First, get economy back on track

Prime Minister Narendra Modi’s claim of turning India into a $5 trillion economy by 2024 is outright preposterous, without basis and sans a work plan to get there. Not only does he sound overly ambitious but also far from the reality of the Indian economy, which is struggling. For India to become a $5 trillion economy by 2024, and thus the third largest economy, behind the US and China, the economy has to post a whopping 12% growth annually for the next five years. Given that the growth momentum has been lost completely, it could take India at least 10 years to expand to a $5 trillion economy. Economists have cited the sub-6% growth posted by India in the last quarter as evidence enough of the economy slowing down, perhaps irreparably in the short run. Former chief economist Arvind Subramanian has brought under scrutiny the government-claimed growth figures. Well-known analysts have also questioned government data showcasing India’s economy to be $2.77 trillion currently, the sixth largest globally.

Opposition parties have brushed aside the prime minister’s assertion on turning India into $5 trillion economy as yet another lie. Even RBI Governor Shaktikanta Das stated recently that the economy has clearly lost traction. The prime minister and his pet Niti Aayog have, however, maintained that doubling the size of the economy is “challenging but not impossible.” Modi had also asked chief ministers to identify ways to double the size of the economy of their respective states in the next five years. But presenting a strategy to reverse the economic slowdown that has firmly set in will be the biggest challenge for Finance Minister Nirmala Sitharaman when she presents her first budget on July 5. For her to present such a strategy, the government has to first honestly concede that the economy is in the doldrums. Secondly, it should state the realistic growth prospects and bring out a white paper on the state of the economy. Thirdly, it should spell out sector-specific strategies to revive growth in each and end the despondency over jobs.

Doctoring or suppressing figures or misleading people on them cannot be part of an economic recovery, nor of the much-promised transparency in governance. Prime Minister Modi should not turn the budget presentation into an exercise of more of the same. Instead, the government should spell out next-generation reforms that will instil confidence in investors, industry, service providers, exporters and markets alike. The battered rural economy must be revived in parallel. While simplifying and consolidating GST administration, direct tax reforms need to be unfurled, too. Taxpayers must be given a well thought out relief. At the same time, fiscal profligacy must be avoided. It’s a tight ropewalk after all.