Denial to acceptance

India has not just lost the status of being the world’s fastest economy but is slowing down at a time when economies elsewhere are beginning to recover. What has surprised experts as well as the BJP leadership is the intensity of the growth deceleration. The slowdown, accentuated first by demonetisation and then by the GST disruption, has been allowed to happen for six long quarters because a sense of self-righteousness and arrogance prevented the political leadership from acknowledging the problem, let alone seek expert advice. Instead, Prime Minister Modi mocked Harvard-educated economists when some positive GDP data for the note-ban quarter appeared. 

Patting himself on the back for the good luck he had brought to the country as oil prices declined worldwide, coinciding with his assumption of power, Prime Minister Modi is now conspicuously silent over the recent spike in the diesel and petrol prices. His Finance Minister has ruled out any cut in taxes on oil, resisting the popular demand. That is due to GST glitches contributing to a possible revenue shortfall. Instead of feeling edgy about the situation, Jaitley engages in self-praise — his favourite pastime — over digitisation, corruption, black money and benami transactions. He has let it be known that the economic indicators are being assessed for appropriate action, showing no concern whatsoever over needlessly applying brakes on a reasonably expanding economy. 

Growth can pick up if the two engines driving it — government spending and consumer buying — are activated again. Media reports say the government is prepared to loosen the fiscal deficit target and spend Rs 5 lakh crore more to stimulate the economy. The RBI too can help. The Railways also has money to spend; it has used only 18% of its budgetary allocation. Tax cuts to leave more income in the hands of people can boost individual spending but that is something this government is averse to. Media reports also hint at possible incentives for builders and quicker GST refunds to exporters. While bank NPAs and revival of private investment are long-term challenges, right now it is enough that the government has conceded that economic contraction is a problem that needs to be fixed.