Addressing the nation from the ramparts of Red Fort on I-Day, Prime Minister Narendra Modi painted a rosy picture of the economy, and spoke of various reforms carried out by his government, such as demonetisation, GST and crackdown on black money, and how they would pave for a new India in 2022.
“In order to build a prosperous India, we need a strong economy, balanced development and next generation infrastructure…The speed of a train decreases while changing the track. We are trying to put the whole country on a new track without decreasing the speed. We have maintained the speed ,” he said. He observed a ‘festival of honesty’ was being celebrated across the country, and a new hope had arisen in the common man.
But, honestly, the Economic Survey-II that took stock of economy thus far this fiscal notes that the country is unlikely to post a better growth this fiscal than the year gone by. Constant and continuous review of situations – economic or otherwise a nation is in – bodes well for the country and paves way for a better appreciation of things on the ground. It is a sort of mid-year review of the government performance.
In 2016-17, the GDP growth decelerated to 7.1 per cent from 8 per cent in the previous year. The Survey in February forecast a GDP growth between 6.75 and 7.5 per cent for the current fiscal. The reading was based on the assumption that the current fiscal would see better exports growth, higher consumption scenario in the domestic market post-demonetisation phase and a faster easing of monetary policy norms.
These assumptions have not come true to the extent it anticipated, forcing the Modi government to revise the GDP growth forecast. Thus, the Survey says it would be difficult to achieve the higher end of the projected 6.75-7.5 per cent growth band.
It cited as reasons farm loan waivers, appreciating rupee, financial stress in telecom and power sectors, and challenges in the transition to single indirect tax regime. But the lower factory output which contracted to a four-year low of 0.1 per cent in June indicates far higher sluggishness in store. The fact that a staggering 6 per cent fall in capital goods segment led to the IIP contraction should be a worry because it reflects lack of new investments.
If the Survey is any indication, we should not be surprised if the GDP growth falls to the levels witnessed during the UPA regime. Some analysts say the growth is already at those levels and the change of base year from 2004-05 to 2011-12 masked the real picture.
The government has 20 months to keep its promises to the nation. It has to end creeping deceleration in all sectors and improve balance sheets of banks and pave way for further monetary easing. The Centre needs to take States along with it to accelerate India's ongoing transformation to improve the lives of over 1.25 billion people. There is no more cushion for incremental measures. Having ignited the hopes of people for a far better India, it is incumbent upon Modi to fast-track all essential sweeping reforms.