The Citizenship Amendment Bill (CAB) was passed by both houses of Parliament in the winter session. But the IBC Amendments Bill wasn’t. This is a clear reflection of the government’s priorities. And utterances by people seen associated with the ruling party on the non-relevance of economic terms like “GDP” don’t help in diminishing this perception.
In fact, after the Reserve Bank of India, surprisingly, pegged down GDP growth for 2019-20 to 5.1 percent, the finance minister Nirmala Sitharaman’s abstinence on commenting where the economy is headed is evidence that the earlier bravado is fading. “I am not willing to discuss as to where the economy stands. I am interested in working towards improving things,” Sitharaman said at a press meet recently.
The “fastest-growing economy” slogan and the “global slowdown impact” explanation also don’t cut ice any more. To be sure, the spread of Indian GDP growth over world economic growth this year will likely be the lowest in eight years at near 2.7 percent —compared with a range of 3 percent to 5.6 percent since 2012. An interesting divergence in global and Indian economic growth has been seen since 2016, with the Indian economy’s sub-par performance. This is quite unlike the preceding years from 2012 onward that saw a clear outperformance.
Have the reforms delivered?
While some recent efforts have been made by the government to address the issues in the financial sector, these haven’t delivered significant results yet. Industry insiders indicated recently to CNBC-TV18 that even some steps announced to offer liquidity to NBFCs have still not translated into any money actually being released.
The NBFC liquidity crisis is proving to be a key impediment to growth today, quite the opposite of being a driver soon after the flush of liquidity aided by demonetisation. This demon is a creation of this government’s demonetisation move, which we know today hasn’t helped reduce the cash in the economy by any significant measure.
To be fair, the government also doesn’t have the fiscal room to spend its way out of the slowdown. Quite to the contrary, the paucity of funds has led to slowing of infrastructure projects—players in the sector and associated industries like heavy commercial vehicles have indicated this to CNBC-TV18 in the recent past.
Even the former flagbearer of growth within infrastructure, roads, has entered a slow lane. Stacked against this grim reality, we have learnt that plans are now afoot to rejig the GST rates to mop up more funds.
GST revision: A bad idea
A revision in GST rates and any possible further changes in processes, filing and applicability at this juncture seem ill-timed. Rather than helping correct a slowing economy by inducing consumption, this will create further uncertainty and drive conservation and pushback of capital expenditure.
The rollout of GST is arguably the biggest economic reform of this government. Sadly, it has also turned out to be its biggest bane, given how its faulty execution has impacted large swathes of the economy and accruals to the exchequer.
The economy today is in a mess. The government’s finances are a mess. India is fast losing the opportunity to attract global capital, following the China de-risk movement.
But our political leaders are busy playing musical chairs in states (Maharashtra), celebrating victories on right to build temples (Ayodhya) or how Hindu, Buddhist, Christian, Parsi and Sikh refugees, not Muslims, from three countries, can get faster citizenship.
Let's focus on the real issues
Are these the real issues? Or, are they jobs, better nutrition, lower infant mortality, higher per capita incomes?
We need to understand that if India’s GDP grows at 7 percent, the per capita income grows less than 6 percent. That’s hardly enough to lift the larger population of the country out of economic deprivation.
A nation can live purely on the drive behind an idea only for so long, be it Hindutva or something else. Eventually, people will refocus on their quality of life.
India saw growth even in the pre-1990 era, with per capita GDP growth ranging from -7.4 percent to +6.6 percent on a calendar year basis between 1970 and 1990. But on a CAGR basis, it was barely 2 percent. So India will continue to grow despite all these issues.Not at its potential rate, though. The question to ask is: What rate do we wish to grow at? A $5 trillion economy slogan won’t get us there. We can get past that goal only with wise policy manoeuvres and a clear priority being given to the economy over all else.