Open Forum

New Delhi, 1 January 2020

Economic Trends 

NEW YEAR CHALLENGING

By Dhurjati Mukherjee

The vast majority of Indians basic livelihood issues of roti, kapada and makan would score any day over trumped up bogeys that don’t have much bearing on their lived reality is a fact, known to every Government. And, thus it is truly unfortunate that the BJP government has chosen this juncture in the nation’s economy to launch meaningless initiatives of Hindutva. Its fullest attention should have gone to reviving the economy, but instead it has plunged into another utterly, avoidable crisis of promulgating the Citizen’s Amendment Act.

While growth forecast has dipped to 4.6 per cent by rating agency Fitch, there are grave doubts about the trend of the economy. In a recent interview to a leading national daily, Chief Economist, International Monetary Fund (IMF) Gita Gopinath, though observing that this year would be better than 2019, she cautioned that it takes five to six years typically to get out of any precarious situation. According to her, the financial sector has to be the focus area in view of high NPAs, high levels of corporate debts etc. and yet it cannot be denied that there has been some improvement on that front with the Insolvency & Bankruptcy Code coming into force.

However, the most critical area is lack of investments, which are necessary to boost any sagging economy. In this connection, it’s pertinent to mention Prime Minister Modi’s assertion that the economy would emerge stronger from the current slowdown. At the same time, what is significant is his request to the private sector, at the centenary celebrations of Assocham, to take bold investment decisions to push up growth. He was confident that “even now, India will emerge stronger from the current state,” and informed that Rs 100 lakh crore will be spent on building infrastructure and Rs 25 lakh crore on revitalising the rural economy that would double the size of the economy to $5 trillion by 2024.  

The questions that emerge from Modi’s observation are that the government spending will be over a period of three years or so as the private sector unfortunately is reluctant to invest majorly. What is important to know is how much of this amount would be spent in 2020-21 and why the private sector is not coming out with investment plans? What is amply clear is that due to a resource crunch in the current fiscal, the government is taking the route of disinvestment, even in cash rich companies like BPCL, the second biggest oil firm of the country. This, according to experts as a wrong move in the backdrop of the company’s expansion plans, and privatising it would kill the goose that lays golden eggs.

However, in the current economic scenario, FDI inflow has been strong, foreign exchange reserves are at a record high and public sector banks are slowly but steadily are on track of professionalism. The government has perhaps realised that too much meddling in the affairs of banks is unwarranted and there is need for giving more autonomy.

There is also talk of innovation and encouragement. However, there is lack of innovative projects on a large scale though number of small projects is under way in different parts of the country. These are, however, not enough to boost the economy at this critical juncture and we find young tech savvy Indians now carrying agritech and fintech apps aimed at benefitting the rural population. 

Indeed, it is difficult to arrive at a firm conclusion about economic revival in the next fiscal and so the government must prepare a road map. The first and foremost is the need for extensive infrastructure development, which should necessarily not mean just roads and highways but also heath and education facilities. States should select five to seven districts for all-round development, keeping in view the potential for rural growth, employment generation and local area development. 

Additionally, there is need to facilitate micro, small and medium enterprises, specially those in rural and semi-urban areas, as these have great potential to generate employment and help the process of rural development. The government has been dishing out various facilities to big corporate, but the strategy has to change to providing finance and technology support to MSMEs, specially those that are labour intensive.

While it’s satisfying to note that rural development has theoretically been given a thrust by the government, how far this will practically take shape is anybody’s guess. Moreover, how this will transform the rural areas, raise livelihood opportunities and how soon, is critical. States need to play their role in carrying out this work through good governance and curb corruption to the maximum possible. However, the most disturbing aspect in accomplishing this task is the resource crunch facing the government.

Plus, while debating economic development we sometimes forget the vital role that agriculture plays in ensuring livelihoods and providing income opportunities to the farming community. Not just this, agricultural production is essential to feed the large population of the country and stabilise prices. There is also the opportunity to diversify agricultural production and focus on such crops that have opportunity for exports.

Undoubtedly, the challenge at the moment is serious and dedicated action is called for. All stakeholders need to come forward, specially those at the grass-root level, the panchayats, in ensuring that the change takes shape. It is essential to ensure effective decentralisation -- both political and economic -- which is missing as it can be the tool for transformation. 

Society is in a state of flux and there is need to bring in stability and strength to institutions and organisations that could help the process of development, both economic and social. The onus is thus on the ruling political party to ensure socio-economic development and bring about a transformation that would uplift the conditions of the struggling impoverished and economically weaker sections, as rising inequality is a big deterrent to sustainable and balanced development. 

Remember, an aspirational young population yearns for a developed nation, in which everyone has equal opportunity to climb up the ladder and lead a better life. But reports, like every other year, indicate that the poor and backward are largely ignored by the political class, which is instead eager to look after the interests of big corporate and upper middle class.

Predictably, 2020 starts with a whimper. Will the New Year witness robust planning, a development process and involvement of people to aim for the elusive prosperity for the teeming millions? To strengthen economy and achieve all-round prosperity, it is but obvious that the right strategy is adopted, rather than indulge in the usual growth measurement. Social justice must be the key in pursuing the path of development in the coming years. The government must note Mahatma Gandhi’s warning: India would never be truly independent until the nature of the State itself is changed.---INFA

(Copyright, India News & Feature Alliance)