Course correcting the economy

A majoritarian government with a thumping mandate has its work cut out. There is no time to fumble or experiment, the Narendra Modi government has to urgently sow several gaping holes in the economy that are causing economic distress. Modi's mixed crew of new and old have the undaunting task of getting the economy back on track. Kickstarting growth is essential and it will entail a synchronised working of several ministries within the government.

Modi 2.0 may have been voted back to power for a lot of things but economic progress is hardly one of them. In his first tenure, India's GDP is slowing in every quarter (a steep drop of almost 2 per cent), FDI as a percentage of GDP was worryingly lower than in 2006, and joblessness was at a 45-year high. Less investment, high unemployment also means muted domestic consumption. One of the biggest indications of a stymied economy is the lack of domestic consumption.

The people of India who had voted for Modi's 'vikas' in 2014 have once again reposed faith in his government to fix issues; there are several of them. Today, the economy is in a virtual coma requiring resuscitation. If the government once again resorts to AEDs such as the blundering demonetisation, it would end up flatlining the economy instead. It is time for hardnosed economists and policymakers to take up the reins of the economy, helping and guiding the country out of this economic mess.

The government needs to quickly set its course within the first 100 days – jumpstart private investment, encourage demand, simplifying tax structures and their compliance. With the Budget likely to be tabled in July, it is also time for the government to put back money into the hands of the people by reducing their personal tax burden. A look at the 20-40 per cent drop in auto sales and the consequential reduction of the production of automotive giants shows the true picture.

Indian exports need a leg-up and India must take advantage of the US-China stalemate. The government must urgently spell out reforms in labour and land acquisition, which will aid the industry in general and infrastructure development in particular. India needs foreign investment, and policies such as the e-commerce policy that seems to benefit 'desi' companies like the Ambanis over the Jeff Bezos of the world, prove to be detrimental.

Monetising public assets, disinvestment, stabilising the banking sector, reducing GST, combating widening trade deficit, and strengthening the agrarian sector and the farmer, would further help in course correction. India desperately needs more liquidity in its system. Therefore, lowering interest rates, greater impetus on infrastructure development, government spending and boosting manufacturing are all dearly needed.

In this stint, Modi must also give back to the Indian institutions their respect and credibility. No more interfering with the Reserve Bank of India (RBI) or getting other institutions to toe the government line. Allowing them to function independently is the best chance for Modi 2.0 to redeem the missteps of the past.

The people of India have chosen Narendra Modi to steer the nation from impending economic doom. Only with the help of knowledgeable, experienced economists and policymakers can this be achieved. We cannot afford another five years of stunted growth, lack of private investment and lower consumer demand. The country needs an agile plan; and here's hoping that the government is already making one.

(The writer is a journalist and media entrepreneur. The views expressed are strictly personal)