In a month’s time, India's Finance Minister Nirmala Sitharaman will present her first budget. The question is what should the economic priorities for Modi 2.0 be? What will the finance minister do? A panel consisting of Gautam Chikermane, vice president, Observer Research Foundation (ORF) and MK Venu, founding editor of The Wire discuss the key challenges that the newly appointed finance minister will face.
Speaking to Bloomberg Quint’s Harsha Subramaniam, MK Venu said that from a macroeconomic standpoint, her immediate priority would be to “revive consumption demand.”
“As we have witnessed over the last 5 years, whatever growth that we have been getting is basically on the back of consumption and demand because private investment hasn’t picked up. So, there has been an investment drought. On top of that, what we are seeing especially in the last three-four months is a precipitate drop in consumption demand which is reflected in very very ugly numbers that are coming out in both discretionary and non discretionary consumption.”MK Venu, founding editor of The Wire
While Gautam Chikermane opined that the slowing down of growth is the biggest challenge that Nirmala Sitharaman would face.
“In order to get the growth back on track, she needs to show some form of a policy continuity which I think she will that has been happening in the first five years which I call Season 1 of the NDA government.”Gautam Chikermane, vice president, Observer Research Foundation
On the issue of the ongoing trade war between the United State and China and the fact that US has already taken action against India as well, MK Venu said, “The government will have to really improve its messaging on the economy front.”
GDP Growth Falls to 5-Year-Low
The Central Statistic Office on 31 May, said that India's economic growth for the full year 2018-19 stood at a 5-year low of 6.8 percent.
Further, the governmental statistical agency mentioned that Gross Domestic Product (GDP) for the fourth quarter of 2018-19 fiscal year (January-March), fell to 5.8 percent against 6.6 percent in the third quarter.
As per Reuters, India's Q4 GDP has fallen below China's, which stood at 6.4 percent in the March quarter, thus losing its spot as the fastest growing economy.
Economic Affairs Secretary SC Garg, reacting to the slow down, told PTI that the fall in Q4 GDP was due to temporary factors like "stress in NBFC sector." Garg also said that economic growth is likely to pick up in the second quarter of the current fiscal year.
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