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Denial is no option
Posted:Oct 5, 2017
 
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Prime Minister Narendra Modi has sought to project the GDP growth slump to 5.7 per cent during April-June as a one-quarter phenomenon. He projected critics of his government’s economic management as Cassandras spreading pessimism and despair. The fact is, however, that India has been experiencing a growth slowdown for not one but five successive quarters since January-March 2016. Moreover, this is happening at a time when global trade seems to be rebounding and many economies, advanced and emerging, are showing signs of a revival. And it’s not just April-June. Data collected by the Centre for Monitoring Indian Economy on new investment project proposals show these at Rs 84,500 crore for the just ended July-September quarter, which is the lowest since April-June 2014, which was when the Modi government had just taken over. On Wednesday, the Reserve Bank if India scaled down its estimate of growth for 2017-18 to 6.7 per cent, from the 7.3 per cent projection made only two months ago.
 
 
Simply put, there’s no more room for denial. The Modi government should accept the reality: The economy today is in the middle of a serious growth and investment slowdown that needs to be addressed. Key to this is restoring business confidence that has been dented due to flawed implementation of the GST, rendering prospects for the manufacturing sector uncertain in the near term. It is unwise in this scenario to paint everyone criticising the handling of the economy as a prophet of doom. What is needed is for the government to accept and recognise the slowdown and act on it. Having said that, it is welcome that the Prime Minister has signalled his government’s commitment to reversing some of the setbacks to growth. Especially encouraging is the PM’s attempt to allay the concerns of traders, his assurance that the government will not get down to retrospective scrutiny of their records and his welcoming of the migration of those from the informal to the formal sector, coming as it does days after former Finance Minister
 
 
Yashwant Sinha had written in this newspaper that raid raj had become the order of the day. It must be hoped that the Modi government will now put into action some of the correctives, starting with the GST and the pile of bad loans on the books of Indian banks. Over the next couple of months, this government is going to be severely tested. This is especially so with the upcoming contraction of the balance sheets by both the US Federal Reserve and the European Central Bank, and the risk of outflows. The government has so far wisely resisted calls for a fiscal boost to the economy. Now is the time for it to show that on the economy it means business.
 
 
 
 
 
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