The state of the economy

Elections are nearing – first, several State Assembly elections and then the general elections. Meanwhile, the state of the economy continues to worsen. Not many days ago, Finance Minister Arun Jaitley had ruled out reduction in the prices of petrol and diesel, claiming that the current prices cannot be reduced because the Government has to bear huge development costs. But within days, he has done a volte face. Now he has reduced the excise duty on petrol and diesel by Rs. 2 per litre even though it will mean a revenue loss of Rs. 26,000 crore in a year and Rs. 13,000 crore in the remaining six months of the current fiscal. Jaitley said he was doing this to give some relief to the people. The Government becomes sensitive to people’s distress only when elections are round the corner.
Now Reserve Bank of India Governor Urjit Patel has pricked the balloon of economic growth. Growth rate estimate has come down from the earlier projected 7.3 per cent to a more realistic 6.7 per cent. It is only by the year end that the actual growth can be estimated. Given the present economic outlook, it may come down further. Urjit Patel has also said that inflation will rise from 4.02 to 4.06 per cent. Former Finance Minister Yashwant Sinha has recently exposed the statistical jugglery of the Finance Minister in presenting growth rate figures. He has said: “Please note that the methodology for calculation of the GDP was changed by the present government in 2015 as a result of which the growth rate recorded earlier increased statistically by over 200 basis points on an annual basis. So, according to the old method of calculation, the growth rate of 5.7 per cent is actually 3.7 per cent or less.” Even so, the warts cannot be hidden.
The people are realizing every day that they were taken for a ride by the promise of heralding ache din. Actually, it is more and more bure din that they will have to face. Investments have not picked up, employment-generating sectors like construction are hit by demand recession, exports are dwindling and demonetization has disrupted the informal economic sector grievously. Unit after unit in the unorganized sector has closed down, rendering people jobless. Privation for the common man has increased. The reality cannot be hidden by spinning stories of an elusive economic growth. Demonetization and GST have come as a double whammy on the national economy. The powers that be can take comfort only from the fact that there is no leadership to channelize the people’s discontent into votes.

Thursday, 5 October, 2017