It’s the economy, stupid

That the Indian economy is in the doldrums is now known to everyone – from businessmen to farmers, from the middle-class homemaker to the top economists, and from opposition politicians to foreign investors. The only ones that seem unable to acknowledge the reality or are perhaps attempting to escape from it is the government of the day. While the price of onions was skyrocketing beyond Rs 100 a kilo, Finance Minister Nirmala Sitharaman was stridently struggling with definitions of whether this is a slowdown or a recession. The truth is, a combination of factors has pulled down India’s GDP growth to a six-year low of 4.5% in the July–September quarter, following on from 5% in the April-June quarter. India’s growth rate now ranks fifth, behind the economies of Vietnam, China, Egypt and Indonesia. The continuous fall in growth rate could well be leading to a recession, a possibility Sitharaman has refused to acknowledge.

PM Narendra Modi took all the credit when his government claimed 7-8% growth and the tag of the world’s fastest growing economy for a few quarters. When the going has got tough and his government appears clueless on how to reverse the slump, it’s surprising and disheartening that he chooses to stay deafeningly silent on the economy. It’s during such distress that a leader should be communicating more often with all stakeholders, exchanging notes, ideas and formalizing policy responses. Instead, he has left it to Sitharaman to singlehandedly defend the government inside and outside Parliament.

The few measures that the government has taken so far have proved to be a case of applying band-aid after wounding the economy by a series of measures, starting with demonetisation three years ago to the disastrous Budget it presented in February 2019. And these measures have had little impact. The cut in corporate tax rates may have pleased corporates and rallied stock markets, but what about the working class that’s hit by retail inflation? The infusion of Rs 70,000 crore into NPA-riddled banks and the exemption of foreign portfolio investors from the ‘super rich tax’ have not helped either. Consumption demand continues to be sluggish, notwithstanding the government’s package rolled out over four Saturdays. Credit demand remains sluggish despite seven rate cuts announced by the RBI in the last year. The Centre has not offered any plausible explanation for the huge 17.6% contraction in the coal sector in October 2019. The government will do well to stop its political agenda, which is driving all sections of the nation into a state of fear and uncertainty, and instead make the economy a priority and evolve a national consensus on how to reverse the slowdown.