IHS Markit, in a recent study, predicts that India will be the world’s fifth largest economy in 2019 and emphasises the key role of the current government in achieving this goal. India is certainly a superpower when it comes to the Asia-Pacific region and is thus key to trade and finance in this corridor. With NPAs being a serious concern looming over the economy, there is expected to be a sharp focus on reforms in the banking and power domains.
With the recent defaults of IL&FS and now DHFL, the credit system and trust in shadow banks have both been hit, leading to a lack in investment flows and the central bank having to turn into ‘accommodative’, as seen in the recent rate pruning. On the other hand, measures that are sustainable in the areas of employment and manufacturing should be in key focus. While the share of manufacturing in GDP is 18 per cent, it is still way below the ideal 25 per cent mark. One expects to see efforts to push that number up before the 75th anniversary of Independence.
In the words of Krishnamoorthy Subramaniam, the current Chief Economic Advisor, unemployment is not exactly the problem; meaningful employment is! This clearly shows the need for a strong learning and development package for the world's largest youth population, especially if the young people are to be made future-ready, both for India Inc and for the kind of entrepreneurial push that the rural economy needs.
Industry, infrastructure
The most important focus, for now, should be on the Make in India programme. This would logically serve to address two main issues that India currently is grappling with; one, the manufacturing output which will tend to increase as production efficiency increases and, two, increased employment and growth of entrepreneurship. With the same government serving for two continuous terms, it would be easier to keep up the pace of economic reforms as accountability has increased further.
Another sector that needs improvement is infrastructure, with a focus on reduced red tape and faster approvals. Surely, that GDP has improved by almost a trillion rupees in just five years shows the potential for a powerful India at 75. With India doing well in terms of implementing GST, it needs some add-on reforms to make it function at 100 per cent.
With a clear indication of the economy now slowing down, there is an immediate need for investment flows as the future of around 250 million households depends on the same. Automobile production has been halted with stagnant sales; the problem needs to be diagnosed carefully.
Demonetisation led to great distress in the SME sector. One of the most important efforts should be in reviving the sector in the coming years.
Farm sector, finance
The agriculture and financial sectors hold the key to rapid growth. It is to been seen to what extent the minimum support price connects with actual expenses in the upcoming Budget. There have already been enough excuses given in regard to food inflation and it’s time that things are acted upon. Yes, the Centre may have, as a knee-jerk measure, promised agri loan waivers for States such as Madhya Pradesh, Rajasthan, and Chhattisgarh but deep down, everyone knows this is a very short-term measure and they need to remedy the situation with some radical reforms.
On the other hand, the stressed financial sector has already taken a toll on every household and there is an urgent need for strict reforms and corrective actions. With SCBs grappling with NPAs and NBFCs defaulting regularly, the situation will only turns more gloomy if the Central government does not step in with serious measures.
(The writer is a student at IFMR, Krea University.)