Sunil Seth
Economic growth is at a five year low. The slowdown can be attributed to weak business spending and low consumption demand for the durable goods. Also the ‘Lead Indicators’ like ‘Metals and Oil Prices’ have contributed to slowing growth, primarily due to the supply shocks from the US-Chine Trade War and US-Iran oil tensions. Because of the plummeting economy, a booster dose to push the economic growth was rolled out by the Finance Minister, Nirmala Sitharaman. The roll back was on the enhanced super rich tax on the foreign and the domestic equity investors, which is levied on long and short-term capital gains arising from the transfer of equity share. ‘Angel Tax’ which was burdening of the startup community aimed at improving the ease of doing business; India moved 23 spots higher to 77 in World Bank’s Ease of Doing Business Ranking ,2018. Another big relief for the slowing growth was RBI’s approval of transfer of Rs.1.76 lac crore dividend and surplus reserves to the Government there by stimulating the pace of economy.
Reinforcing the Banking Sector struggling with the bad loan cleanup was the big consolidation of Public Sector Banks by the merger of the ten Public Sector Banks into four is going to improve the risk taking capacity , simultaneously boosting their power to finance projects. Frontloading of Rs. 70,000 cr of additional capital for PSU Banks too is expected to help credit off take. Announcement of Rs. 20000 cr of extra liquidity to Housing Finance ; 100% FDI in some sectors coupled with additional depreciation for vehicles acquired from now, till 31st March 2020 for beleaguered Auto Sector being the another fillip to the slowing economy. The silver lining to the slowing economy is ‘Consumer Confidence Index’, reflecting buoyancy and Quarterly Business Confidence Index surging too. Above all is the fact that India attracted the highest FDI flows in 2018, being amongst one of the top 10 countries. Low Interest Rate regime of RBI is expected to further stimulate the growth. The only drag on the growth , is the ‘Real Estate Services’. At the same time, there is an opportunity for India to attract the Global Manufacturing Business moving out of China pursuant to the trade war between America and China. India, with its large economy and talent pool, can be the largest beneficiary provided it gets its policies right. India has demographic advantages of a young population and a burgeoning middle class. The working age population aged between; 15 to 64, stood at 66.43% in 2018, surpassing Japan, Germany, US and lagging China. Age Dependency Ratio (<15 & >64) to Working Age Population (between15-64) is higher than China. The demographic dividend is expected to remain favorable for an average of 37 years till 2055. However, for reaping the demographic dividend, it is mandatory to increase productivity and labor force participation which is visibly low at this point of time. A robust industry needs a buoyant and resilient ‘Infrastructure’. India already has the advantage of a stable ‘Currency and Interest Rates’. India’s borrowing is primarily domestic hence remained insulated from the gyrations at the International Level.
Although ‘Demonetization and Good and Service Tax’ dented the economic growth, but these are short term and random risk inducing short term risks. Now, the liquidity infusion, continuous impetus on infrastructure acceleration of farm income there by augmenting rural consumption, favorable demography and low export dependency will trigger a self sustaining virtuous cycle which will pave the way for a robust growth of the Indian Economy.
India is the fastest growing economy in the world. A momentary pause cannot fade away the glowing Optimism that lights up India. Latest push by the Finance Minister is yet a push for the economy from ‘Emergency to Intensive Care Unit’. Another ‘Booster Dose’ has been announced to get the ‘Indian Economy’ out from the ‘Indian Care Unit’. Final ‘Stimulus’ is needed yet which could possibly be the announcements regarding reduction in ‘Income Tax’; and the economy is going to have a ‘Joy Ride ‘ then.
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