Economy needs a boost

Economic Survey projects a positive overall picture but fails to suggest any immediate policy measures to tackle the current slowdown

AuthorPublished: 5th Jul 2019  12:00 amUpdated: 4th Jul 2019  6:55 pm

Despite India losing the tag of the fastest growing economy in the world and reeling under a slowdown, the Economic Survey 2019 report has projected an overall positive picture based on strong macroeconomic fundamentals. While pegging the growth rate at 7% for 2019-20, on the back of anticipated pickup in investments and consumption, the survey rooted for a consistent 8% growth to enable the country to become a $5-trillion economy by 2025. However, the survey report, tabled by Finance Minister Nirmala Sitharaman in Parliament, did not suggest any immediate policy measures to tackle the current economic slowdown. The economy has been facing challenges in manufacturing, industry and agriculture sectors as the growth rate slowed to a 20-quarter low of 5.8% in the January-March quarter. A steep fall in investments and consumption was the major reason behind the growth slowdown for the second consecutive year to 6.8% in 2018-19 — from 7.2% in 2017-18 and 8.2% in 2016-17. Over the past few months, vehicle sales have continued to slide, GST collections are below par and job creation continue to suffer, raising concerns about the economy. Below average monsoon rains in many States is likely to deepen the agrarian crisis, adding to the economic woes. However, the survey report, prepared by the new Chief Economic Adviser Krishnamurthy Subramanian, predicted a surge in growth in 2019-20 on the back of pick up in private investment and robust consumption growth.

Growing at 8% consistently over the next five years is a tall order indeed. The country needs to embark on a virtuous cycle of savings, investments and growth to achieve this objective. During the past five years under NDA-1, India grew at an average of 7%. For the GDP to grow at a high rate consistently, there are three prerequisites: inflow of investments, low inflation and stable currency. Besides, what is needed from the government is creation of conducive investment climate, liberalised labour laws and focus on attracting domestic and foreign investors. India needs to follow the successful models of China and Southeast Asian countries and give a big boost to investments, generate jobs and concentrate on exports. Inflation has been under control over the past few years, staying around 4%. The survey sees a fall in crude prices in the next few years, thus helping India control both its inflation and import bill. This, according to the survey, would contribute to the long-term goal of a $5-trillion economy. But, how crude oil rates move would depend on the international market, especially in view of the ongoing tiff between Iran and the US. Any change in the status quo would peg down government estimates and have a bearing on prices, and thus, consumption.

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