, instead of moving in, we allowed other countries to break into it. Bangladesh was one of them. We have to make sure that we build up our own supply chains. We are thinking about it, but we have to move fast because if other supply chains get established, then it is all the more difficult to break into them,” he said.

To get a larger share of global trade, India also has to be more competitive and lower tariffs will help, he said. “Imports and exports are not independent; they are linked together. For exports to work and to build supply chains, we have to be able to import raw materials and components which make our supplies more competitive. If you suddenly run out of components, who will trust your supply chain? Certainty of supply chain is a very critical aspect. We have to be very smart,” Bhagwati said. Lower tariffs enable countries to import more and feed their supply chains, he said.

“Sometimes in the political economy, we see pressure getting built up to lower tariffs,” Bhagwati said, referring to former US president Donald Trump’s description of Indian customs tariffs as high. Trump, who had described India a “tariff king” in his first term in office, said in September India was an “abuser” of tariffs.

Last year, India reduced customs duty on several products imported from the US, including apples, almonds, lentils and chickpeas. That was part of removal of retaliatory duty imposed on US exports in 2019 after the US raised import duty on certain items.

Read more | India, US working on $1 bn multilateral financing for clean energy supply chain

“We have to be active with the World Trade Organization to make sure the things of interest to us remain free from trade tariffs and restrictions. And I think we are aware of that,” Bhagwati said.

The only way India can take full advantage of its demographic dividend is by attracting investment in new productive capacity in both manufacturing and services, which can employ people, he said.

“There are two ways to do it. One is to invest yourself and the other is to invite foreign capital. In our case, foreign capital is willing to come in and create jobs because we have skilled manpower… We have to maximize that advantage and try and say look, ‘We will give you good terms and so on, come and invest and use our manpower,’ because the skilled manpower also then gets doubly trained and get additional skills. Thus, it creates the manpower resources for more investments to come in. It has a virtuous, snowballing effect.”

Washington, DC
CNN
 — 

Spending at US retailers fell in March as consumers pulled back after the banking crisis fueled recession fears.

Retail sales, which are adjusted for seasonality but not for inflation, fell by 1% in March from the prior month, the Commerce Department reported on Friday. That was steeper than an expected 0.4% decline, according to Refinitiv, and above the revised 0.2% decline in the prior month.

Investors chalk up some of the weakness to a lack of tax returns and concerns about a slowing labor market. The IRS issued $84 billion in tax refunds this March, about $25 billion less than they issued in March of 2022, according to BofA analysts.

That led consumers to pull back in spending at department stores and on durable goods, such as appliances and furniture. Spending at general merchandise stores fell 3% in March from the prior month and spending at gas stations declined 5.5% during the same period. Excluding gas station sales, retail spending retreated 0.6% in March from February.

However, retail spending rose 2.9% year-over-year.

Smaller tax returns likely played a role in last month’s decline in retail sales, along with the expiration of enhanced food assistance benefits, economists say.

“March is a really important month for refunds. Some folks might have been expecting something similar to last year,” Aditya Bhave, senior US economist at BofA Global Research, told CNN.

Credit and debit card spending per household tracked by Bank of America researchers moderated in March to its slowest pace in more than two years, which was likely the result of smaller returns and expired benefits, coupled with slowing wage growth.

Enhanced pandemic-era benefits provided through the Supplemental Nutrition Assistance Program expired in February, which might have also held back spending in March, according to a Bank of America Institute report.

Average hourly earnings grew 4.2% in March from a year earlier, down from the prior month’s annualized 4.6% increase and the smallest annual rise since June 2021, according to figures from the Bureau of Labor Statistics. The Employment Cost Index, a more comprehensive measure of wages, has also shown that worker pay gains have moderated this past year. ECI data for the first quarter of this year will be released later this month.

Still, the US labor market remains solid, even though it has lost momentum recently. That could hold up consumer spending in the coming months, said Michelle Meyer, North America chief economist at Mastercard Economics Institute.

“The big picture is still favorable for the consumer when you think about their income growth, their balance sheet and the health of the labor market,” Meyer said.

Employers added 236,000 jobs in March, a robust gain by historical standards but smaller than the average monthly pace of job growth in the prior six months, according to the Bureau of Labor Statistics. The latest monthly Job Openings and Labor Turnover Survey, or JOLTS report, showed that the number of available jobs remained elevated in February — but was down more than 17% from its peak of 12 million in March 2022, and revised data showed that weekly claims for US unemployment benefits were higher than previously reported.

The job market could cool further in the coming months. Economists at the Federal Reserve expect the US economy to head into a recession later in the year as the lagged effects of higher interest rates take a deeper hold. Fed economists had forecast subdued growth, with risks of a recession, prior to the collapses of Silicon Valley Bank and Signature Bank.

For consumers, the effects of last month’s turbulence in the banking industry have been limited so far. Consumer sentiment tracked by the University of Michigan worsened slightly in March during the bank failures, but it had already shown signs of deteriorating before then.

The latest consumer sentiment reading, released Friday morning, showed that sentiment held steady in April despite the banking crisis, but that higher gas prices helped push up year-ahead inflation expectations by a full percentage point, rising from 3.6% in March to 4.6% in April.

“On net, consumers did not perceive material changes in the economic environment in April,” Joanne Hsu, director of the surveys of consumers at the University of Michigan, said in a news release.

“Consumers are expecting a downturn, they’re not feeling as dismal as they were last summer, but they’re waiting for the other shoe to drop,” Hsu told Bloomberg TV in an interview Friday morning.

This story has been updated with context and more details.