Reforms halted, Re saw all-time low in 2016

The Indian economy began to see its sweet spot with an enviable growth rate and ebbing inflation in 2016, but the year ended with demonetisation, apparently sapping all its strength and threatening to destabilise reforms.

In February, India overtook China as the fastest growing major economy in the world amid a creaking global economy but by November, major institutions started cutting India’s economic growth forecast substantially.

The country’s biggest indirect tax reforms GST, which almost looked like a reality by August when Parliament passed a constitution Amendment Bill, ended the year with an uncertain future breaching the April 2017 deadline. The RBI, which began the year with some tough decisions on bad loans plaguing the banking sector ended it with a dent on its image for frequent rule changes.

The Indian rupee, which remained a star performer for a better part of the year, saw a lifetime low on November 24.

But a crusade on black money continued. The year began with the signing of Double Taxation Avoidance Agreement (DTAA) with Mauritius and ended with a similar exercise with Singapore burying routes of illicit wealth into India.

The November 8 decision to debunk 86% of India’s currency at one go without any warning may have put the common man through a lot of hardships but many believe that it is intended to herald a new and high economic growth era in India.

The government seemed to have lost the plot with manufacturing, the fulcrum of Make in India in the wake of cash crunch post demonetisation. Job creation took a hit and the landmark government initiatives like Start Up India, Digital India, Smart Cities helped little in pushing the job market.

But among a couple of laudable reforms heralded by the government was reforms on Foreign Direct Investment.  The sectors that have benefited maximum by this reform include services, telecom, automobile and trading. Now, the government is focussed on improving the ease of doing business for overseas and domestic investors.

Two major reforms lined up for next year are — a major crackdown on gold, which is one of the largest contributors in generation of black money and benami properties.
 
Certain sectors, however, did not fare well. Exports was one of them. It has fallen almost every month from December 2014 to May 2016. Thereafter in June, it looked up again to go down in July and August. It is only from September this year that the country has seen exports recovering once again.