PM’s ad­vi­sory coun­cil a check on Jait­ley

The Free Press Journal - - EDIT -

That the Prime Min­is­ter’s Eco­nomic Ad­vi­sory Coun­cil (EAC) has met and iden­ti­fied con­fi­den­tially the rea­sons that it at­tributes to the eco­nomic down­turn in the coun­try is a re­flec­tion of Naren­dra Modi’s ap­par­ent re­al­i­sa­tion that he needs to look at the econ­omy not solely through the eyes of Fi­nance Min­is­ter Arun Jait­ley. It is a hard re­al­ity that Jait­ley has been in the thick of con­tro­versy over the per­ceived fail­ure of the de­mon­eti­sa­tion of high-value cur­rency and the ini­tial hic­cups of the Goods and Ser­vices Tax (GST). It was widely spec­u­lated that the Fi­nance Min­is­ter was not kept in the loop at least on de­mon­eti­sa­tion but be­ing the coun­try’s fi­nance min­is­ter he could not shrug off re­spon­si­bil­ity. There is in­deed com­plete si­lence on why Jait­ley was not part of the EAC’s first meet­ing with the Prime Min­is­ter. If he was abroad at­tend­ing the an­nual meet­ings of the World Bank and the In­ter­na­tional Mone­tary Fund, could the Prime Min­is­ter not have waited for him to re­turn?

The five-mem­ber Coun­cil was unan­i­mous that the govern­ment shouldn’t stray from the path of fis­cal con­sol­i­da­tion, thus rul­ing out a fis­cal stim­u­lus to re­verse the down­turn in the econ­omy. Coun­cil chair­man Bibek De­broy said the com­mit­tee had reached a con­sen­sus on the fis­cal con­sol­i­da­tion pol­icy be­ing fol­lowed by the govern­ment. The twin ob­jec­tives of the coun­cil would be to ac­cel­er­ate growth and em­ploy­ment in the next six months. It is un­clear as to what would be the rem­edy if the Fi­nance Min­is­ter does not agree with the pal­lia­tives sug­gested by the ad­vi­sory coun­cil. While some creases in the cloth can be ironed out, would it not be counter-pro­duc­tive if the EAC and the Fi­nance Min­is­ter func­tion at cross-pur­poses? The Coun­cil, which in­cludes Niti Aayog ad­vi­sor and for­mer fi­nance sec­re­tary Ratan Watal, and econ­o­mists Sur­jit Bhalla, Rathin Roy, and Ashima Goyal, would con­vene again in Novem­ber.

Ahead of the meet­ing of the World Bank and IMF for which Jait­ley is away to the US, a re­port put out by the Bank while ac­knowl­edg­ing the slow­down in the In­dian econ­omy rec­om­mended greater fo­cus to help boost the in­for­mal econ­omy. It said sound poli­cies around bal­anc­ing pub­lic spend­ing with pri­vate in­vest­ment could ac­cel­er­ate growth to 7.3 per cent by 2018. It said while on the one hand, pub­lic and pri­vate con­sump­tion gained pace: af­ter im­ple­men­ta­tion of the 7th cen­tral pay com­mis­sion rec­om­men­da­tions; and due to the re­vival in ru­ral de­mand af­ter nor­mal mon­soon and agri­cul­tural im­pe­tus, on the other hand, over­all de­mand slowed as pub­lic in­vest­ments started to wane. Ac­cord­ing to the bank, GST is ex­pected to dis­rupt eco­nomic ac­tiv­ity in early 2018, but has mo­men­tum to pick-up. The World Bank study said the most sub­stan­tial medium-term risks are as­so­ci­ated with pri­vate in­vest­ment re­cov­ery, which con­tin­ues to face sev­eral do­mes­tic im­ped­i­ments such as cor­po­rate debt over­hang, reg­u­la­tory and pol­icy chal­lenges, along with the risk of an im­mi­nent in­crease in US in­ter­est rates. "If the in­ter­nal bot­tle­necks are not al­le­vi­ated, sub­dued pri­vate in­vest­ment would put down­side pres­sures on In­dia's po­ten­tial growth," the re­port said.

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