Recently, an economic survey was released for the year 2019-20, in which many observations were cited to tell that the Indian economy is reviving again from a slow down. The data of GDP growth for the last quarter was not released, but Chief Economic Advisor, Mr. Krishnamurthy Subramanian speculated that economy of India is growing in last quarter at higher pace compared to other quarters of the given fiscal year, also the economic survey tells that the GDP of upcoming year will grow at the rate of 6 to 6.5 percent, which grew at 5 percent for the year 2019-20. However, the government blames external factors for this. Notably, government data told that the fiscal deficit of the Central government came down from 3.4 percent of GDP to 3.3 percent of GDP. When many reports quoted that there is an ongoing employment crisis in India, the government told that according to the Periodic Labour Force Survey the share of regular salaried persons in the economy increased 5% between 2011-12 and 2017-18. The country was badly hit by food inflation in December last year, but the economic survey introduced the concept of THALINOMICS, which tells that food affordability in India has increased in past years, or it can be said that the average cost of veg thali, as well as nonveg thali, has gone down in past years. The government is targeting the aim of India becoming a 5 trillion dollar economy, for this, they have announced the aspirational and much needed National Infrastructure Pipeline worth rupees 103 lakh crores, under which government will spend in various sectors in upcoming 5 years. This will boost the employment generation as well as strengthen the Indian economic and social infrastructure. Government is also planning to improve the health of Non-Banking Financial Companies(NBFCs) in-country and assured the people that they will improve the financial sector of the country.
Now if we look at the budget, government reduced various taxes like income tax and withholding tax. Also government forgo the Dividend Distribution Tax for the companies. Tax concessions were given for Employee Stock Option Plans (ESOP) and the government extended the tax holiday by one more year for affordable housing. To boost the indigenous MSME sector government imposed 1% TDS on E-Commerce participants, on the other hand, it increased the customs duty on many products to save the interest of native industries as well as promote Make in India. Centre also emphasized to promote agriculture, more generally, the primary sector of India and to do so many forthcoming plans were laid in the budget.
But the most important question arises here that with all these above planning is the economy of India going to recover soon? the primary reason for slump in Indian economy is the fall of demand and more specifically rural demand, but government is not doing anything to improve this, even in this budget there is no big announcement to counter this and opposite to that government decreased the MNREGA funds, which has the potential of surging rural demand, also the change in current Income Tax slab is not worth appreciating because if one will opt for new decreased Tax slab he/ she will have to forgo the tax deductions under section 80c and 80d of Income Tax Act. No future plans of the union government are on the table to boost employment in the country, though government cited data of increasing regular salaried person the majority of people in India are dependent on an irregular income sector. Despite the fact that government has lower down the corporate tax, no foreign companies are coming to India due to various hurdles in setting up a business in India. Yes, we are doing great in Doing Business Report of the world bank but still it is a long process to set up business in India also companies fear of Intellectual Property Rights in India. The major issue which restrains companies from investing in India is loose enforcement of contract laws. The start-up environment in India is not so good, for this economic survey quoted an example that for obtaining a license for a gun in Delhi you have to submit only 19 documents, but for setting up a restaurant you need to submit more than 40 documents. The government says that this slowdown is cyclic in nature, but no counter-cyclical measures were taken by the government. Banks are under the overburden of non-performing assets but no bold steps are being taken by the government to recapitalize the banks. The backbone of the country, the manufacturing sector is going through the worst crisis which registered a 15-year low growth of 2.5 percent which was 6.9 percent for the year 2018-19.
Not only we are lagging in internal factors, but our external diplomacy is also not doing good. Due to pressure from the United States, we stopped oil imports from Iran, this increased the oil prices for India. we also failed to crack a deal for India in Regional Comprehensive Economic Partnership (RCEP), though it will protect the interest of indigenous industries we also lost the opportunity to improve the exports of the service sector to a large extent. Again the U.S. is not signaling any good sign of cooperation, as it removed India from the list of Generalized System of Preference nations, this is enabled the U.S. to increase the tariffs on Indian products, which otherwise were facing low or no tariff for entering into United States market. U.S. is also demanding India to open its market for their goods. Recently, the office of United States Trade Representative removed India from the list of developing nations and put India into the list of developed Nations, now you must be thinking that this is a proud thing, then why we are concerned about it? No, it is not a good thing in Indian context as now this will enable the United States to impose countervailing duties on many Indian products, this step will hamper the exports of India to the United States and on the other hand, U.S. is pressurizing India to reduce the trade deficit of U.S. with India, and in near future, no hopes are visible to solve this problem. Also, we banned the import of palm oil from Malaysia and started importing it from Indonesia on higher costs due to bitter relations with Malaysia. The connectivity projects proposed by India to enhance the regional connectivity in South Asia have also gone in sleep mode. In a nutshell, we can say that India is not able to milch profit from other countries.
To revive the economy of India government must focus on enhancing demand and consumption in country. For this, the government must invest at the Grass root level. Also, the government need to look on the recommendations made by an economic survey to develop exports of country and make a shift from making in India to assemble in India, this will make India a hub of Global Value Chain like China and will spur the employment generation. Also, India needs to improve its diplomacy more and crack profitable deals for India and must not succumb to external pressure.