The declining economy

Economic truth has a weird way of coming out, piercing through the miasma of political propaganda. Seven months ago, on November 8 to be precise, when the Centre announced the demonetization of high-denomination currency notes, the people were told that it was a panacea for several ills afflicting the country. In one master stroke, the Centre claimed to have exorcised the devils of black money, funding of terrorists, funding of Maoists and the circulation of forged notes. The intense difficulties that the ordinary people of this country had to go through, day after day, week after week, month after month, and the hundred-odd people who died standing in queues before bank counters or ATMs were a small price to be paid for such a boon. The political authorities claimed that the people had fully supported demonetization as was confirmed by one electoral victory after another of the candidates of the ruling party. Nothing could have been more beneficial for the economy than demonetization, the country was told.
Now the truth has come out. India has ceased to be the fastest-growing economy in the world, ahead of China, as was being constantly claimed by the Government. Economic deceleration has begun. While the GDP growth for the entire financial year is a respectable 7.1 per cent, in the last quarter (January to March) it declined to 6.1 per cent. This is directly attributable to demonetization. The bubble of massive investments coming in has also burst. The plain fact is that in spite of the Government throwing open all sectors of the economy to private investors, nobody is investing. Following the huge growth of non-performing assets (NPA) which meant bank loans misappropriated by the corporate sector, the banks became credit shy. Now the situation is that even when the banks are willing to lend, nobody is interested in borrowing. Gross value-added growth or GVA in the last fiscal was 10.7 per cent. Today it has come down to a mere 3.8 per cent. The economic forecast is that the slowdown is likely to persist.
Judging by the sang-froid shown by Finance Minister Arun Jaitley despite the dismal picture of the economy, the Centre is not thinking of course correction and undoing some of the harm that has been done to the economy. The Government is bent on the course it is following. This presages more bure din for the people in the coming days.

Sunday, 4 June, 2017