Urgent lift needed from the 5%-growth abyss
The Centre has confirmed earlier projections that India’s economy will grow at 5% for the current financial year, the slowest since FY 2009 when the world faced a financial crisis and GDP growth hit a low of 3.1%. The only consolation seems to be that the second-half performance of 5.2% growth is better than the first half, which was a dismal 4.8%. While this and other indicators signal the bottoming out of the slowdown, and possible better times next fiscal, the massive slowdown this FY has left a yawning `2-3 lakh crore revenue shortfall—a deficit the government is struggling to bridge.
The first of the green shoots suggest that many of the government measures in the last few months—the cut in corporate taxes, providing aid for completing housing projects, etc.,—aimed at boosting consumption and private investment are finally bearing fruit. But there is hardly any let up in the current challenging times. With the clouds of war again forming over West Asia, there is nervousness in the markets and crude’s price is inching up. At home, manufacturing growth is the lowest since 2006. For the construction industry, crucial for job formation, growth this year will be a miserable 3.2%, compared to last year’s 8.7%. Seen together with the continuing poor sales of the auto industry, recessionary conditions seem to be persisting.
With the new Budget just weeks away from being unveiled, there is pressure on the Union finance minister to be liberal with more concessions. These may include reducing the personal income tax rate, which will put more money in family pockets, and hopefully result in more consumption. Increasing government spending will also keep the growth wheels turning, especially when current figures indicate very slow private investment. Data has also shown that the skills development plan of the government has fallen short of target by more than half and the rural jobs development programme is grossly underfinanced. When it appears the slowdown is likely to continue, these areas need urgent attention.