Why Modi, Jaitley will take time to get Indian economy back on track, restore high GDP growth
All major engines of economic growth - private investment, private consumption, exports, agriculture and even government expenditure - have either failed to pick up momentum or slowed down.
- Oct 18, 2017,
- Updated Dec 28, 2017 4:53 PM IST
The festive season is on but unlike before, Sushil Aggarwal, owner of Ghaziabad, Uttar Pradesh-based Avon Modplast, a moulded plastic furniture manufacturing company has yet to see a jump in sales. Orders from rural and semi-urban parts of North India remain subdued. Capacity utilisation is hardly 40 per cent. "Consumers are confused, and sentiments are down", complains Aggarwal.
Animesh Saxena, who runs Neetee Clothing, an apparel export unit in Gurugram, Haryana says the supply chain in the apparel and textile sector is in trouble with the introduction of the Goods and Services Tax (GST) regime. "Unless urgent measures are taken, a revival of textile exports seems very difficult," he warns.
Sunil Harzai, of Noida-based Sidharth Exports, an established leather products manufacturer believes discriminative tax policies are turning the sector non-competitive. His sales are down 35 per cent and capacity utilisation 40 per cent.
It was the macro-level impact of problems highlighted by the likes of Aggarwal, Saxena and Harzai - among the millions operating Small & Medium Enterprises or SMEs across the country - that was high on the agenda of the re-constituted Prime Minister's Economic Advisory Council (EAC) on 11 October and the 22nd meeting of the GST Council on October 6.
With first quarter GDP growth figures at 5.7 per cent - the slowest in three years - fixing the economy was top priority for the government. The focus areas of the EAC, chaired by Niti Aayog member Bibek Debroy, include economic growth, job creation, informal sector, patterns of consumption and production, among others. It is focusing on critical interventions to accelerate economic growth and employment over the next few months, with greater social and financial inclusion, based on rigorous analysis.
The GST Council meet focused on the problems of small units. Finance minister Arun Jaitley did not disappoint. The GST council eased the compliance burden on small and medium businesses and exporters through fewer tax filings, reduced rates on 27 items, talked about introducing an e-wallet system by April 1 for faster input credit, and deferring some provisions.
Jaitley was not just trying to fix problems faced by small businesses alone. He had a much bigger problem to fix - a slowing economy at a time when the global economy was showing some signs of growth.
Earlier, on September 28, Jaitley got central public sector undertakings (PSUs) to commit an additional Rs 25,000 crore capital expenditure plan, over and above the Rs 3.85 lakh crore budgeted in 2017/18, to bolster economic growth. The task before the entire government and political leadership today is to fix the economic health of the economy and do that quickly.
A Business Today survey indicates (see Rock Bottom) sentiments of the business community were never so low. It confirms observations made by the Reserve Bank of India's (RBI) industrial outlook survey which said there is waning optimism during July-September 2017 about demand conditions across parameters, especially on capacity utilisation, profit margins and employment.
Many analysts, think tanks and research bodies have reduced India's growth outlook for the year. The Economic Survey forecasts GDP growth to at the lower emd of the 6.75 - 7.5 per cent band. The World Bank revised India estimates from 7.2 to 7 per cent; the RBI believes it will be 6.7 per cent and Morgan Stanley revised its forecast to 6.4 per cent from 7.6 per cent. Almost every rating agency and equity advisory firm tracking the Indian economy has made a downward correction of the country's 2017/18 growth projections. The most optimistic estimates now peg annual GDP growth to a tad below 7 per cent this fiscal.
The festive season is on but unlike before, Sushil Aggarwal, owner of Ghaziabad, Uttar Pradesh-based Avon Modplast, a moulded plastic furniture manufacturing company has yet to see a jump in sales. Orders from rural and semi-urban parts of North India remain subdued. Capacity utilisation is hardly 40 per cent. "Consumers are confused, and sentiments are down", complains Aggarwal.
Animesh Saxena, who runs Neetee Clothing, an apparel export unit in Gurugram, Haryana says the supply chain in the apparel and textile sector is in trouble with the introduction of the Goods and Services Tax (GST) regime. "Unless urgent measures are taken, a revival of textile exports seems very difficult," he warns.
Sunil Harzai, of Noida-based Sidharth Exports, an established leather products manufacturer believes discriminative tax policies are turning the sector non-competitive. His sales are down 35 per cent and capacity utilisation 40 per cent.
It was the macro-level impact of problems highlighted by the likes of Aggarwal, Saxena and Harzai - among the millions operating Small & Medium Enterprises or SMEs across the country - that was high on the agenda of the re-constituted Prime Minister's Economic Advisory Council (EAC) on 11 October and the 22nd meeting of the GST Council on October 6.
With first quarter GDP growth figures at 5.7 per cent - the slowest in three years - fixing the economy was top priority for the government. The focus areas of the EAC, chaired by Niti Aayog member Bibek Debroy, include economic growth, job creation, informal sector, patterns of consumption and production, among others. It is focusing on critical interventions to accelerate economic growth and employment over the next few months, with greater social and financial inclusion, based on rigorous analysis.
The GST Council meet focused on the problems of small units. Finance minister Arun Jaitley did not disappoint. The GST council eased the compliance burden on small and medium businesses and exporters through fewer tax filings, reduced rates on 27 items, talked about introducing an e-wallet system by April 1 for faster input credit, and deferring some provisions.
Jaitley was not just trying to fix problems faced by small businesses alone. He had a much bigger problem to fix - a slowing economy at a time when the global economy was showing some signs of growth.
Earlier, on September 28, Jaitley got central public sector undertakings (PSUs) to commit an additional Rs 25,000 crore capital expenditure plan, over and above the Rs 3.85 lakh crore budgeted in 2017/18, to bolster economic growth. The task before the entire government and political leadership today is to fix the economic health of the economy and do that quickly.
A Business Today survey indicates (see Rock Bottom) sentiments of the business community were never so low. It confirms observations made by the Reserve Bank of India's (RBI) industrial outlook survey which said there is waning optimism during July-September 2017 about demand conditions across parameters, especially on capacity utilisation, profit margins and employment.
Many analysts, think tanks and research bodies have reduced India's growth outlook for the year. The Economic Survey forecasts GDP growth to at the lower emd of the 6.75 - 7.5 per cent band. The World Bank revised India estimates from 7.2 to 7 per cent; the RBI believes it will be 6.7 per cent and Morgan Stanley revised its forecast to 6.4 per cent from 7.6 per cent. Almost every rating agency and equity advisory firm tracking the Indian economy has made a downward correction of the country's 2017/18 growth projections. The most optimistic estimates now peg annual GDP growth to a tad below 7 per cent this fiscal.