On A Slippery Slope
As a new government takes charge, the fastest growing large economy globally seems to be headed for a slowdown. The signs are all there. There is rural and farmer distress; the fiscal noose is tightening; tax collections are well short of target; automobile sales are down to a seven year low; credit offtake is low; and consumption too is slowing. Trade is also moving is the slow lane.
These are some of the challenges that the new government has to handle. To discuss this, Business Today organised a roundtable. The participants included Ajit Ranade, President and Chief Economist, Aditya Birla Group; Shweta Saini, Senior Consultant, ICRIER; Sachidanand Shukla, Chief Economist, Mahindra & Mahindra; D.K. Joshi, Chief Economist, Crisil; Devendra Pant, Chief Economist and Head Public Finance, India Ratings; and Biswajit Dhar, Professor of Economics, JNU. The discussion was moderated by Prosenjit Datta, Editor, Business Today. Edited excerpts:
Prosenjit Datta: The government is going to inherit an economy with problems a tight fiscal position, severe rural and farmer distress and lower than target tax collections. Commentators have said we are heading towards the middle income trap, and the most worrisome thing is that the two things that pushed up economic growth, government spending and consumption, are coming down, if reports are true.
Ajit Ranade: The immediate concern is rainfall. We are looking at a situation where at least 42 per cent of the area is under drought, although that will change in the coming months. There is concern about how severe the drought will be.
Our calculations say that never in the past 100 years have we had five consecutive years of negative long period average deviation of monsoon, as we have had now. This will be the sixth year running. So, we are looking at not just a drought year, but something that has accumulated over years. Another big crisis that we are looking at is on the market side where they had anticipated that increasing MSPs (minimum support prices) and running the PM AASHA (the Pradhan Mantri Annadata Aay Sanrakshan Abhiyan) would curtail the
