Free Fall­ing

With bad news on all fronts, the gov­ern­ment needs to in­ject pos­i­tive sen­ti­ment and tar­get growth

India Today - - ECONOMY - By Sh­wweta Punj

The Jour­ney So Far

Bold tar­gets have been set for In­dia be­com­ing a five tril­lion dol­lar econ­omy but all eco­nomic data sug­gests it will be a daunt­ing chal­lenge. Growth has plum­meted and In­dia has lost the cov­eted fastest grow­ing econ­omy tag to China.

The fis­cal deficit touched 52 per cent of the budget es­ti­mate for the full year in the first two months of FY20. The aim is to re­strict the deficit tar­get to 3.4 per cent of GDP, but mount­ing ex­pen­di­ture and pres­sure to spend more cou­pled with de­clin­ing rev­enues could mean that In­dia slips on this.

On the in­fla­tion front, con­sumer price in­fla­tion has been a per­cent­age point lower than the tar­geted four per cent. Head­line CPI in­fla­tion rose to 3.2 per cent in June from 3 per cent in April-May.

In the April-June 2019 quar­ter, the In­dex of In­dus­trial Pro­duc­tion (IIP) grew at 3.6 per cent as against 5.1 per cent in the same pe­riod the previous year. The fall in fac­tory out­put was led by a de­cline in man­u­fac­tur­ing and min­ing ac­tiv­ity.

The ru­pee has slid from 68.75 to a dol­lar on July 30 to 71.9 on Septem­ber 5, on weak eco­nomic data and neg­a­tive mar­ket sen­ti­ment

In ad­di­tion to the slow­ing econ­omy, the ru­pee is slid­ing as for­eign port­fo­lio in­vestors (FPIs) turned neg­a­tive af­ter an en­hanced tax sur­charge an­nounced in the budget re­stricted their ac­tiv­ity. It has since been re­voked.

As­sur­ances have been given on end­ing ‘tax ter­ror­ism’. In­come tax or­ders and sum­mons no­tices will be is­sued through a cen­tralised com­puter sys­tem from Oc­to­ber 1.

The ‘an­gel tax’, levied on star­tups, has been re­voked

Is It Enough?

The big­gest chal­lenge the econ­omy faces is a break­down in con­fi­dence among all stake­hold­ers. The gov­ern­ment has to re­store con­fi­dence through pol­icy pre­dictabil­ity, take more short­term mea­sures to im­prove liq­uid­ity and act fast on its prom­ise of min­i­mum gov­ern­ment. It also needs to pur­sue its dis­in­vest­ment agenda with in­tent.

The Un­fin­ished Agenda

The econ­omy ex­panded at its slow­est in 25 quar­ters—5 per cent in the first quar­ter of FY20. The Cen­tre has to front­load ex­pen­di­ture—in terms of in­fra­struc­ture spend­ing—to spur eco­nomic ac­tiv­ity

In­dus­trial pro­duc­tion growth slipped to a four­month low of 2 per cent in June. Mea­sures needed to ar­rest the slow­down

Ris­ing food in­fla­tion, slid­ing ru­pee are other ma­jor con­cerns

Give employment­gen­er­at­ing sec­tors such as tex­tiles and man­u­fac­tur­ing a push

Im­prove ease of do­ing busi­ness

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.