DISEQUILIBRIUM: Breathing life into the economy
By SANDEEP BAMZAI
Published: 00:24 GMT, 15 June 2014...View MoreDISEQUILIBRIUM: Breathing life into the economy
By SANDEEP BAMZAI
Published: 00:24 GMT, 15 June 2014 | Updated: 00:27 GMT, 15 June 2014
e-mail
View
comments
Rain on the parade, yes that is a distinct possibility as Narendra
Modi and his team try to come to grips with what they have
inherited from the UPA.
The lost decade has meant that the economy lies in a shambles,
clocking two successive years of sub five per cent GDP growth.
Ergo, most economic metrics are predictably in tatters. The backbone of Indian manufacturing and exports - micro,
small and medium enterprises - is a wasteland, having
being bled by repeated interest rate hikes.
With no policy side interventions possible at this late stage,
a scramble of emergency response systems is the only way
out
It's a gross understatement to say that times are tough.
Prime Minister Modi in Panaji, on Saturday,
gave us a peep into the future when he articulated that the
time has come for tough decisions, bitter medicine and above all - financial prudence.
The Prime Minister has chosen to systematically
approach the problem of reviving the economy.
He realises that economic alleviation will take time and he needs to get
his teeth into the innards of the rapidly decelerating economy.
Efficiency
As such, Modi has chosen to meet ministries in clusters in order to
narrow focus on the issues and problems.
These meetings, which began late this week, have been structured in a well defined manner.
The Planning Commission has been kept out of this exercise it is
more or less defunct given that Modi has not even bothered to
appoint a new deputy chairman.
Instead, the new dispensation has adopted a spanking new plan.
First, finance, corporate affairs, disinvestment,
banking, revenue, financial services and expenditure cluster visit
the PMO, give a presentation and seek incentives
based on their needs.
This exercise is expedited with finance secretary Arvind Mayaram and Planning Commission secretary Sindhushree Khullar, in attendance,
taking notes.
This is the Plan Panel's only connection with the budget making exercise in this regime.
Next up is agriculture, rural development and food processing, which comes in on June 16, with its bag of woes and
policy measures.
They are then followed up by the transportation cluster - railways, roads and civil aviation.
The sequencing goes on with the industry cluster - heavy industries, chemicals, petrochemicals, pharma and fertilisers, followed by
energy comprising petroleum, natural gas, coal,
renewable energy and power.
These presentations are crucial to bring the PM up to speed with what is happening
across the spectrum of government.
Top sources close to the developments privately say the
situation is grim as the BJP/NDA has inherited an extremely floundering economy, as the profligate
UPA has left the treasury in a state of ruin and disrepair.
The complexities of reversing the downturn, and more importantly, lifting sentiments, which are currently at
bootstrap level, is of bigger concern for Modi.
Governance
The overarching strategic imperative is to nurse the economy - which has
been wheeled into an ICU - improve its vital signs and then bring it back on the rails.
The primacy of specificity is not lost, for there are areas that need urgent attention.
However it has to be said that at no time is Modi taking his eyes off the
ball, which in this case includes fiscal prudence, consolidation and managing the errant current account deficit.
Expanding domestic demand is the key here, given that as much as 67 per cent of our GDP is consumed locally.
There are some ways to do this, and one of them is to woo the middle class.
Crimped and cramped by tight fiscal control after the inordinately elongated fiscal profligacy of the
UPA, Modi's team is looking for ways and means to provide relief to the
middle class.
Tax breaks is one option but combining social welfare schemes to create productive assets is really the more obvious route.
It is clear that populism is not the way forward for Modi, for that is the
easy way out of this peculiar cul de sac.
Neither is shooting his way out of trouble by printing rupees given that the treasury is hardly
brimming with riches.
As the cluster meetings wind down by the end of next week, the financial implications of
incentives to revive the economy will be arrived at.
After a complete comprehension of the ills that afflict various verticals in the economic vector and its cost impacts are assessed, the plan allocations will be worked out.
Given that there is not much room to manoeuvre, this precarious tightrope walk will have to be done keeping all stakeholders and
their aspirations in mind.
The role played by Mayaram and Khullar in this exercise is crucial,
as the budget will be actualized depending on their
assimilation of data and inputs.
However stern challenges remain, with the bigger threat
percept coming from what is looming large on the radar - a price spike in food
and oil prices and the disastrous prospect of a failing monsoon.
With no policy side interventions possible at this late stage, a scramble of emergency response systems is the only way out.
One thing though that is cast in stone is that we are
not getting a populist budget.
That is de rigueur for Modi and good for the country.
Here is my web blog; <a href="https://riches7777.xyz">riches777</a>;
About Me
DISEQUILIBRIUM: Breathing life into the economy
By SANDEEP BAMZAI
Published: 00:24 GMT, 15 June 2014...View More