The slowdown on growth

The Economic Advisory Council recently set up by the Prime Minister has admitted that the economy has considerably slowed down, a fact that Finance Minister Arun Jaitley has been stoutly denying in the face of unassailable facts to the contrary. The Council, headed by Bibek Deb Roy, has admitted that the performance of the Government in employment generation has been dismal and the economy is sluggish. The Council has also observed that demonetization and GST alone are not responsible for the economic slowdown. It is an indirect way of saying that demonetization and GST have something to do with the economic slowdown. It remains to be seen whether the EAC’s observations act as a check on Jaitley’s effervescence on the ‘success’ of these two measures. The Council has also cautioned the Government that in the search for short-term quick-fix remedies, the goal of keeping fiscal deficit under control should not be given less importance.
The first step to solving a problem is admitting its existence. Arun Jaitley has been consistently denying that there are serious problems bedeviling the economy.  Jaitley, a lawyer-turned-economist, should do well to take seriously the observations of the Council members. The Council says it will submit its final recommendations to the Government in three to four months. Meanwhile, it has identified ten areas for stimulating growth. It should be borne in mind that all rating agencies have lowered India’s growth forecast. The IMF has brought it down by 0.5 percentage points to 6.7 per cent; the IBRD has lowered the growth estimate from 7.2 per cent to 7 per cent, while the ADB has revised its estimate of India’s growth from 7.4 per cent to 7 per cent.
This, the Finance Minister does not seem to be in a mood to admit. The people are realizing more and more that there is a wide credibility gap between the promises and performance of the Modi Government. If the Government is unable to reduce this credibility gap soon, people’s disappointment would be reflected in the election results. Political prudence lies in admitting problems and finding ways to tackle them. To be in a constant denial mode is counter-productive. The Government should also realize the unwisdom of setting the Congress as its benchmark. The tendency on the part of the ministers is to refer to the failures of the previous UPA Government rather than to tell the successes of the present Government whenever confronted with inconvenient questions. This is not going to help it in the long run.

Friday, 13 October, 2017