oppn parties Economic Survey 2019: Acche Din Will Have To Wait

News Snippets

  • S&P has raised India's growth forecast for FY26 to 6.5%
  • TCS to open a 20-acre office campus in New Town in Kolkata
  • Stocks rebound on Tuesday as Trump announces ceasefire, but conflicting news about violations temper the mood to wash away gains: Sensex rose more than 1100 points intra-day but closed just 158 points to 82055 and Nifty gained72 points to 24044
  • Neeraj Chopra wins Golden Spike title at Ostrava with a modest throw of 85.29m
  • First Test: Ben Ducket fires a brilliant 149 as Indian fielders miss too many chances to allow England to escape to victory
  • First Test: England beat a sloppy India by 5 wickets to take a 1-0 lead in the 5 match series
  • Calcutta HC says Cricket Association of Bengal is not liable to pay tax on advertisement inisde Eden Gardens cricket ground as it is not a 'public place' because it does not have unrestricted access for the general public
  • Supreme Court admits a plea from a child of a single OBC mother who had applied for an OBC certificate for her son
  • Supreme Court approves applying strict preventive detention laws for 'cybercriminals'
  • SBI likely to shift part of operations of its Global Market Unit from Kolkata to Mumbai
  • FM nirmala Sitharaman calls for a "structured, process-driven approach to compliance" and asks top I-T officials to speed up refunds and simplify processes
  • Marine insurance costs surge as the oil corridor in Strait of Homruz becomes risky due to war
  • Stocks weaken on Monday on global cues: sensex sheds 511 points to 81896 and Nifty 140 points to 24971
  • Former left-arm spinner Dilip Doshi dies in London at 77. He played for India in 33 Test matches and for Bengal in domestic tournaments
  • Pant becomes the only keeper to score two centuries in the same Test in England
Brilliant batting by England wins the match for them as sloppy India fail to defend 371 runs ////// England take a 1-0 lead in the 5 match series
oppn parties
Economic Survey 2019: Acche Din Will Have To Wait

By Sunil Garodia

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.

What one can read between the lines in the Economic Survey (ES) 2019 is that the economy is not going to turn around anytime soon; that though the intent is there yet the government will also not be able to do much to turn in around in the very near future and that the citizens must tighten their belts and wait for some more time for acche din as far as the economy is concerned.

Let us consider the extraneous and natural factors first. The country is experiencing a menacing summer and the monsoon is expected to be below normal, which is just a polite term to suggest that farm distress will be exacerbated. That, in turn, would dry up demand for goods from rural areas, leading to distress in factories. Then, the worldwide economic slowdown will also affect India in a big way. Exports will not grow at the expected rates. Oil prices are likely to remain firm and might even touch higher levels as OPEC and Russia have decided to cut production. India is already in a soup as it has no access to Iranian oil after the US sanctions on Iran.

Internally, the ES suggests investment, mainly private investment, will be the driver of growth. But in the absence of demand, will entrepreneurs invest? The major investment must first come from the government, largely in infrastructure. Once large sarkari investments are made, jobs will be generated and factories will get orders. The chain effect will generate more jobs. Disposable incomes will rise, leading to demand for goods and services. Only then will the private investment be forthcoming. But since the government is constrained about keeping the fiscal deficit in check, where will the money come from?

The absence of demand has badly affected sales of vehicles, both four and two-wheelers (with reports of numerous dealerships across the country downing shutters) and consumer durables, to name just two domains. This, in turn, has affected tax collection, with GST collections being below expected levels for three successive months now. If the government does not get the revenue it will have to borrow to invest or divest in state-owned enterprises. Obviously, the latter route is more prudent and practical. The government must fast track the divestment process and get out of companies that are draining it's resources.

The idea to encourage MSME (nourish dwarfs to become giants, as the ES grandiosely proclaims) is good. It is true that the MSME sector has the potential to create job opportunities exponentially, on its own and also by providing downstream and upstream opportunities to other entrepreneurs, but it all depends on the demand for goods and the flow of bank credit to such enterprises. Banks have always treated the sector negatively (and the bad loan stress will make them more stringent now) and in the recent past, the RBI even spurned the government efforts to ease the flow of credit to the sector.

In essence, if the economy is to be turned around fast, the government will have to act as the principal player. It will have to find the money to make investments. Divestment is the best possible route, along with cutting the flab from numerous departments. The government must also seriously think about earning from unused assets in entities such as the Railways. It must desist from throwing good money after bad in Air India, BSNL and MTNL, to name just three guzzlers of public resources. It should not let the interests of a few lakh employees (who should be provided for by other means) of these enterprises come in the way of prudent economic policy that will benefit the entire nation. Borrowing must be the last resort. The PPP route must be revived and made attractive for private players to come forward. Once demand rises, private investment will also start to flow and tax collections will improve to ease the pressure.