Plotting the recovery

Abstract

The economy can be revived. It will take a joint effort by government and the private sector. The prime minister has advised the senior economic team in the country to reconsider macroeconomic policy and revive growth. The finance minister has reportedly consulted,over the last few days,officials in his ministry and the Planning Commission. But that may not be enough to revive the economy,especially when it is clear that the US Federal Reserve is ready to reverse its unconventional monetary policy. It would be useful if consultations are also held with industrialists and businesses,especially those that recorded negative trends in production and sales in the last few years. Inputs from private-sector banks could also be helpful in gaining insights and designing a revival plan.

The diagnostics of the Indian economy are well known,as the Centre’s gross fiscal deficit has been galloping unbridled since 2008-09. The current account deficit has reached record highs over the past two years. While subsidies,market borrowings,short-term debt,bank credit to government,imports and inflation have been rising,investment,capital expenditure,bank credit to the commercial sector and industrial production have been decelerating. According to the latest IIP data,13 of the 22 sectors of industry have recorded negative growth. The negative growth in consumer durables and the capital goods industry is stark. Consequently,the growth rate of the economy has spiralled downwards from 9.6 per cent in 2006-07 to 5 per cent in 2012-13,and can be expected to be lower in 2013-14. This has resulted in flight of capital and sovereign debt downgrades by some rating agencies. Read more at: https://indianexpress.com/article/opinion/columns/plotting-the-recovery/