THE START­ING LINE

What should the new gov­ern­ment do to keep In­dia on the growth track? A low­down from four ex­perts

Business Today - - THE HUB - By PROS­EN­JIT DATTA IL­LUS­TRA­TION BY NILANJAN DAS

AGOVERNMENT’S per­for­mance de­pends to a cer­tain ex­tent on the cards it has been dealt with when it takes charge. The cards are dealt to a cer­tain ex­tent by his out­go­ing pre­de­ces­sor, as well as the over­all con­di­tion of the global econ­omy. The first UPA gov­ern­ment led by Man­mo­han Singh was lucky in that sense. The do­mes­tic econ­omy was gain­ing mo­men­tum be­cause of the steps taken by his pre­de­ces­sor, Atal Bi­hari Va­j­payee. To add to that, the global econ­omy was on a tear (which ended in 2008 with the Lehman Brothers col­lapse, which in turn trig­gered off the global fi­nan­cial melt­down). So for the first four years of UPA’s term, the In­dian econ­omy showed some as­tound­ing growth, though the gov­ern­ment it­self had rel­a­tively lit­tle role in push­ing that growth. The se­cond UPA gov­ern­ment had to deal with the pro­longed slump in the global econ­omy caused by the fi­nan­cial melt­down, which it tried to tackle through a stim­u­lus. The stim­u­lus did help for a bit – debt fu­elled pri­vate in­vest­ment took off, and the GDP growth zoomed again for a bit, but it left se­ri­ous prob­lems. High in­fla­tion and ris­ing cur­rent ac­count and fis­cal deficits. A few other prob­lems plagued the Man­mo­han Singh gov­ern­ment in this se­cond term. De­spite the stim­uli in two bud­gets, growth started slow­ing down. A re­lent­less rise in crude prices wrecked the bud­get and fis­cal dis­ci­pline. Re­cal­ci­trant al­lies and ac­cu­sa­tions of cor­rup­tion, along with a more ac­tive Op­po­si­tion, en­sured that no new ini­tia­tive went through. Pol­icy paral­y­sis had set in.

Prime Min­is­ter Naren­dra Modi’s party won a brute ma­jor­ity in 2014, and he took charge of the gov­ern­ment against this back­drop. Things were get­ting bet­ter though. Crude prices fell dra­mat­i­cally giv­ing him an enor­mous cush­ion to main­tain fis­cal dis­ci­pline while also spend­ing more on in­fra­struc­ture. The ma­jor­ity in the Lok Sabha also al­lowed him to try out tough re­forms such as GST and IBC. Mean­while, the global econ­omy was im­prov­ing and the In­dian econ­omy was also grow­ing rapidly.

So what will the next PM, who will take over in the mid­dle of the year, be in­her­it­ing from this NDA gov­ern­ment? Whether it is Naren­dra Modi him­self who comes back for a se­cond term as PM, or some­one else, this is how things look on the eco­nomic front at the mo­ment. Oil prices are still mod­er­ate and in­fla­tion is low. The fis­cal deficit is largely un­der con­trol and the GDP is grow­ing at over 7 per cent. Those are the good news. The bad news is that agri­cul­tural dis­tress (and angst) is at an all time high de­spite many sops an­nounced by the Union and dif­fer­ent state gov­ern­ments. Job growth has been min­i­mal, which is cre­at­ing a big stress. Pri­vate green­field in­vest­ment is still ex­tremely slug­gish. And the global econ­omy is star­ing at a slow­down.

What should the next Prime Min­is­ter and the next Fi­nance Min­is­ter do af­ter tak­ing charge? We asked four em­i­nent econ­o­mists to lay out the eco­nomic pri­or­i­ties for the next gov­ern­ment.

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