Economic Highlights
New
Delhi, 27 January 2020
Happiness
Budget
MODI
NEEDS BEST ROPE TRICK
By Shivaji Sarkar
India has high expectation
from the ensuing 2020-21 Union budget. It wants growth, high demand, boost
agriculture, lower prices and a feeling of happiness all around. Even the world
depends on India to end the global economic slag, as the IMF Chief economist
Gita Gopinath hopes. She is candid and told the World Economic Forum that slowdown
in was India dragging down global economy. It has lowered global growth
forecasts being lowered by more than 80 per cent.
The UN report of World
Economic Situation Prospects (WESP) is not that hopeful. It says that
growth of 2.5 per cent in 2020 is possible, but a flare-up of trade tensions,
financial turmoil, or an escalation of geopolitical tensions could derail a
recovery. In a downside scenario, global growth would slow to just 1.8 per cent
this year.
Amid global and domestic
expectations Prime Minister Narendra Modi’s government has to do the best
rope-trick because the WESP hopes that being the largest economy in the
sub-continent, when India revives South Asia average will look up. It has also
to look beyond infrastructure for giving boost to the economy. Infra may have
helped some large companies but not the citizens. So it has to remove multiple
pricing on infra use.
The globe is torn between
escalation and de-escalation of trade tensions pushing down global trade growth
to 0.3 per cent. India is a victim as exports are falling. In such difficult
world scenario, it is not easy to take all the flak that Modi government is
taking.
Would India start the process
of de-globalisation? Some experts view giving slip to the Regional
Comprehensive Economic Partnership (RCEP) free trade agreement is the first
process to changing the economic ties. The next logical step should be towards
WTO that has made services expensive for the poor and taken toll on investment
and exports.
It is not an easy call for
India to chart out the course. In the WTO regime, each move is somewhere linked
to its agreements, which US President Donald Trump virtually calls shackles. He
has already cut funding to WTO particularly to its dispute resolution
mechanism. India has taken the first step to follow Trump in a different way.
WTO bans farm subsidies. India has followed it but has announced Rs 6,000
annual pension to farmers.
The farm sector definitely
needs a push. So does the rural sector. The NITI Aayog accepted the social
development goal index-2019. It states that 25 States are witnessing increase
in poverty, hunger and inequality. Some months back, the NSSO consumer survey
report found that purchasing power of the rural poor is decreasing. It stated
that the rural poor can spend mere Rs 19 for food. It means for over decades,
the situation has not changed much. The prescription is to boost incomes of the
rural farm and non-farm labourers. It is dependent on the revival of the
agricultural sector. Farm incomes are at 15-year low.
Rural workers are not having
adequate employment. Even the much-touted MNREGA has not been of great help.
Spending in the rural areas is declining. Unless it increases the demand surge
not possible. The sector is important. Over 54 per cent of the population is
dependent on farms. The Rs 75,000 crore kisan pension scheme if doubled can
increase money circulation. But that is not easy for a government, which has to
tighten the belt in the last January-March quarter to keep deficit in check.
There are suggestions to levy
some tax on farm products to support farm income support scheme. It is
difficult at a time when food prices are surging at 7.6 per cent inflation. An
OECD-ICRIER report estimated that during 2014-16, farm revenues reduced 6 per cent
affecting incomes of farmers by about Rs 45 lakh crore. The kisan huts and
reforms in APMC are yet to come up. The experiments in some clusters in
Uttarakhand and Andhra Pradesh need budgetary support.
In fact, most farmers depend on
loans and many of them are in heavy debt. The farm sector needs attention but
the hands of the government are tied. One reason stated to be for the farm
distress is severe check on cash transactions through income-tax and banking
instrumentations post note-ban. It has constricted money flow. Direct or
indirect questioning is treated by farmers and traders as harassment.
Transactions through banks are stressing the banking sector as well as creating
bottlenecks. It has increased costs and rural distress.
This is surprising because cash
circulation has increased by Rs 6 lakh crore since 2016. The obvious solution
of boosting cash transaction is not being considered. The unusual fear of
the black has stymied transactions, demand and development. People are
receiving notices for their purchases. This further affects demand.
Two sectors, insurance and
mutual funds have become the most undependable. People find that their
hard-earned money is being robbed. Along with this bad loans and instances of
rising bank fraud are shaking confidence of the people. The lowering of
interest rates on savings has hit the poor, farmers, and every depositor. It
must be raised to lubricate the economy through monetary policy revision.The Rs
25,000 crore bail-out package for real estate is yet to help the home-buyers.
It is fraught with a risk of bank NPAs growing to quote IMF’s Gopinath.
Every government action for
giving boost is fraught with risk. Its concern for reducing government
expenditure is real as it does not have finance. The constriction can lead to
difficult scenario and rise of commodity prices. The government has to look for
ways to keep the prices in check not for the sake of the people but being the
largest consumer to keep its expenses in check.
It needs to do away with severe
multiple pricing as in the road, rail and banking sector through various kinds
of fees, charges, cess and tolls. Each of this creates bottlenecks and
increases prices. It has to have a relook at pricing petroleum, which has hit
the economy hard through policies begun by the UPA government.
Each such careful cut would help
the economy as for the same money more development and investments would be
possible. It is an arduous but necessary task. People await a soothing budget
for happiness, higher than 5.7 per cent 2019 growth and India become the global
leader.---INFA
(Copyright, India News & Feature Alliance)
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