Finance Minister Arun Jaitley and officials from his ministry went into a huddle this week to chart a way out for India’s sluggish economy. Prime Minister Narendra Modi was elected to power with a massive mandate in 2014 on a platform that promised development, jobs and economic growth. Yet, despite benign global conditions, low oil prices and inflation under control, India’s Gross Domestic Product has nevertheless slowed for six quarters straight, coming in at a mere 5.7% growth in the quarter that ended in June 2017.

That is worrisome enough for a massive country that needs high economic growth to take advantage of a demographic dividend that could soon turn into a burden, and especially in a nation where millions still live in poverty. But it is also an ominous sign for Modi’s Bharatiya Janata Party, which is hoping to be re-elected in Lok Sabha polls slated for 2019. A tottering economy could dash those hopes, and so the government is reportedly mulling a Rs 5 lakh crore stimulus package aimed at steering India out of these doldrums.

Much of the commentary in the Indian media over the week sought to give prescriptions to the government on what the economy needs in order to recover, while a few analysts focused on why it is struggling in the first place.

  1. Surjit Bhalla, senior India analyst at Observatory Group, says even at an unlikely 6.5% for the rest of the year, 2017’s numbers will not match the average for the bad years of the Congress-run United Progressive Alliance government. Writing in the Indian Express, Bhalla blames the low growth on the mismatch between inflation, down seven percentage points since 2013, and the central bank’s interest rates, which are only down two percentage points.
  2. Swarajya Editorial Director R Jagannathan says Bhalla “probably oversimplifies” by blaming everything on interest rates. Instead, his hypothesis is that “the current slowdown – which began five years ago – is prolonged because the Narendra Modi government has substantially sealed the border between illegal (and tax-avoided) capital sources and legal ones.”
  3. “All of us are battling capacity underutilization,” says the Chief Financial Officer of L&T R Shankar Raman in an interview with Mint’s Shakti Patra. “In fact, I don’t see the private sector coming back for the next couple of years.”
  4. “Whatever may be the proximate causes [of the downturn],” writes Ajit Ranade, chief economist of the Aditya Birla Group in Mint, “in light of the fact that all four demand drivers are losing steam, this is a prime case for a fiscal stimulus.”
  5. University of Tunku Abdul Rahman research professor TK Jayaraman, writing in The Wire, cautions against a stimulus package, saying it is a blunt tool with uncertain returns. “Presently, what is needed is not any additional fiscal push but simply better governance. It will restore confidence. The present display of earnestness to implement reforms, structural and labour, which have been initiated, should be carried through to logical conclusion.”
  6. Kaushik Basu, a former chief economist of the World Bank, believes that though things seem dire, it is still possible for India to climb out of the ditch. “If India implements policies that boost short-term growth, while laying the groundwork for long-term performance, confidence should rise naturally,” Basu writes in Mint. “Once investment picks up, India will be able to recapture its past rapid growth – and sustain it in the coming years. That outcome would benefit not just India, but the entire global economy.”
  7. “Based on their observations, [Organisation for Economic Co-operation and Development’s] Isabelle Joumard and her colleagues prepared a list of 19 things to do,” writes economist Ashok V Desai in the Telegraph. “They go beyond industry; if implemented, they would make India a well administered country. Of them, India has moved only on goods and services tax; there too, complexities were introduced at the last moment which will make it pretty useless. Is it because India’s democratic rulers cannot even read an IMF paper in simple English?”
  8. “It is all the more important now that the government should not fall to the temptation of spending its way out of the slowdown, with one eye on the 2019 general elections,” writes Puja Mehra for The Hindu Centre for Politics and Public Policy. “The government will have to guard against calls for going populist. The economy is growing a lot slower now than it did when the 2008 global downturn hit us.”
  9. “The Indian economy began losing momentum well before the demonetization decision was announced in November. The question is what is to be done,” says a leader in Mint. “This newspaper continues to believe that the answer does not lie in either dramatic interest rate cuts or a large increase in the fiscal deficit. Economic stability is a public good that is difficult to secure but easy to gamble away, especially in an election season.The key to a sustainable recovery is the investment cycle.”
  10. Journalist TN Ninan in Business Standard says Modi and the BJP are likely to win 2019 anyway, so they should look beyond short-term fixes. “The fact is that short-term crisis solutions create distortions, and are not a substitute for foundational work. Since Mr Modi and his team expect to win the 2019 elections, the groundwork for improved performance in their second term should be done now. In other words, go beyond whatever short-term measures are in the works, and tackle the underlying issues that hold India back.”