With the markets rising to an all-time high just after Modi’s team taking charge, the task of reviving the slowing economy will be challenging for the NDA 2.0.
When Finance Minister Nirmala Sitharaman presents the Budget tomorrow, expectations are high that it will contain the right measures to boost the economy and tackle the crisis of unemployment, that has risen to a 45-year high.
Real GDP growth has declined, owing to a decrease in private consumption. The manufacturing and agriculture sectors too are facing a huge dip in growth and the automobile sector continues to skid.
New policies
Hit by rising non-performing assets (NPAs), banks tightened the norms which has affected credit growth. This, in turn, has made the environment unattractive for investors. One way to counter this situation is to increase consumer spending. The government should focus on pro-consumer policies by making services and products more affordable. The recent cut in the repo rate should serve the purpose, provided banks transmit the gains. This will help reduce lending rates, helping the consumer to spend more.
The priority for the NDA 2.0 should be to put in place policies that ensure an increase in manufacturing demand. The government must increase expenditure, as was done during the global financial crisis of 2008. The aim here should be an expansionary fiscal policy and a loose monetary policy.
Road to development
Farmers distress has been making headlines for years now. The government, in its interim Budget, announced that it would provide farmers a fixed income every year, but only to those who have up to two hectares of land. It was a cash stimulus move and must be backed by structural reforms. To boost the economy, agricultural distress must be addressed immediately.
With increasing population, public transport, roads and healthcare are lagging behind. Quality infrastructure in the rural and semi-urban areas is required. Investment in infrastructure will help generate more employment.
There is a need to strengthen the credibility of statistical and data systems, so that policy-makers are in a stronger position to make radical changes with regard to employment. An integrated approach on skill development and human resource management is required. .
(The writer is a student at IFMR Graduate School of Business, Krea University.)