Government machinery sprung into action as the prime minister constituted eight Cabinet committees ahead of the budget to be presented next month. Amongst the committees, two new inclusions were made to target economic slump and unemployment. Debutant Cabinet committees on investment & growth as well as employment & skill development outline the severity of economic affairs for the country. Throughout the month-and-a-half wide election process, the opposition decried these issues while BJP swept the mandate even as their campaign largely discounted them. The landslide victory for PM Modi and his BJP was an indication of unwavering faith the country holds in his government. This directly transfers people's expectation of a revival of the economy as the elected government's prime responsibility. As per the CSO data, India's economic growth cited a 20-Quarter low of 5.8 per cent in Jan-March window (4th Quarter of 18-19) while annual growth slumped to a five-year low of 6.8 per cent in the Financial Year 2019. The GDP growth has slowed down while private investment has been stressed due to poor credit offtake since the banks are saddled with NPAs. Narrowing the problem of a poorly performing economy, in a sense, leads to NPAs which is why policy changes meant to clean up the huge NPA bin will be instrumental in reviving India's economic growth. Poor performance by agriculture and manufacturing sectors along with mounting NPAs and 45-year high unemployment have pushed India behind China in economic growth. But what adds to this equation is the weak consumer spending – 16 per cent decline in Automobile sales in April. Amidst the poor indicators signifying the economic slump, the two new Cabinet committees will be instrumental in targetting the core issues in order to give impetus to the economic growth. The indicators definitely build a gloomy picture but RBI remains confident in revitalising the monetary affairs. RBI's Monetary Policy Committee brought down the repo rate by 25 bps to 5.75 per cent in the wake of slumped economic growth. This was a consecutive third time in a calendar year that RBI reduced the repo rate by 25 bps. Though this time, RBI changed the Monetary Policy stance from neutral to accommodative. As the banks pass the benefit of the rate cut to consumers, borrowers can avail lower EMIs. Together, the government and the RBI will look to revitalise the growth story and bring India back to the forefront.
There are several key decisions that the select committees will have to take while aptly compiling ground details with a strategic overlook to ensure their goals are achieved at the earliest. The budget is going to project the real picture with targets and expenditure highlighted. The committees have ample time to assess the stressed sectors and cook action plans for the same. Prime Minister Modi and Home Minister Amit Shah will preside over both of the new committees in a bid to address the issues that have been persistently ailing the country since Modi's previous term. India today faces the problem of unemployment which has rendered a potential asset in India's working demographic useless. A comprehensive strategy on employment is necessary to address it and provide impetus to job creation. The problem is too wide open to be ignored now and efforts will have to be expedited to ensure stable quarter performance and consequential growth, even if menial, in the successive quarters of this financial year. RBI's 'accommodative' stance suggests the possibilities of more cuts should inflation persists. RBI's MPC report clearly states "a sharp slowdown in investment activity" and "continuing moderation in private consumption growth" are worrisome matters. The government has to pay close attention to boost people's spending, increasing demand. More demand will attract investment, more investment will create more capacity and capacity, in turn, will facilitate hiring processes. With the expectations of tax rebates offered to individuals and households in the budget, public saving and spending will increase. The new budget is expected to include job creation targets in view of the current situation as the committees prepare to combat the dismal indicators in a bid to revive India's growth story. While the budget will make the revival trajectory clearer, it is the implementation part which needs to be pepped up in order to yield desired results - high economic growth.