Can Sitharaman’s announcements be the energy drink that the Indian economy needs to wake up from its slumber?

The Government is right about something, the Indian economy is still growing. But the problem is nobody believes that it is doing so or that it is catching up as fast as it should and this lacklustre conviction is the Government’s fault. Growth numbers have been manipulated and uncomfortable figures massaged, others have been withheld to spin a particular narrative. But not all numbers can be fudged. Declining sales and growth figures for publicly listed companies do come out as does Government data. These numbers are painting a grim picture. And while Union Finance Minister Nirmala Sitharaman may be right in arguing that India too will be impacted as the world itself is headed towards a cyclical slowdown, the fact is that the Indian economy is still largely based on domestic consumption. This makes arguments from the likes of former vice chairman of Niti Aayog, Arvind Panagariya — which essentially went (with due apologies to Marie Antoinette) “let them export” when he was talking of the troubles faced by the Indian automotive industry — belie an understanding of the situation. But at least someone in the Government, maybe even the Prime Minister, saw that private sector investment in our country was hurtling downhill. This, coupled with little or no major foreign investment, will worsen the job crisis further. India, which mind you needs to create a million jobs a month over the next decade to absorb its “demographic dividend,” might actually start losing them.

At least the realisation has dawned that unless domestic consumption is enhanced, there can be no short-term growth. So the measures announced by the Finance Minister, crucially about bank recapitalisation and associated issues as well as the Government paying back its dues to ease working capital crisis alongside, are a good start. It is the cup of coffee that many people have to start their day. It is, however, not a full meal and one hopes that the Government thinks of some other radical new measures to boost the economy. While cutting tax rates is an anathema to Indian Governments — whether on the personal side or on products — it might become essential to boost spending because when people are worried about the state of the economy, they will not spend unless one actually puts money in their hands. Cheaper loans will not make an iota of difference if people do not want them. At the same time, the Government has to rein in motormouths inside the official structure, who have actively gone and harmed industries with comments that have been out of line. Many of those remarks have come from motivated individuals inside policy-making institutions and others, who hold important roles. There is no doubt that this Government, or any Indian government, will have major social sector priorities but if economic growth falters, the aim to lift hundreds of millions out of poverty will remain a pipe-dream. The situation is frankly quite critical and while one should not go as far as to say that the survival of the modern Indian nation state depends on competent handling of the situation, anyone who makes such an argument today will have the attention of many. We are hoping that this stimulus will lift sentiments and energise the equity market. Others still want the big bang reforms, not a nudge.

Writer & Courtesy: The Pioneer

Can Sitharaman’s announcements be the energy drink that the Indian economy needs to wake up from its slumber?

The Government is right about something, the Indian economy is still growing. But the problem is nobody believes that it is doing so or that it is catching up as fast as it should and this lacklustre conviction is the Government’s fault. Growth numbers have been manipulated and uncomfortable figures massaged, others have been withheld to spin a particular narrative. But not all numbers can be fudged. Declining sales and growth figures for publicly listed companies do come out as does Government data. These numbers are painting a grim picture. And while Union Finance Minister Nirmala Sitharaman may be right in arguing that India too will be impacted as the world itself is headed towards a cyclical slowdown, the fact is that the Indian economy is still largely based on domestic consumption. This makes arguments from the likes of former vice chairman of Niti Aayog, Arvind Panagariya — which essentially went (with due apologies to Marie Antoinette) “let them export” when he was talking of the troubles faced by the Indian automotive industry — belie an understanding of the situation. But at least someone in the Government, maybe even the Prime Minister, saw that private sector investment in our country was hurtling downhill. This, coupled with little or no major foreign investment, will worsen the job crisis further. India, which mind you needs to create a million jobs a month over the next decade to absorb its “demographic dividend,” might actually start losing them.

At least the realisation has dawned that unless domestic consumption is enhanced, there can be no short-term growth. So the measures announced by the Finance Minister, crucially about bank recapitalisation and associated issues as well as the Government paying back its dues to ease working capital crisis alongside, are a good start. It is the cup of coffee that many people have to start their day. It is, however, not a full meal and one hopes that the Government thinks of some other radical new measures to boost the economy. While cutting tax rates is an anathema to Indian Governments — whether on the personal side or on products — it might become essential to boost spending because when people are worried about the state of the economy, they will not spend unless one actually puts money in their hands. Cheaper loans will not make an iota of difference if people do not want them. At the same time, the Government has to rein in motormouths inside the official structure, who have actively gone and harmed industries with comments that have been out of line. Many of those remarks have come from motivated individuals inside policy-making institutions and others, who hold important roles. There is no doubt that this Government, or any Indian government, will have major social sector priorities but if economic growth falters, the aim to lift hundreds of millions out of poverty will remain a pipe-dream. The situation is frankly quite critical and while one should not go as far as to say that the survival of the modern Indian nation state depends on competent handling of the situation, anyone who makes such an argument today will have the attention of many. We are hoping that this stimulus will lift sentiments and energise the equity market. Others still want the big bang reforms, not a nudge.

Writer & Courtesy: The Pioneer