Getting the economy back on track

It is important to understand the myth and reality of the current economic situation in order to map the road ahead Economics is a technical subject of interdependent variables and parameters, that allows for objective mathematical and statistical analysis. It is no more a single commodity demand-supply subject. Those in responsible positions who are ignorant of this fact end up trying to put a spin and gloss on reality, and thus get exposed soon as ridiculous, as we can see today in media debates. Is it true then that the Indian economy is headed for a serious crisis? Yes, that is a reality. It is, however, a myth that any or every crisis necessarily means an imminent collapse of the economy. The Indian economy is not near a collapse yet. The situation today in the Indian economy is therefore still retrievable and a turnaround can be commenced within three months if the government initiates “real” economic policy changes, as was done in 1991-96 during the tenures of Chandra Shekhar and P.V. Narasimha Rao as Prime Ministers. Hence, no amount of quoting foreign agencies such as the International Monetary Fund, or international events in explanations will help address the crisis that is looming unless we initiate major economic reforms that are credible and incentive-driven for the people. We therefore need a reality check today. A few basic facts The reality of today can be assessed from the following facts. One, the growth rate of the economy with proper index number-based GDP has declined over the last two financial years. The annual rate for 2018-19 is for obvious reason not available, but my guess is the trend has not changed. Two, household savings, which are the bulk of India’s national investment, dropped from a high of 34% of GDP to about 24% of GDP in 2017. Non-household savings are about 5% of GDP. This decline happened even before demonetisation and the decline continues because of intrusive and sometime obnoxious tax measures. I consider the Goods and Services Tax (GST) a flop borrowed from the United Progressive Alliance (UPA) government. Despite my protest, it was introduced much as a carnival in Parliament, with gongs reverberating. Three, non-performing assets of the public sector banks (PSBs) have also risen sharply, in fact at a rate of growth much higher than the rate of new advances of these banks, making many large PSBs financially unviable and likely to collapse. This could cause financial contagion in 2019 in all sectors.

Source  :  https://www.thehindu.com/todays-paper/tp-opinion/getting-the-economy-back-on-track/article25522304.ece

About ChinmayaIAS Academy - Current Affairs

Check Also

HEAT WAVES

A heat wave is a high temperature condition that can be lethal to the human …

Leave a Reply

Your email address will not be published. Required fields are marked *

Get Free Updates to Crack the Exam!
Subscribe to our Newsletter for free daily updates