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LATEST NEWS UPDATES | What can be done to revive India's sluggish economic growth? Here's what five economists prescribe -Mayank Jain

What can be done to revive India's sluggish economic growth? Here's what five economists prescribe -Mayank Jain

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published Published on Sep 22, 2017   modified Modified on Sep 22, 2017
-Scroll.in

Hike government spending, pour money into rural areas, cut interest rates, refrain from disruptive moves like demonetisation.

India’s economic growth is slowing but can the government bring it back on track? This is what Finance Minister Arun Jaitley reportedly discussed with ministers and officials Tuesday evening. While a concrete plan to address the problem is apparently being developed with Prime Minister Narendra Modi’s blessing, a section of the industry and many economists have criticised the government for not being prudent enough to read the distress signs and for treating the slowdown as temporary and transient.

The economy grew by a mere 5.7% in the quarter ended June 2017, extending the streak of falling growth to the sixth consecutive quarter. This has seemingly forced the government to go try and figure out what went wrong, and how it can be fixed. Distress signals, though, had been flashing for a while: in the first quarter of this financial year, growth fell to 5.7% as against 7.9% in the same period last fiscal year.

All four contributors to economic growth – domestic consumption, foreign consumption or exports, private investment and government spending – are hit by the slowdown. In the first quarter of this fiscal year, domestic consumption fell to 6.66% as against 8.41% in the same period last fiscal; exports as a share of the Gross Domestic Product was down to 19% from 20%; and fixed capital formation decreased from about 31% of the GDP to 29.8%, signalling a slowdown in the industry as well.

As for reasons for this poor showing, Bharatiya Janata Party chief Amit Shah cited “technical reasons” while India’s Chief Statistician TCA Anant blameddestocking by industries in anticipation of the Goods and Services Tax.

Scroll.in spoke to some economists to get a sense of what the government can do to address concerns about the economy and spur growth. Here’s what they suggested.

Spend more and forget about ratings


“The government needs to give economy an immediate boost and fiscal spending is the way to go about it without worrying too much about the consequences because economic growth is in doldrums,” said Ajit Ranade, chief economist at the Aditya Birla Group. Although the government has already spent much of its budgeted expenditure, he argued, it needs to spend more to spur investment and demand in the economy to push up the growth numbers.

“The argument against fiscal spending is that it will be inflationary, ratings downgrade will happen, interest rates will go up, or debts could become unsustainable,” Ranade said, “but right now, the situation is very dire.”

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Scroll.in, 21 September, 2017, https://scroll.in/article/851337/what-can-be-done-to-revive-indias-sluggish-economic-growth-heres-what-five-economists-prescribe


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