A road map for economic revival

The FM’s prescriptions are positive. Build on them

Swas a cannot considering included growth categorical front. justify revival restraining peaking finance of The While to the She complacency help minister’s government’s in in recognising hinted minister saying at the the the tax current economy at Hindustan that remarks officials various Nirmala on green thinking hopes quarter the and economic steps from suggest shoots Times Sitharaman business of regarding that harassing Leadership in guarded the the sentiment. government gave economy, the businesses, optimism. economy. a Summit, glimpse These she is simplifying could crisis what is of that be to non-banking coming be the India’s done government in to the tax revive finance next regime, might consumer budget, companies. hinting not and have sentiment, keeping However, that complete a bigger a deal watch she clarity stimulus also with on indicated the the on distortions (GST) farm prices regime, which and and welfare have in handling crept of urban into the consumers. the contradiction Goods and between Services high Tax Coming approach from is welcome. the highest The levels economy of policymaking, has undergone such a fundamental a candid been struggling transformation to find since a sustainable the 1991 economic medium-term reforms. growth It has anchor since the 2008 financial crisis gave a big blow to export demand as an important driver of growth. Demonetisation and the implementation of GST have also tilted the scales against informal businesses. A sustained growth revival cannot be based on attempts to go back to the pre-2008 era. This is where the minister’s emphasis on working on structural constraints and questioning orthodoxy is important. If India has to achieve a big infrastructure push — the government plans to spend ~100 lakh crore in infra projects until 2024 — it needs an overhaul of financial institutions. Similarly, an obstinate adherence to fiscal discipline, even if growth continues to lag, will be unhelpful. However, this cannot come at the cost of the Centre not fulfilling its revenue promises on the GST front to the states. It is welcome that the minister said that this contract is sacrosanct.

The government needs to act as a pragmatic facilitator of growth to put the economy back on a high growth path. This will need a mix of counter-cyclical fiscal policy, structural reforms, and even out-of-the-box thinking, without losing sight of the larger macroeconomic picture. The finance minister’s remarks suggest that there is hope on all these fronts.