Longest Spell of Slowdown

Parliamentarians quibble like Tweedledum and Tweedledee over the state of the economy but worst fears have come true with 4.5 per cent GDP growth in the July-September quarter. With sixth successive quarter of deceleration in the economy, India is now officially in a deep slowdown - the longest spell of downturn in over two decades. The last such slowdown that dragged on for six quarters was between Q4FY11 and Q1FY13.

But this time round it's different. With Q3 of FY20 likely to be as bad, if not worse, the economy will likely break records for all the wrong reasons. It's going to be a painful and bumpy ride on the path to recovery. The most optimistic see a turnaround in four quarters, the most pessimistic expect full recovery after eight quarters. Eight quarters may be a fraction in the lifecycle of an economy but for businesses that are on the brink, every day seems like a lifetime.

The Centre's rapid fire - but random moves - peppered with slogans such as rekindling the "animal spirits" in the economy have had little effect in kickstarting the growth engine so far. In the process, India has whiled away six precious quarters waiting for that elusive turnaround. It seems there are a few more to go. That has destroyed businesses, jobs and consumer confidence across the length and breadth of the country.

India needs a three-stage roadmap to revive the economy: immediate measures focused on reviving consumption; short-term measures aimed at reviving investment and long-term measures and structural reforms for ease of doing business to facilitate the immediate and short-term measures. The first lot aimed at delivering results in three-four quarters, the second in one-two years and structural reforms in four-five years.

For immediate measures, consumption cycle is vital. It rests on consumer confidence, rising income levels or disposable income and lower interest rates. The Centre must force banks to transmit the remaining 1 per cent rate cut to the consumer; making products affordable through GST cuts and leaving more income in the hands of individuals via lower income tax slabs could stimulate demand. Accelerating public investment in infrastructure creation is the other engine to revive consumption. The latter is the toughest for the Centre.

In the short term, to revive private investment, India needs to simplify GST, bring liquor and fuel under GST; simplify Insolvency and Bankruptcy Code and enforce timeliness; implement RERA across the country; clean up banking system and relax FDI rules.

And, finally, India needs long-term structural reforms so that recovery or turnaround emerging out of the first two steps can be robust and entrenched for the long term. India needs reforms to make land available to industry on-tap and compensate the land owners fairly; labour reforms that compress 40-odd labour codes with the aim to reduce harassment, costs and time; and the biggest of them all - legal reforms for speedy processing of cases through various stages of judiciary. Over three crore cases pending in courts have clogged up the judiciary. Government - the biggest litigator - also needs to exercise restraint in appeals on cases it loses. We need to make a start. Well begun, is half done!