Mumbai: Five corrective steps can reverse the economic slowdown, which is cyclic as well as structural primarily because of the demonetisation of higher value currency notes and implementation issues with the Goods and Services Tax, economist and former Prime Minister Manmohan Singh said in an interview to a daily newspaper.
The first step prior to implementing the five steps is to accept that the economy is in crisis, he said in an interview in Hindi with Dainik Bhaskar.
The government must listen with open mind to all stakeholders and experts, he said adding that he does not perceive any targeted approach by the Narendra Modi-led Bharatiya Janata Party (BJP) government on this subject.
“The Modi government should come out of the habit of news headline management. Already a lot of time is wasted. Instead of making sectoral announcements, efforts should be made now to simultaneously take forward the entire economy framework,” he said proposing five steps to put the economy on path of high growth.
Firstly, even though this would mean a revenue loss for a brief time, GST should be made ‘logical’. Secondly, formulate new ways to revive rural consumption and strengthen agriculture. “The Congress’s election manifesto mentions ‘concrete alternatives’, wherein money could reach in the hands of people by freeing agricultural markets,” he said.
Thirdly, for capital formation there is a need to promote liquidity in the system. Fourth step is to revitalise key labour-intensive sectors such as textile, automobile, electronics and affordable housing. For that easy loans would be needed, especially for micro, small and medium enterprises (MSMEs), he said.
His fifth step depends on export opportunities emerging due to the ongoing United States-China trade war. “We must recognise new exports opportunities emerging because of America-China trade war. Remember, solutions to both cyclic and structural problems are must. Then only, we can get back to the high growth rate in 3-4 years,” he said.
He said the government cannot live in denial while expressing his opinion on the current state of the Indian economy. “India is in extremely serious economic slowdown. The growth rate of 5 per cent in the last quarter is lowest in the six years. Nominal GDP growth is also at a 15 year low. Many key sectors of the economy have been affected,” he said.
The automobile sector is in trouble because of a steep reduction in output. More than 3.5 lakh jobs have been lost. This pain is visible at auto hubs in Manesar, Pimpri-Chinchwad and Chennai. Ancillary industries are also affected. The slowdown in truck manufacturing is more worrying, which is a clear indicator of tepid demand of goods and essential commodities. The all encompassing slowdown has also gripped the services sector, he said.
The real estate sector is not able to perform well for quite some time, which is affecting related industries such as bricks, steel and electricals. Core sector has slowed after a fall in coal, crude oil and natural gas sectors. The rural economy is depressed because of non-remunerative prices of crops. The unemployment was 45 years high in 2017-18. Consumption, which is the reliable engine of economic growth, is 18 months low. A decline in sales of Rs 5 biscuit packet has told the whole story, Singh said.