Do you think economic reforms in India have stalled?
Do you think economic reforms in India have stalled?
India is capable of becoming a superpower. But what will it take to encash on the demographic dividend? With basic issues such as infrastructure and poverty alleviation yet to be tackled, have India’s economic reforms stalled? Amidst a gloomy global landscape, the world was looking to India for growth and development. Can India live up to its potential? Let us find out.
Yes
1. Data proof - Official data has shown that GDP grew at the average rate of 7% in 3 months leading up to June 30th, down from 7.5% in the first quarter of 2015. This data was weaker than the analysts were expecting
2. Non Productive Monsoon Session - Adding to the conundrum is a non productive monsoon session of the India Parliament which has been counted as the biggest disaster since NDA’s government formation. The session has failed to produce lasting economic reforms.
3. BRICS Nations Weaker - While the Chinese stock market is crashing, both Russia and Brazil are in recession and south African economy fell by 1.3% in the second quarter of this fiscal. India too has its share of challenges and with the continuing downward trend of global and regional growth, the country is being pulled into a spiral of stalled growth.
4. GST Bill Stalled - Plan to modernise the goods and services tax should help to standardise costs and smoothen trade barriers. Yet this bill had to be put aside and the opportunity to initiate difficult reforms has been lost.
5. Indian Economy Failing to Gain Traction - GDP growth in fiscal 2015 was recently upgraded to 6.9% following changes in how economic growth is computed in the third largest economy of the world. This has changed the comparative economic picture and indicated the failure of the Indian economy to gain traction.
6. Poll Promises Unfulfilled - On the economic front, many of the proposed reforms have failed to materialise
7. Huge Commitments, No Action - While foreign funds have been promised to India for infrastructure development, timely execution and implementation of the same is also needed.
No
1. Host of New Agreements Formed - Proposal to create a USD 75 billion fund between India and the UAE is just one of the many agreements signed to jumpstart the Indian economy. India has signed numerous beneficial agreements with Israel and Germany recently as well to further bilateral economic cooperation
2. Inflow of Funds - Recently concluded foreign visits will bridge the gulf in India’s infrastructure to develop railways, ports, roads, airports and industrial corridors. Foreign money is the key to develop the infrastructure needed for reviving the Indian economy.
3. Ease of Environmental Clearances - Over the years, many projects were stalled due to lack of environmental clearances. This is more so in the field of infrastructure. Cost burden of companies has been on the decrease as lack of cost overruns on projects have impacted growth and development in a positive manner.
4. Cheap Oil Imports - The falling price of oil which is a crucial source of energy for powering the Indian economy has also proved beneficial. Cheap oil imports have created momentum for several industries in the nation.
5. Indian Retail Inflation Cools - India’s retail inflation fell to a record low in July and industrial production hit a 4 month high in June. Consumer prices increased 3.78 percent Y-O-Y in July which is their slowest pace to date, as against 4.42 predicted by analysts.
6. Output expanding - Output at factories, utilities and mines have risen by an annual 3.8% in June assisted by sharp rebound in demand for goods
7. RBI rate cut - Crash in global commodity prices has helped inflation to slip beyond medium term target of 6 percent prompting rate cuts. This can have the impact of boosting the economy by making loans cheaper and increasing consumption
8. Monetary Easing - Latest inflation data along with yuan devaluation has increased the hope of monetary easing, paving the way for bold economic reforms.
Conclusion
All in all, India is yet to see the kind of economic growth it is capable of achieving. Indian exports have fallen in recent times. There has also been a slowdown in the proposed nature and type of investments over the past half decade with investments falling from INR 15.4 lakh crore to INR 4.05 lakh crore in 2014 and just INR 1.5 lakh crore in the beginning 5 months of 2015. Investment proposals have also fallen (1843 in 2014 as against 4336 in 2011). Number of proposals stood at 826 within the first 5 months in 2015 as against 868 in the same period during 2014. Problems in land acquisition, flip flops on earlier judgements are some of the obstacles that characterise the Indian economy. However, a few good steps can lead the way for continued growth and development. As ease of doing business increases and billion dollar investments are announced, the economy looks to be gaining some momentum in recent times. But only time can tell how fast and how much will the Indian economy grow!
