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Recession is not a worry for consumers and businesses in UK as…

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Britain is weathering the worst cost-of-living squeeze in memory better than indicated by dire projections for a catastrophic recession.

Read more: World Economic Forum 2023 summit kicks off at Davos on Jan 16 | 10 top points

Real-time indicators and surveys point to the health of consumer spending and business investment. They suggest a deep recession is unlikely following official figures that showed surprisingly strength in both October and November.

An Institue of Directors survey showed the number of executives planning to increase invesment in the next year outweighed those anticipating cuts, with 5% set for “much higher” spending.

The data along with softening inflation and falling energy costs are a boost for Prime Minister Rishi Sunak’s government, which is struggling to contain the fallout from crippling strikes and plummeting disposable incomes. It also complicates the Bank of England’s calculations on how quickly to raise interest rates.

For months, the central bank has projected that the economy had already tipped into a recession in the second half of last year. It expects no growth until 2024, when Sunak is likely to fight another election.

Friday’s figures from the Office for National Statistics showed the economy grew slightly in two of the final three months of 2022, meaning a recession probably won’t start until this year at the earliest. While the UK still is projected to have the worst and longest slump of any Group of Seven nation, there’s signs the downturn may be less protracted than feared.

Read here: World Bank warns global economy could tip into recession this year

What Bloomberg economics says

“The current downturn may be shallower than we had initially expected. That won’t matter much for the Bank of England’s next policy decision — the committee is laser-focused on inflationary pressures. It could, however, carry more bearing further out. If the economy doesn’t weaken enough to cool the labor market, the BOE may be forced to do more.”

Data due out next week are likely to show that companies kept hiring in December, bidding up wages for workers at a historic pace. Economists surveyed by Bloomberg also expect inflation will tick down further from 10.7% in November and that retail sales are likely to have rebounded in December.

Industry groups led by Make UK and the Institute of Directors say British factories and small businesses still plan to plow investment into the economy this year. That’s despite recession warnings and dismal confidence readings.

“What we found was, even though you’ve got those difficult challenges at the moment, there are some green shoots,” said Bhavina Bharkhada, head of policy and campaigns at Make UK.

Make UK’s survey this week showed that manufacturers’ investment plans have held up in recent months, with executives planning to pump money into new products and energy efficiency. More than two-thirds of factories are pumping investment into product development and training staff, while over half are spending to boost energy efficiency.

Kitty Ussher, chief economist at the IOD, said there’s a “marked” difference in the way business leaders felt and how they were acting. While sentiment is near rock bottom, investment intentions are near levels last seen in 2019, before the pandemic hit, according to the latest survey from the group that represents company executives.

“In 2019 confidence was pretty low, but you also had investment intentions pretty low as well,” Ussher said. “They correlated really well. What’s really noticeable at the moment is confidence is as bad as the beginning of lockdown, yet the economy is fully open.”

Read here: World economy headed for a recession in 2023: Researcher

The IOD’s surveys indicate business leaders are still alarmed about high levels of inflation, which have largely been caused by sky-high energy prices. Ussher thinks optimism could grow again this Spring so long as inflation eases in line with the BOE’s forecasts and the situation in Ukraine doesn’t deteriorate.

Shoppers also appear to be withstanding soaring energy and grocery bills, shaking off a historic shock to their disposable incomes. Richer households that account for the lion’s share of spending haven’t cut back as much as poorer ones.

Credit and debit card data showed the strength of demand in recent weeks along with an easing of financial conditions, according to Panmure Gordon. Stock prices have risen while market interest rates and mortgage costs have fallen in the past quarter with Panmure’s own financial conditions index easing back to +0.4 after soaring from -0.5 to +0.7 in the first 10 months of 2022.

Retailers including Marks & Spencer Group Plc and Tesco Plc, have reported strong Christmas sales, an indication that households are still opening their wallets. Consumer confidence has also begun to climb away from record lows.

Card spending in late 2022 outperformed 2021 levels, said Simon French, chief economist at Panmure Gordon. Households are enjoying a tax break and support for natural gas and electricity bills that’s among the most generous in Europe.

