Editorial 1: A light-bulb moment for the Indian fan market
Context
- The lessons from India’s LED revolution can help the country’s growing ceiling fan market.
The LED bulb story
- Even in the humid weather of August and September, as in the dry heat of May, the ceiling fan continues to provide comfort to many in India.
- The ceiling fan market is undergoing a churn too, driven by policy imperatives and a regulation change.
- But the fan market must learn from the successes and hiccups of the light-emitting diode (LED) bulb story.
- The policy imperative driving the change in the fan market is energy transition in a world that must grow sustainably with changing climate.
- India’s goal of reducing harmful emissions per unit of GDP, by 45% by 2030, relative to 2005, requires a sharp reduction in the energy consumed for economic activity.
- Households account for nearly a third of all electricity consumed in India, and ceiling fans, used by 90% of households, as per a Council on Energy, Environment and Water (CEEW) survey of 2020.
- The India Cooling Action Plan projects that the number of fans in use in India could grow to a billion by 2038, from about 500 million now, as incomes grow along with average temperatures.
The ‘star rating’ programme
- Given the importance of fans, the Bureau of Energy Efficiency (BEE), India’s energy efficiency regulator under the Union Ministry of Power, made the Standards and Labelling (S&L) programme, popularly known as the ‘star-rating’ programme, mandatory for ceiling fans in May 2022.
- But ‘5-star’ fans (the star rating) cost twice as much as typical unrated fans — not a small barrier to adoption in India’s price-sensitive market.
- To tackle this, Energy Efficiency Services Limited (EESL) is planning a demand aggregation programme to sell 10 million ‘5-star’ ceiling fans.
- The programme hopes to transform the fans market much like it did for LED lamps under the famous Unnat Jyoti by Affordable LEDs for All (UJALA) programme.
- The UJALA programme, launched in 2015, helped reduce the price of LED lamps from ₹400 to ₹90 in a span of three to four years.
Steps to a transformation
1. First is to maintain a technology-agnostic policy.
- Demand aggregation is most effective when a single technology specification is procured in bulk.
- In the case of LEDs, it was the nine-watt white light LED bulb. But fans have a wider spectrum of technology, each with its own trade-offs.
- A policy that covers more than one specification would be more cost-effective in the long run.
- A typical ceiling fan uses the time-tested induction motor, which is rugged but may have limits on energy performance.
- The newer kid on the block, the brushless DC (BLDC) motor, is the only commercially available technology so far that meets the ‘5-star’ performance benchmark.
2. Second, manage the balance between price reduction and quality.
- The intense pressure on price on LEDs during the UJALA programme led to lower-quality products entering the market, with higher failure rates.
- While replacing a bulb is easy and cheap, replacing a ceiling fan is inconvenient and costly.
- Low-quality products could lead to a deficit of consumers’ trust in the new technology, prompting them to revert to the old.
3. Third, foster high-quality domestic manufacturing capacity for high-efficiency fans.
- While the growth of the LED market spawned new manufacturers and brands, India arguably missed the bus on maintaining the quality of local manufacturing and reducing import dependence for components.
- India can leverage its massive domestic market to achieve economies of scale for finished products and components, and expand into the export market.
- Indian quality and performance standards must be updated to align with international ones to ensure that manufacturers are competitive.
4. And, finally, dedicate resources to strengthening the standard and labelling programme.
Conclusion
- Fans are undergoing their first major phase of disruption in decades. Energy-efficient fans can not only help the vulnerable population get access to a critical service for coping with events of extreme heat with lower electricity bills, but are also central to India’s clean energy transition and can play a part in its economic growth.
Editorial 2: Tracking India’s growth trajectory
Introduction
- The conventional way to assess a country’s economic situation is to look at the quarterly (three-month) and annual (12-month) GDP (gross-domestic-product) growth rate and compare it to previous quarters as well as years. In the quarterly release of GDP figures by the NSO (National Statistical Office), the country’s performance is likened to reviewing a report card of its economic performance.
GDP growth rate
- The Q1 data covering the GDP growth rate from April to June of FY24 boasts a nominal growth rate of 8% and a real growth rate of 7.8%.
- The growth story currently posits that the numbers reflect an uptick in the agriculture sector growing at 3.5%, unlikely to be sustained due to pressure from the El Niño phenomenon, and the services industry, with financial, real estate and professional services growing at 12.2%.
Calculating GDP
- The first factor to consider is that calculating the GDP growth rate involves many complex statistical choices and sophisticated statistical operations.
- One such decision the NSO made while conducting their research was to use the income approach of calculating GDP rather than the expenditure approach.
- The income approach involves summing up all national incomes from the factors of production and accounting for other elements such as taxes, depreciation, and net foreign factor income.
- However, the expenditure approach dictates headline growth to be 4.5% rather than 7.8% which is a large discrepancy.
- Moreover, another essential statistical operation is the adjusting for inflation using the price deflator.
- Typically, the deflator is meant to adjust growth figures when they are overstated by inflation.
- In this case, deflation due to falling commodity prices, reflected in the wholesale price index, has worked to overstate the real growth.
- Furthermore, there is a base effect from the COVID-19 degrowth period, which continues to plague India’s growth figures.
- Although less pronounced in FY24, the base effect has a role in comparative statistics due to sporadic growth in the years following FY20-21.
- Additionally, one must consider whether the proposed, supposedly cooled, inflation rate calculated through the consumer price index can be sustained at current levels with the impending depreciation of the Indian rupee against the dollar due to capital outflow pressures resulting from the RBI’s reluctance to raise interest rates.
Revenue from taxes
- Moreover, the government’s tax revenue from direct taxes has weakened over the previous quarter while the indirect tax revenue remained strong, indicating a K-shaped pattern.
- The income streams from progressive taxation seem to be a laggard compared to its regressive counterpart.
- A muted growth of direct tax collected in an economy boosted by the services industry is a statistical discrepancy which remains unexplained in the proposed GDP growth story.
A nuanced approach
- In conclusion, after a meticulous analysis of India’s Q1 FY24 economic transcript, it becomes palpable that the reported growth narrative might be somewhat over embellished.
- The divergence in growth figures brought forth by the income and expenditure approaches manifest a significant disparity, raising fundamental questions about the veracity of the promulgated optimistic narrative.
- Moreover, the underpinnings of this growth story, nuanced by inflationary adjustments and conspicuous fluctuations in tax revenue streams, signal a cautious trajectory.
- Additionally, the apprehensive outlook on the agriculture sector and potential fiscal constraints paint an arguably more restrained picture than initially portrayed.
Conclusion
- Therefore, it seems prudent to assert that India’s economic performance, although showing signs of resilience, does not quite emerge as the unequivocal success story depicted in initial observations, urging a more nuanced and critical approach in assessing the trajectory ahead.
