GARHWAL POST / editorial / 10th July 2014 Grim Scenario The Economic Survey 2013-14 presented by Finance Minister Arun Jaitley depicts the gradual slide of the economy into stagnation and drift. With little good news to give, it conveys a general sense of despair. With a decade of politics that has promoted the culture of entitlement, getting the people to understand the crisis and the need for hard measures is going to be difficult. This has already been seen by the reaction of the political parties and media to the hike in railway tariffs. In the rush to score points, the magnitude of the crisis is being overlooked. Many refuse to recognise that the corrosive role of inflation and unemployment on the economy cannot be corrected merely by government handouts. “Projecting Indias growth at 5.4-5.9 percent, the annual report card on the state of the countrys economy said that price rise remained a cause for worry, while calling for a complete rehaul of the subsidy regime, and increasing tax revenues.” The report has said that ‘direct cash transfers is the right way to subsidise soil nutrients and that fuel prices must be market driven’ – obvious enough solutions to critical issues, but bitterly opposed. Add to this the $1 trillion investment in infrastructure required over the next five years, which no expert has any idea on how to arrange. The expectations from PM Modi are many, but Indians seem content to let things slide without accepting the need for major structural changes – theoretically yes, but in reality, no! Another unpleasant piece of news is that fiscal consolidation has been recommended through higher tax-GDP ratio, than merely reducing the expenditure-GDP ratio. Although, the latter, too, is necessary! Another reason for worry is that the gross NPAs of banks have registered a sharp increase. Overall NPAs of the banking sector increased from 2.36 percent of credit advanced in March 2011 to 4.40 percent of credit advanced in December 2013, says the report. The reality is probably worse, because in the environment of crony capitalism that has existed, some things have probably been well concealed. The report has also noted that RBI has identified infrastructure, iron and steel, textiles, aviation and mining as stressed sectors. This almost encompasses all that is essential to taking India forward in the 21st century. The story of the UPA years has been the thrust in these areas being subverted by major scams, as the politician-bureaucrat-capitalist nexus tailored policies to suit their ends. Of course, while castigating the actions of the past, the government feels confident that wholesale and consumer price inflation will ‘go downward’, but the faltering monsoon and erratic rise in prices of onions, etc., will scuttle any feel good effect among the people. The report also says that India managed to contain its fiscal deficit at 4.5 percent of GDP in 2013-14, largely by cutting plan and capital expenditure, which is naturally unsustainable. The government is of the opinion that the countrys fiscal situation is worse than it appears. The need to streamline environmental clearances for infrastructure projects was highlighted, as this would give a boost to core sectors such as power, fertilisers, coal, steel, cement and refining. Uttarakhand has suffered enormously as a result of whimsical decision making in the power sector. In this context, it was only natural that Industry grew by just 1 per cent in 2012-13 and slowed further in 2013-14, posting a modest increase of 0.4 per cent. It is in this bleak scenario that Modi is expected not only to keep things ‘normal’, but also initiate an economic revolution in the country. Thursday’s budget will not only have to get necessary wheels in motion, but also change the mindset that the politics of patronage and convenience can continue as it has over the past.
Posted on: Thu, 10 Jul 2014 08:52:20 +0000
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