Another member of the Prime Minister’s Economic Advisory Council on Thursday warned about the state of the economy, saying the country was facing a structural slowdown. Shamika Ravi, who is also the research director of the Brookings India think tank, tweeted in response to a question on the economic slowdown, that many ministries need to follow “a national growth strategy with time-bound goals”.
“Need major reforms, not mere tinkering,” she said. “Leaving economy to the finance ministry is like leaving the growth of a firm to its accounts department.”
On Friday morning, she assuaged the concerns of a Twitter user who feared that the government was preparing people “for something unpleasant”, saying: “The effort is towards realising the full potential of India’s dynamic economy through concrete next steps.”
Ravi’s colleague in the advisory council, Rathin Roy, has also argued that India is currently dealing with a structural demand problem. Last month, he had said India was facing a “silent fiscal crisis” because of a shortfall in tax revenues. Roy had also expressed reservations about the government’s decision to raise a part of its gross borrowing programme from external markets in foreign currencies.
On Friday afternoon, former Congress President Rahul Gandhi said the government’s economic advisers had finally acknowledged that India’s economy was in a mess. “Now, accept our solution and remonetise the economy by putting money back in the hands of the needy and not the greedy,” he added.
Ravi’s statement came a day after NITI Aayog Vice Chairperson Rajiv Kumar said extraordinary steps were needed to deal with an unprecedented crisis in the financial sector. He said the government needed to encourage the private sector to invest, and eliminate apprehensions about policies in the minds of private players. Kumar claimed that the roots of the economic slowdown lay in the indiscriminate lending during the 2009-’14 period leading to a rise in non-performing assets. The Congress-led United Progressive Alliance was in power at the time.
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On Monday, Bibek Debroy, the chairperson of the prime minister’s advisory council, recommended a Goods and Services Tax Council-like mechanism for the Centre and states to strategise public expenditure for maximum impact. Debroy said the advisory council had discussed whether the slowdown was cyclical or structural in nature.
The same day, former Reserve Bank of India Governor Raghuram Rajan called the slowdown in the economy “very worrisome”. He advised the government to immediately fix problems in the power and the non-bank financial sectors and enact reforms to spur private sector investment.
However, Chief Economic Adviser Krishnamurthy Subramanian on Thursday ruled out any major stimulus package for the economy, saying “profit is private, losses are public” was not good economics, The Economic Times reported. He said cyclical slowdowns in industries were usual and expecting the government to support them in the “sunset phases” could be morally hazardous.
Economic growth slipped to a five-year low of 5.8% in the January to March quarter. This was the slowest pace of growth in 17 quarters. A number of economists have also raised questions about the methodology of assessing official growth numbers. In recent weeks, the automobile sector and biscuit makers have reported a slowdown in sales. Steelmaker JSW Steel has also said the industry may be forced to cut its production in the future because of falling consumer demand.
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