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Economic Slowdown: Govt Needs Better, Long-Term Reforms

The economy is facing a slump. Small changes will not help. The government needs to take better measures.

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Video editors: Abhishesk Sharma and Purnendu Pritam

The list of unemployed people is getting longer. The automobile industry is facing a crisis. Companies like Parle and Britannia are facing a crisis. The textile industry, which generates the maximum employment, is in a state so dire that it had to put out advertisements in newspapers to explain the troubles that they are facing.

To combat the chaos, the government has taken decisions and borrowed Rs 1,76,051 crore from the Reserve Bank of India.

The question remains: Is this enough to improve the situation? The government doesn’t think so and says more announcements are to come. In times when it’s hard to manage a USD 2.7 trillion economy, the government wants to make India a USD 5 trillion economy.
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Recently, Britannia's managing director said that people will think twice before buying biscuits worth Rs 5, while Parle said that they may have to lay off 10,000 employees due to the dip in demand of their products. The automobile sector is in turmoil too.

The government rose to action only when the situation took a turn for worse. Finance Minister Nirmala Sitharaman tried to course-correct by removing the surcharge on capital gains taxes in her Budget speech.

The market slipped, stabilised and ultimately came to a standstill. Despite removing the excess surcharge from FPI (Foreign Portfolio Investment), they continued to be sold. This is a clear message from investors that they don't trust the numbers of economic growth anymore.

The government had made big announcements regarding the automobile sector. They said that BS4 vehicles will be sold till March 2020 and allowed on-road till their registration expires. The government-supported auto sector is demanding 18% GST on components instead of 28%. They have objections to categorising two-wheelers as luxury goods.
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If business booms, as will earnings. Sales will increase if purchasing power increases. The auto industry won't need government support.

Finance Minister Nirmala Sitharaman announced recapitalisation of banks to the tune of Rs 70,000 crore. But small traders will opt for loans only if they are confident that their business will make profit.

Companies which used to put out advertisements for job vacancies have instead started to put out advertisements of their dire economic condition. Textile sector, real estate and steel industry still have hopes from the government.

A report by Pooja Mehra reveals that of the 7,80,216 companies that filed income tax returns in 2016-17, 46% of them incurred losses. The government has not made the report public yet. If it does so, it will have to accept that it made mistakes.

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Business Standard’s Nitin Sethi wrote that GST earnings dipped in April and May. Finance Minister Nirmala Sitharaman spoke of making GST easier and refund-efficient. It is a good decision but will take time.

There's unemployment, companies are in crisis and the economy is facing a slump. Small changes will not help. The government needs to take better measures. The government is taking REACTIVE steps when it should take PROACTIVE steps.

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