MORE BAD THAN GOOD
THE ROAD AHEAD APPEARS QUITE FOGGY.
FOR THE current NDA government, the 8.2 per cent GDP growth clocked in the first quarter of this fiscal along with the lower than anticipated inflation should have been a reason for comfort. But over the past few weeks, bad news on the economic front – both macro and micro – has far outweighed any good news. Crude oil prices have been rising inexorably and many analysts expect it to cross $100 a barrel. Meanwhile, the rupee has been plunging in value, and it has been the worst performing currency in Asia since the beginning of this year, having dropped below ` 74 to a dollar at the time of going to press.
If this had helped spur exports, it would have been some consolation but exports have been sluggish while imports are growing faster, leading to rising trade and current account deficits, both moving beyond comfort levels. The Infrastructure Leasing & Financial Services (IL&FS) default could not have come at a worse time, since the financial and corporate sectors are already under stress because of the twin balance sheet problem. To top it all, the news on the GST collections is still not encouraging and unless things pick up dramatically during the rest of the year, the government could well find a revenue shortfall staring at it. All in all, not a great outlook when it also has to grapple with a global trade war and impending elections.