“There’s a risk of a hangover in the first half of the year,” French said. “There’s the risk the jobs market and the property market lean in against what has been a near term outperformance. I’m still thinking there will be a recession, albeit a much shallower one than the Bank of England and Office for Budget Responsibility saw.”

Growing optimism over the growth outlook for 2023 will bolster the case for those policy makers at the Bank of England arguing that more tough action will be needed to tame double-digit inflation. Markets currently expect the Bank of England’s benchmark lending rate to peak just below 4.5%. Investors are paring their bets on significant increases despite signs of resilient demand.

Read here: One-third of world economy to be in recession: IMF chief’s dire warning

A stronger economy could keep inflationary pressures higher even as the squeeze on households is eased by the downward trend in natural gas prices. City of London forecasters have upgraded their expectations for UK growth in the latest survey by Bloomberg. In the new forecasts, economists expect a 0.9% contraction in 2023, 0.1 percentage points better than the previous month.

“There’ll come a point in the Spring when the heating gets turned off and there’s a quite a big debate about whether the Bank of England should keep raising rates,” Ussher said. “The issue then for the Bank of England is to work out whether the rise in optimism is a problem.”

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Number Theory: What does the Economic Survey tell us about the Budget?

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What does the 2022-23 Economic Survey — it was tabled in Parliament on January 31 — tell us about the Union Budget? Here are four things that stand out.

Revenue growth in 2023-24 could slow down with a lower nominal GDP growth

The survey has projected a nominal growth rate of 11% for 2023-24. Real GDP growth, according to the survey, is expected to be in the range of 6-6.8%. The first advanced estimate of GDP, which was released by the National Statistical Office (NSO) earlier this month, put nominal GDP growth in 2022-23 at 15.4%. This means that nominal growth is expected to slow down significantly in the next fiscal. Unless there is a significant increase in tax buoyancy – the change in tax collections per unit change in GDP – growth in tax revenues in 2023-24 will likely be lower than what it was in 2022-23. To be sure, the moderation in nominal growth is more because of a decline in inflation rather than a fall in real GDP growth, which as per survey’s baseline projection is likely to be 6.5% next year.

UNION BUDGET 2023: FULL COVERAGE

The moderation in nominal growth is more because of a decline in inflation rather than a fall in real GDP growth, which as per survey’s baseline projection is likely to be 6.5% next year.

The government will likely achieve its fiscal deficit target for 2022-23 and consolidate further in FY24

Last year’s Budget estimated fiscal deficit for 2022-23 at 6.4% of GDP. While the Revised Estimate (RE) for fiscal deficit will presented in tomorrow’s budget (and even RE numbers are liable to changes) the survey does drop a hint that the government will be able to achieve its fiscal deficit target for 2022-23. This, the survey suggests, has happened because of buoyant growth in direct taxes and Goods and Services Tax (GST) and limited revenue expenditure, “which should ensure the full expending of the Capex budget within the budgeted fiscal deficit”.

ALSO READ: After ‘smart recovery’ from Covid, what do MSMEs expect from Budget 2023

The Revised Estimate (RE) for fiscal deficit will presented in tomorrow’s budget (and even RE numbers are liable to changes) the survey does drop a hint that the government will be able to achieve its fiscal deficit target for 2022-23.
The Revised Estimate (RE) for fiscal deficit will presented in tomorrow’s budget (and even RE numbers are liable to changes) the survey does drop a hint that the government will be able to achieve its fiscal deficit target for 2022-23.

Focus on disinvestment and asset monetisation programme will continue

One area where the budget has fallen significantly short of its targets in the recent past is disinvestment. For example, the Budget Estimate (BE) for disinvestment receipts in the 2021-22 Budget was 1.75 lakh crore, which was brought down to 78,000 crore in the RE numbers for 2021-22. BE numbers for 2022-23 put disinvestment receipts at 65,000 crore. While the RE numbers for 2022-23 are likely to be lower than this number, the survey suggests that the government’s disinvestment push is likely to continue. The survey, in fact, has tied disinvestment and the asset monetisation programme of the government to the capex tilt in government spending. “A capex thrust in the last two budgets of the Government of India was not an isolated initiative meant only to address the infrastructure gaps in the country. It was part of a strategic package aimed at crowding-in private investment into an economic landscape broadened by the vacation of non-strategic PSEs (disinvestment) and idling public sector assets”, the survey said.

