Notes
from my Diary
The first and often most crucial stage of finding solution to a
problem is usually the "acceptance" that there is a problem. Till
very recently the government and its various organs appeared mostly in denial
steadfastly refusing to accept that—
(a) the country is facing a
economic slowdown;
(b) the slowdown is
structural in part and may not correct on its own without intensive policy
intervention;
(c) the slowdown is wide
enough to impact the most sectors of the economy and deep enough to impact
almost sections of the society;
(d) the slowdown is caused
by both domestic and global factors and may need comprehensive coordinated
efforts at fiscal, monetary, trade, geo political and strategic policy levels;
and
(e) the fastest rate
growth is not fast enough for an economy having the largest number of
unemployed, under employed, and employed in disguise youth in the world.
It should be a matter of some comfort that the realization has
begun to dawn upon the government that the economy is slithering down. The
finance minister recently admitted that “It would be too presumptive of me to
say it (the economic slowdown) has bottomed out.”
As reported by news agencies, "Sitharaman said it’s a bit
too soon to say whether Asia’s third-largest economy would be able to stick to
its fiscal deficit targets. However, the government’s asset sales program --
key to plugging a gaping hole in the budget -- is moving ahead comfortably, she
said.
The RBI governor has also made similar statements in past couple
of weeks.
However, there are still many organs of the government which are
refusing to accept the problem. For example consider the following:
- Recently a union minister dismissed a suggestion of slowdown citing the crowd of people at railway stations and shopping malls.
- The bureaucracy has not been adequately sensitized about the urgent need for economic revival. They have rendered many of the measures taken by the government to arrest the economic slowdown less effective. For example, the riders and exclusions added in the proposals to restructure the corporate tax rates and launch a rescue fund for the beleaguered real estate sector have rendered these measures much less effective.
- There seems to be no direction to the enforcement agencies to not initiate coercive action against businesses merely on the basis of suspicion of wrong doing; and to the judicial officers of the government for not protracting the litigations unnecessarily.
- We have not heard chief ministers of most populated states like UP, MP, Bihar, and West Bengal etc. admitting the economic distress in their respective states.
- The public sector bankers and officers have not been assured of full immunity for any action taken, loan sanctioned, investment made in good faith and within the set parameters.
Unless, all the organs of the central government and various
state governments arrive at a consensus and initiate a coordinated policy
response, it may be difficult to find a sustainable solution to the current
episode of economic slowdown.
Interestingly, many brokerages have already seen the light at
the end of the tunnel. The next six months are going to be interesting for
sure.
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