Sliding Indian economy needs a shot of reforms

At a time when the global economy is enjoying its best decade since the financial crisis and benefitting with improved growth rates, India seems to be missing the momentum. It is among the minority OECD nations that will be seeing a deceleration in growth rather than an uptick. The Indian economy is forecast to grow at 6.5 per cent for the current financial year. It’s the slowest pace in four years, and it does not take secondguessing to know why. First, the lingering impact of the surprise demonetisation drive conducted in November 2016, and then the rushed introduction of goods and services tax in July last year that slowed the Indian economy which had been among the fastest growing just a few years ago. The country was expanding at more than eight per cent between 2005 and 2009 and more than seven per cent between 2010 and 2014.

There’s no denying that GST is a monumental reform, one that was long overdue. The Prime Minister Narendra Modi-led government deserves all the credit for making it a reality. Also, there is also nothing like a perfect GST, and some disruption was a given. But it is the timing and design of the tax itself that has rocked the boat. Moreover, India’s exports have suffered in the last few months because of a stronger rupee, and job creation hasn’t been very impressive. A lot needs to be done to chug the engine of growth at a faster pace. Manufacturing needs to be propped up and that would require a slew of reforms in the labour sector; corporate taxes need to be revised; and the transportation network needs to improve to make India more competitive on the global front. The government seemed to have started out right with programmes such as Make in India and Digital India, but progress can be described as muddled at best. Now with elections slated this year in eight states, and national election looming early next year, there’s not much hope for a strong reform-minded approach. The government might just side with populist measures during Budget next month than take a corrective course. Let’s hope it doesn’t miss the bus.