Introduction:
Finance minister Nirmala Sitharaman has said India has emerged as the fastest growing economy amid the pandemic. Responding to a debate in Parliament on inflation, Finance Minister also said that there is no question of India getting into recession or stagflation. She also pointed out the high ranking of Indian economy by global rating agencies. At 1.49 Lakh crore, GST collection for the month of July is the second highest level ever since the introduction of GST. India’s manufacturing sector also rebounded in July with sales and production growing at the fastest pace since November 2021. According to S&P Global India Manufacturing Purchasing Managers’ touched 56.4 from a nine-month low of 53.9 in June. As per provisional estimates released by National Statistical Office (NSO), Indian economy in 2021-22 has fully recovered to the pre-pandemic real GDP level of 2019-20.
Measures required to revive the economy:
- The government should address the growth slowdown concerns; free up funds for investment and spending by banks, housing finance companies and MSMEs; and importantly, undo some controversial proposals, in the budget and outside it, which were affecting sentiment in the markets and the corporate sector.
- Promote the ease of doing business and even the ease of living for ordinary citizens.
- Restricting imports by the government should not be done because it is anti-consumer and overall raises the cost of production.
- The issues surrounding auto sector must be addressed
- The Reserve Bank of India (RBI) can quickly increase the amount of cash in the economy.
- We need to follow expansionary fiscal and monetary policy.
- Prioritize growth now than inflation target.
- Then banks, especially public sector banks, can use that together with interest rate policy to provide easy credit. A larger supply of credit should lead to cheaper credit.
- Direct tax code reform is very important for small businesses.
- This will have to be supported by reduction of the administered price of credit, which is the RBI’s repo rate.
- There could be hurdles to credit off-take due to fiduciary or prudential reasons, so those need to be tackled. Same for mismatched expectations.
- Higher liquidity and disposable income, and increased employment can pull us out of the problem.
- Labour laws reforms, land reforms and agriculture reforms also need to be amended to generate employment.
- The government needs to hold granular conversations with the private sector.
- A skills and industrial policy which can make full use of an abundant pool of reasonably priced labour
Challenges:
- We need to work on creating jobs.
- Farmers distress- Prices in the farm output has been extremely low.
- Farm loan waiver is not the solution because it further stresses the banks which are under serious NPA problem.
- Services sector has been growing much in the informal sector than the formal sector.
- Since report highlight global slowdown we need to boost the investment which may fall too.
Way Forward:
- Need of land reforms.
- Need of labour reforms.
- Need of Judicial reforms.
- Need of market reforms in the agricultural sector.
- Rural wages and credit needs to be improved for improving the consumption in rural sectors.
- Bring investment into the economy and increase the consumption.
- We need to concentrate more on the growth of domestic economy.
- Give opportunities for private sector to pick speed.
- Speed up the resolution of NPAs and a simplified bankruptcy framework.
- Enhancing governance of public sector banks.
Thus it is clear that the economy needs to be addressed based on the ideology of reform, perform and transform in totality to overcome the current challenges of slowdown.
