The slippage of GDP growth to 6.6 per cent for the October-December quarter is a temporary blip and should not be of immediate concern. With the elections barely two months away and Prime Minister Narendra Modi seeking a second term, the government is expected to come out with various voter-friendly sops and concessions which could give an impetus to growth. The recently-announced Rs 6,000 per year, to be deposited directly into the bank accounts of farmers, will mean a little more purchasing power in rural India, however measly (at Rs 500 a month). They will also be able to borrow three times this amount as lending institutions can leverage this Rs 6,000. These measures may not erase rural distress entirely, but it will provide some psychological relief which is better than nothing for a sector that gets stepmotherly treatment when compared to urban India. The urban middle class has also got more spending power with the generous tax sops announced in the Union budget.
The good news is that India still remains the fastest growing economy with China still to catch up. Recent reports indicate that job creation has been one of the best seen in six-and-a-half years. Job creation is Mr. Modi's Achilles heel, his weakest point. He rode to an unprecedented victory in 2014 on the 2016 promise of creating 10 million new jobs. Despite being the fastest growing economy, employment rate was down to 40.6 per cent in March 2018 from 43.5 per cent in January 2016. This is best illustrated by the observation of former RBI governor Raghuram Rajan that 25 million people applied for 90,000 railway jobs.
