Economy: Roll out corrective measures now

RBI Governor Shaktikanta Das has advised corporates, market participants and investors to not entertain a sentiment of ‘gloom and doom’. In an apparent acknowledgement of economic slowdown, Das, however, conceded that there was no place for a “Panglossian” view of the economy either. There’s a message in the RBI governor’s address, delivered at the Indian banks’ summit the other day. Das, a seasoned bureaucrat and old hand at North Block, dwelt at length on the not-so-positive mood in the economy. He pointed to the mood swings – from angst to optimism. The recognition that sentiment plays a significant part in economic revival is welcome. While the ‘regulator never sleeps’ attitude of the RBI governor provides reassurance, a sense of urgency needs to be displayed by the political bosses at the highest level. As Das pointed out, the adverse corporate and market sentiment has only been accentuated by headwinds in the global economy.

The chairman of the Prime Minister’s Economic Advisory Council, Bibek Debroy, not only conceded that there is an economic slowdown but also doubted if 7% growth could be achieved. Playing safe, he pointed to a possibility of 5.8% growth in the March quarter being a blip. One positive takeaway from Debroy’s recent interviews was the suggestion to set up a body on lines of the GST Council to take charge of public expenditure. It’s an interesting idea, worth consideration by both states and the Centre. If indirect taxes could be managed jointly, a direct taxes code evolved in partnership, why not manage spending together? A mechanism akin to the GST Council could maximize the benefit for states, remove roadblocks in spending and even avoid overlap in making targeted interventions. Former finance minister Arun Jaitley had gone a step further and suggested a joint framework of states and the Centre to manage healthcare and develop tourism.

The RBI governor’s take on the slowdown and Debroy’s suggestions may have to be taken seriously if mid-course corrective measures being contemplated by Finance Minister Nirmala Sitharaman have to have the maximum positive impact. Further action should centre around creation of jobs, curbing the widespread handing out of pink slips in sectors like automobiles, motorcycles and real estate. Talking up the sentiment could be an important step towards a fresh policy landscape. As argued earlier, communication between stakeholders and the finance ministry on a real-time basis could set the ball rolling for a change in the mood. Prime Minister Narendra Modi presiding over the economic review is an important signal. Devoting a big chunk of his time in the Independence Day address to the economy was again reassuring. But words alone will not suffice. Corrective measures have to be rolled out now.