The economic situation in the country is a mixed bag, neither alarming as the Opposition would have us believe, nor rosy as the Narendra Modi government would claim ad nauseam. There are some positive signals which are tempered by some negative ones.
On a hopeful plane, the country’s GDP rose to a seven-quarter high of 7.7 per cent in January-March, 2018 following a good rabi harvest and an upturn in the manufacturing and construction sectors. This is good news for the government when the general elections are less than a year away.
Doomsday forecasters who saw demonetisation of high currency notes and the introduction of GST (Goods and Services Tax) as veritable disasters must wake up to the fact that as predicted by independent experts, the downturn due to GST was temporary and has been got over.
The GST collections which averaged Rs 89,885 crore monthly in 2017-18 were higher at Rs 94,016 crore in May, indicating that GST is stabilising and the economy is picking pace.
GDP figure healthy and hope-inspiring
The GDP figure of 7.7 per cent in the preceding quarter is healthy and hope-inspiring. This is as per the statistics of the credible Central Statistics Office (CSO).
The overall growth rate for the full year (2017-18) was estimated at 6.7 per cent. Although this is the lowest in four years of the NDA rule, it is a result of the effect of the GST introduction which was projected to slow down the economy and on recovery lead to a steady increase. The growth rate of GDP was 7.1 per cent in 2016-17 and is expected to be bettered to 7.5 per cent in the current year after the setback in 2017-18.
The upturn in the manufacturing sector is also encouraging though it is not uniformly good. Construction, which was an important catalyst earlier, is back in shape. The services sector, meanwhile, continues to show fine growth.
The biggest worry for the Modi government
It is, however, the farm sector which continues to be sluggish and dependent on the vagaries of the weather. The biggest worry for the Narendra Modi government today is farm distress with farmers up in arms against the established order, agitating for more remunerative prices for their produce and a better deal generally.
Opposition parties, as is their wont, are exploiting the dissatisfaction in the rural areas to the hilt, fuelling their anger and stoking the embers of resentment at government policies.
The current agitation in seven states in which farmers are dumping vegetables and milk on the highways in protest over their plight presages hard times for the Modi government.
Heavy debts and farm distress are driving farmers to commit suicide in many states and the governments at the Centre and in states are clueless about how to deal with the situation. The Opposition parties are passing the buck to the Centre and fanning the flames.
Farm loan waivers have become commonplace across the country and the effect it is having on the country’s finances is unnerving.
Fuel price hike may disturb middle class support
The other bad news on the economic front is the continuous rise in prices of petroleum products with its concomitant effect on petrol and diesel prices across the country.
The Modi government is petrified that sustained high prices of petrol and diesel could disturb the middle class which stood by the BJP in the general elections in 2014 but could turn its face away from it in 2019.
Returning to a regime of subsidies is a scheme being actively considered to woo back the middle class but that would not be without its ill-effects on the country’s economic well-being. Excise duty cuts is a palliative that the government would bank upon as a last resort.
The absence of national approach
Surely, the Modi government faces tough challenges ahead but the task is made doubly difficult by the absence of a national approach. The Opposition is in no mood to cooperate with the government in overall national interest and the government does not have the skills and good sense to take the Opposition along in a national endeavour.
Yet, despite all this, if there are positive signals for the economy it is a matter of some satisfaction and hope.