The survey, in fact, has tied disinvestment and the asset monetisation programme of the government to the capex tilt in government spending.
The survey, in fact, has tied disinvestment and the asset monetisation programme of the government to the capex tilt in government spending.

A big stimulus to mass demand may not be in the offing

Here the survey has said more by way of omission than commission. Chapter two of the survey, which talks about India’s medium-term growth prospects, makes an argument that India is set to leapfrog into a sustained high growth trajectory in 2023-2030 as a result of policy driven reforms during the 2014-2022 period. The growth boom, the survey argues, was delayed because of “balance sheet stress caused by the credit boom in the previous years and secondarily due to the one-off global shocks that followed”. “Once these global shocks of the pandemic and the spike in commodity prices in 2022 fade away, the Indian economy is well placed to grow faster in the coming decade”.

To be sure, it is to be expected that the Economic Survey – it is after all a government document – will paint a comforting picture of the state of the economy. However, this year’s survey has made a larger argument to suggest that the concerns of a K-shaped recovery in the economy where the rich (both firms and households) have done better and emerged as the primary driver of the growth revival, are unfounded. This also means that the government does not see any need to support the aggregate demand of the non-rich, which would entail larger spending on the revenue and not just capital account.

This year’s survey has made a larger argument to suggest that the concerns of a K-shaped recovery in the economy where the rich (both firms and households) have done better and emerged as the primary driver of the growth revival, are unfounded.
This year’s survey has made a larger argument to suggest that the concerns of a K-shaped recovery in the economy where the rich (both firms and households) have done better and emerged as the primary driver of the growth revival, are unfounded.

This has in fact been the driving philosophy of the budget in the post-pandemic period, and the survey’s line of argument suggests that it will continue to be the case. While such as approach has helped India’s macroeconomic fundamentals, keeping the fiscal deficit and debt-GDP ratio in check, its exact implications for long-term growth are still to be seen. That India does not have a Consumption Expenditure Survey after 2011-12 has only made this debate more difficult to resolve.


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What Economic Survey says about education: Decline in…

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Enrolment of students increased in schools across the country in financial year 2022, with an additional 194 million students being enrolled, while at the same time the drop-out rate witnessed a “steady decline”, the economic survey 2022-23 said.

The survey tabled by Union finance minister Nirmala Sitharaman in Parliament on Tuesday said financial year 2021-2022 (FY22) witnessed an improvement in the gender parity in school enrolment, growth in basic infrastructure facilities at school level, and a better pupil-teacher ratio in schools.

UNION BUDGET 2023: FULL COVERAGE

According to the survey, 265 million children were enrolled in schools across the country with around 194 million additional children being enrolled in primary to higher secondary levels. Of these 194 million, around 10 million children were enrolled in pre-primary (pre-nursery, nursery and kindergarten), 122 million in primary (classes first to fifth), 67 million in upper primary (classes sixth to eighth), 39 million in secondary (classes 9 and 10) and 29 million in higher secondary classes (classes 11 and 12).

The enrolment has increased at all levels except for pre-primary. “At the pre-primary level, enrolment reduced from 1.1 crore [11 million] in 2021 to 1.0 crore [10 million] in 2022,” said the survey.

Read | What does the Economic Survey tell us about the Budget?

The survey says that the financial year 2021-22 saw an improvement in Gross Enrolment Ratios (GER) in schools across all levels. GER stands for the enrolment in a specific level of education, regardless of age, expressed as a percentage of the eligible official school-age population corresponding to the same level of education in a given school year.

