Most of those running the economy are professional & lifelong politicians. Most others are lawyers, farmers and ‘traders’. Then there is an assortment of ‘intellectuals’, and a few handy ‘second hand’ car salesmen. The policymakers are doctors, technocrats, and bureaucrats. The team alas has not a single plumber.
Economy is choking
India’s economy is firmly in the grips of a slowdown, with several macro and micro headwinds tangling and sharpening the slowdown further. This sounds extreme but here are some anecdotal evidence.
A Crux study across 18 macro indicators suggests that 11 are lower than the 5-year average. This must worry us. Poor indicators across all the consumer-facing sectors are affecting the industrial sector as well. There are other equally sagging characteristics. The fundamental indicator i.e. price signal (demand vs supply) is dropping.
This is concerning.
Signal and the noise
Similarly, the four contributors to economic growth: private investment, government spending, domestic consumption, and exports are all declining into a vicious spiral.
Consumption contributing 60% of the GDP, is gasping and needs revival. The real estate, a loadstar and linking about 300 ancillary industries is on shaky grounds. Auto & distributaries are witnessing a bumpy ride. The global slowdown is not helping. The tariff war is making it worse. Infrastructure is the big elephant in the room. Fortunately, most optimistic commentators and the north block are not in denial any more.
Economies thrive on hope. Belief is the tonic.
In developing economies, the government partners industry.
Revitalising the economy needs holistic policy framework and healthy ecosystem that enables regulatory clearances, eases stringent procedures, equitable land acquisition, speedy implementation, fostering innovation and outcomes. Burdensome regulation, poor policy, the inspector raj, scrutiny and intense monitoring choke growth.
More is needed on the ‘softer’ side. Prevalent labour laws, complex tax structure, and bureaucratic hassles only diminish competitiveness. Judicial reforms are needed for sustainable and equitable growth.
Cart before the horse
Our economy is ‘sulking’ and the only way to bring hope is for the government to infuse money on one hand and ‘leave a lot more in the pockets of the consumers. Corporate tax reduction has only addressed the supply side of the problem. GST tax rate will address the demand side.
The policymakers must answer a few fundamental questions.
Why a labour-abundant economy is not a producer and exporter of labour-abundant goods? Why do the government and its institutions still owe over 3 lakh crores to the MSME and delay payment? Why is it that most micro-entrepreneurs don’t grow beyond 10 people?
Something is amiss.
The manufacturing sector is new hope and a threefold multiplier. Similarly, investment in rural electrification, rural infrastructure, the effective agricultural framework will create a more effective and a more sustainable ecosystem; yielding a 15 multiplier.
Growth creates jobs and demand, setting in a virtuous economic cycle.
Sadly, vision alone will not do it
The middle-class vote with their wallets; and is concerned. The government’s inaction will lead to job loss, social unrest and will cost; the party will pay. Growth-enhancing measures often require careful, painstaking, bold and disruptive reforms. The economy needs to grow at 9 %, to par the threshold and inflection point to eradicate poverty and provide a life of dignity.
Bankruptcy Act, digitisations, GST is value-enhancing, yet the benefits lag. That is tomorrow, but before tomorrow comes today.
The economy needs a plumber and a visionary, both in equal measures. The plumber to fix the gaping hole and the visionary to get economy out of it.
The visionary Prime minister must entrust a plumber to fix the economy.
Disclaimer: The views expressed in the article above are those of the authors’ and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.