HOW TO STEADY A WOBBLY ECONOMY
Budget 2020 will be presented in the shadow of one of the longest spells of slowdown — six quarters so far — in more than two decades. That poses a host of challenges for Finance Minister Nirmala Sitharaman as slowing tax collections have left practically no leeway for fiscal stimulus out of the government’s balance sheet. On top of that, exports have stagnated, private investment has ground to a halt and consumption is still reeling under the effect of demonetisation, GST, lack of jobs and public sentiment. Just public expenditure seems to be driving the economy for now.
Business Today hosted a Pre-Budget Panel Discussion to debate how to steady a wobbly economy. The panelists were Gopal Krishna Agarwal, National Spokesperson of BJP on Economic Affairs; Sumant Sinha, Chairman and Managing Director, ReNew Power; Rahul Garg, Senior Partner, Tax and Regulatory, PwC India; D.K. Joshi, Chief Economist, CRISIL; and Dinesh Kanabar, Founder and CEO, Dhruva Advisors. The discussion was moderated by Rajeev Dubey, Editor, Business Today. Edited excerpts:
Rajeev Dubey: How do you see the economy in 2020? We are in the middle of one of the longest spells of slowdown – six quarters and counting.
Sumant Sinha: The ongoing slowdown is partly cyclical and slightly structural. Several things have happened over the past one-and-a-half years that hit economic growth. But now when I look at metrics coming out, my sense is that we are bottoming out. In automobiles and power demand, the rate of deceleration has decreased. We’ll see a pick-up. On the headline rate, economic growth will be better in 2020. How much better, only time will tell.
The government has taken several measures that are long-term in nature. It is not as concerned about short-term results such as fiscal stimulus, as it is to get the economy structurally back on track. It will take time. One key metric moving in the right direction is NPAs (non-performing assets). It’ll put more money in banks. And with the decline in provisioning, we will see more lending from banks. This will have a big impact on the economy. Coupled with front-loaded investment programmes (the recent infrastructure announcement), we should be looking at better economic growth going forward. Finally, if global factors are supportive, we’ll see faster growth; otherwise it will hover around 6 per cent.
Gopal Krishna Agarwal: Challenges are always there in the economy. The government handled legacy issues between 2014 and 2019. At present, macroeconomic parameters are fine. We are in a position to leap forward.
4.55% GDP (constant prices) growth in September 2019, the lowest since 2013
There are global issues, too. Petroleum prices, China-US trade war, for example.
The government is focussing more on domestic demand. Export-oriented growth model may not work for us. We have to preserve our domestic market. The government has made structural reforms such as RERA and GST. We are moving fast on digital platforms also — Ru-Pay, BHIM, FasTag. I accept that there are some implementation challenges. Once these are tackled, the economy will move ahead.