“The GER in the primary enrolment in class I to fifth as a percentage of the population in age 6 to 10 years – for girls as well as boys have improved in FY 22. This improvement has reversed the declining trends between FY17 and FY19,” the survey said.

According to the survey, at the upper primary and primary level, the GER for girls is better than that for boys.

For instance, at the primary level, 104.8% girls and 102.1% boys were enrolled in 2021-22. It recorded an improvement from 2020-21 when 104.5% girls and 102.2% boys were enrolled. Similar trends have been observed at the upper primary level as well. In 2021-22, 94.9 % girls were enrolled as opposed to 94.5% boys. This was 92.7% and 91.6% for girls and boys respectively in 2020-21.

In higher education, the total enrolment increased to nearly 41 million in FY21 from 39 million in FY20. Since FY15, there has been an increase of around 7.2 million in enrolment , approximately by 20%. “The female enrolment has increased to 20 million in FY21 from 19 million in FY20,” said the survey.

The survey highlighted an increase in the GER in higher education as well. “The GER in higher education, based on 2011 population projections (revised), was recorded at 27.3 in FY21, which is an improvement from 25.6 in FY20. The GER for males increased from 24.8 in FY20 to 26.7 in FY21 while GER for females has also shown improvement from 26.4 to 27.9 during the same period,” it said.

The survey highlighted a “steady decline” in school drop out rates at all levels from 14% in 2020-21 to 12.6% in 2021-22. The survey emphasised that government schemes such as Samagra Shiksha, and Right to Education (RTE) Act 2009, improvement in school infrastructure and facilities, residential hostel buildings, availability of teachers, regular training of teachers, free textbooks, uniforms for children, and the PM POSHAN Scheme played the major role in increasing enrollments and retaining students.

It also mentioned that distance education in India also witnessed a 7% increase in enrolment in the financial year 2021-22 from FY20, and 20% increase since FY15.

“Basic facilities in schools continued to improve in FY22 over earlier years except for medical check-ups in schools as the schools remained closed physically in the wake of Covid-19 curbs,” the survey stated.

In terms of school basic facilities, including toilets (girls or boys), drinking water, and hand-washing facilities, and digitisation, the survey showed a significant improvement. For instance, the number of schools having the internet increased to 33.9% in 2021-22 from 24.5% in 2020-21.

Terming Pupil-Teacher Ratio as an indicator which is inversely related to improvement in quality of education, the survey stated that it has improved at all levels continuously between FY13 to FY22. “It has increased from 34.0 to 26.2 at primary, 23.0 to 19.6 at upper primary, 30.0 to 17.6 at secondary, and 39.0 to 27.1 at the higher secondary level. The improvement in the number of schools, teachers’ availability, and facilities in schools is expected to help improve enrolment and reduce dropout rates,” the survey started.

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January GST collection at ₹1.55 lakh crore, second highest-ever

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PTI | | Posted by Ritu Maria Johny

The GST collection in January surged to over 1.55 lakh crore, the second highest-ever mop-up, the finance ministry said on Tuesday.

“The gross GST revenue collected in the month of January 2023 till 5:00 PM on 31.01.2023 is 1,55,922 crore of which CGST is 28,963 crore, SGST is 36,730 crore, IGST is 79,599 crore (including 37,118 crore collected on import of goods) and cess is 10,630 crore (including 768 crore collected on import of goods),” the ministry said in a statement.

The revenues in the current financial year up to January 2023 are 24 per cent higher than the GST revenues during the same period last year.

This is for the third time, in the current financial year, GST collection has crossed 1.50 lakh crore mark. The GST collection in January 2023 is the second highest next only to the 1.68 lakh crore gross mop-up reported in April 2022.

“Over the last year, various efforts have been made to increase the tax base and improve compliance. The percentage of filing of GST returns (GSTR-3B) and of the statement of invoices (GSTR-1), till the end of the month, has improved significantly over years,” the ministry said.

In the October-December 2022 quarter, a total of 2.42 crore GST returns were filed till the end of the next month compared to 2.19 crore in the same quarter of the last year. This is due to various policy changes introduced during the year to improve compliance, it added.

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