Slowdown has been there, but no danger mark crossed. Strong revival will happen
Former Prime Minister Manmohan Singh is an eminent economist and, therefore, his comments on economic issues matter. The other day, he claimed that the nation’s economy had slipped into bad shape under the Modi Government's three years in office. He said that the demonetisation decision had contributed to a “sharp” dip in growth and that the country's economy was running on a single engine of public sector spending. Contesting Singh with his tall stature on economic issues is embarrassing, but certain facts have to be highlighted which make us wonder: Indeed, how is the former Prime Minister saying such a thingIJ The Reserve Bank of India's (RBI) growth forecast for the current fiscal has been pegged at 7.3 per cent, which is only marginally lower than projected earlier. Besides, the RBI has also downgraded the inflation figures to an even more respectable level than the present. The Central Statistics Office has talked of real gross value added (GVA) for 2016-17 at a healthy 6.6 per cent, and said that the re-monetisation effort that has picked steam over the last few months will help in the growth picking up and even reaching the figures expected before demonetisation set in. Bank lending rates have seen a downward trend, and although the cuts have not been as big as many would have wished for, they will still add significantly to a spike in consumer spending across sectors. The Goods and Services Tax regime is expected to boost economic growth by some couple of percentage points once the system stabilises. While it is true that the ‘single engine of public spending' is pulling the economy to a large measure at present, various structural reforms in the financial sector and steps taken — and being taken — to tackle non-performing assets of banks will help private investment to come in at much larger amounts than now.
All of these considered in a holistic manner do not indicate gloomy days ahead for the Indian economy, and so Manmohan Singh is exaggerating. He has political compulsions to do so, because purely as an economist he would have understood the slowdown in its context and also realised that, because the fundamentals are strong, high growth is just round the corner. Instead, the former Prime Minister has resorted to relying on the negative that, demonetisation had robbed the nation of the tag of the world's fastest growing economy by pulling down the 2016-17 growth to 7.1 per cent, and the March quarter registering an admittedly disappointing 6.1 per cent growth. He must look ahead for the optimistic signs — a good monsoon is expected, food grain output and horticulture production has been at a record high; and is likely to be good again, riding on a robust rainfall. Harping on demonetisation will serve as a blinker when the sight needs to be free from restraint. Manmohan Singh must remember that he had presided over an economic paralysis in his second term in office.