NVR Swami
Just under four months away for the New Year, India’s Prime Minister Narendra Modi may look at various options to give a nudge to make the Indian economy tick faster.
He has put or readied almost all the ingredients in place since he came to power with a massive popular mandate in May last year.
But heavy opposition political pinpricks have chased him and have derailed Parliament sessions.
No Upper Hand
The Goods and Services Tax (GST), an essential input in economic reforms, is, for instance a casualty and is held up in Rajya Sabha or the Upper House where the ruling Bharatiya Janata Party (BJP) is a poor second to the opposition Congress party in numbers.
There is an element of dismay across the country on the disruption of Parliament.
Mr Modi has been in constant touch with trade and industry on a host of issues affecting the people. Their discussions have also taken place against the background of a slump in Chinese economy and the turbulence it whipped up in global markets.
China normal
At the G20 meeting of Finance Ministers and Central Bank Governors held in Ankara earlier this month, Chinese Finance Minister Lou Jiwei presented the state of his nation and said that the Chinese economy had entered a ‘near normal’ phase.
Chinese troubles can have worldwide repercussions because as one of the main drivers in the world economy, it is the biggest trader in goods and a key market for commodities.
There is no indication from Mr Modi as to what his plans are but he may float some signals as the winds blow from the forthcoming Dussera and Deepavali celebrations.
He is the typical Gujarati icon who with millions of Indians, at home and around the world, holds the two festivities dear to heart. Positive vibes are a must.
Resilient economy
The industrialised West looks up to him to deliver results. Many critics believe that he may have a magical Mantra or two.
Rating agency Moody’s Investors Service has lowered India’s growth rate forecast from 7.5% to 7% for 2015 because of a 7% drier than average monsoon, although rainfall was not as low as feared at the start of the rainy season.
In its Global Macro Outlook for 2015-16, the agency said that India’s growth was resilient beyond short-term monsoon effects.
It has, however, retained the growth forecast at 7.5% for 2016.
Moody’s said: “One main task to our forecast is the pace of reforms slows significantly as consensus behind the need for reform weakens once the least controversial aspects of the government’s plan have been implemented.”
Optimistic view
As a net importer of commodities, India’s growth outlook benefits from the fall in commodity prices over the past year. Also the country was “little affected” by demand from China and more generally slower global trade growth.
Economic activity, it said, would continue to strengthen on the back of a gradual implementation of reforms that foster domestic and foreign investment.
Consumption growth will continue to be supported by large income gains as inflation has fallen to relatively low levels by the country’s past standards and favourable demographics.
“Barring a large shock to commodity prices or food inflation we think that the central bank’s inflation targets are achievable,” the agency said.
Containing inflation
Maintaining inflation at lower levels than in the past will support real incomes and spending. As long as the central bank’s objective is credible it will also foster investment by providing more visibility about the future revenue growth and margins.
Growth in 2015-16 will also be supported by an accommodative fiscal policy stance and the budget focuses on sustained economic growth as a driver of narrower deficits.
Administrative pundits believe that with better political acumen Mr Modi’s ruling BJP can work diligently, overcome legislative snags, have institutional and regulatory reforms while the Prime Minister himself can have a better team of advisers and ministers with a comprehensive plan for all-round recovery and development.
Photo :
India’s Prime Minister Narendra Modi delivering the keynote address at the ‘Global Call to Action Summit’ 2015 in New Delhi on August 27, 2015 (Picture by Press Information Bureau, Government of India)
