Ministers and officials have been asked to prepare reports on how to stimulate the economy.
The economy has been crying for attention for six straight quarters now as it plunged from 7.5 per cent in 2016-17 to 5.7 per cent in April-June. Demonetisation and the uncertainties of the Goods and Services Tax only helped the law of gravity — but the downward slide had started well before November 8, 2016. It’s puzzling why the usually hands-on Prime Minister Narendra Modi didn’t act sooner as he’s privy to the GDP numbers year-on-year. Even private investment hasn’t been happening for over a year as companies are said to be highly leveraged and pleas to find a resolution to this problem fell on deaf years. Government spending can’t be the only fuel to pump up the economy through infrastructure projects. It should have been a big concern for the government that India had lost its pride of place as the fastest growing economy to China, which is growing quarter-on quarter.
It’ll probably be only next week that a decision at the highest levels on what is to be done will be taken. Ministers and officials have been asked to prepare reports on how to stimulate the economy. It’s unbelievable that all these worthies were sleeping on their watch as the economy hit a slippery slope.
Short of getting former RBI governor Raghuram Rajan, a highly-respected economist, back at the helm, the government can take a cue from what the United States did following the 2008 depression. Then President George W. Bush gave a $300 tax rebate to each individual US taxpayer below a certain income limit and a similar amount per dependent child under 17. This helped to stimulate the economy and get the American economy back on the rails.
On tax rebates, finance minister Arun Jaitley has a solemn promise to keep to honest taxpayers. He had said that with the number of taxpayers brought into the tax net after demonetisation, the burden on taxpayers would be lessened. Reports confirm millions were brought into the tax net. Interest rates too are among Asia’s highest and make India’s exports uncompetitive, so the Reserve Bank and its Monetary Policy Committee will hopefully cut interest rates when the credit policy is announced on October 4. The RBI and its monetary policy committee had earlier misinterpreted inflation’s growth, so there’s a need for a correction. The good monsoon should also help considerably in that direction.
There are signs that there could be some “green shoots” as the index of industrial production has shown a rise of 1.2 per cent year-on-year in July 2017 from a mild downturn of 0.2 per cent in June 2017. The government should build on this in key sectors and get the economy back on track as the fastest-growing in the world.