- Indian growth indicators have been in constant decline, in the April-June quarter, growth plummeted to a dismal 5.7 per cent.
- The growth for fiscal 2017-18 is projected to be below 7 per cent, this will not provide enough room to the finance minister to increase allocations in sectors starved of funds.
- The United Nations lowered India’s growth estimates to 6.7% for FY17 as compared to the 7.1% in FY16.
- The UN’s trade and development report mentioned that the informal sector, which still accounts for at least one-third of the country’s GDP and more than four-fifths of employment, was badly affected by the government’s ‘demonetisation’ move and it may be further affected by the rollout of the goods and services tax (GST).
The effects on various sectors:
- We cannot expect increased allocations in education, health, agriculture, rural development, transportation, women and child welfare when the next budget will be presented. Reduced allocations in MGNREGA will further hurt the poor.
- Our textile sector awaits modernisation but the leather sector is unlikely to recover in the near future. Pharmaceutical pricing policy has also dampened prospects of investments. Absence of robust exports means a slowdown in manufacturing which in turn impacts employment.
- Farm sector is also under stress; around 12,000 farmer suicides were in 2015 alone, these are the result of the crisis bedevilling agriculture. Nearly 70 per cent of those occupied in agriculture have holdings of 1 hectare and less, which is not enough to sustain families.
- Most are marginal farmers entirely dependent on the vagaries of the weather. Drought and floods play havoc and the consequent dependence on moneylenders entangles them in a vicious debt cycle. In good times, even with bumper yields, prices crash and the farmer loses. The real problem is the absence of a ready market when the crop is harvested. Absence of cold chains to preserve fruits and vegetables makes for a buyers’ market.
- The telecom sector is undergoing consolidation.
- Discoms in the power sector are reeling under debt.
- eal estate is also under mess. Homebuyers are up in arms and major players will soon face insolvency. Slowdown in construction activity impacts not only jobs but also impacts the demand for steel, cement, sanitary ware and other inputs which are an integral part of construction activity.
Need of the hour:
- For the economy to grow at a constant 7 per cent, exports must pace upward of 15 per cent annually, but the exports are not competitive unless interest rates come down and the rupee declines substantially.
- We need to shift to horticulture and commercial cropping to increase farmers’ income. Loan waivers may give a temporary reprieve but that is not a solution.
- To deal with other ailments there is need to think out of the box.
- To sustain high growth, agriculture must grow at 4 per cent per annum.