.........MUMBAI: SBI Research on Tuesday confirmed what no one wants to hear: the current economic slowdown is indeed real, not ‘technical,’ as some would like to believe. In a frank assessment of the economic outlook in its latest report, it dismissed the notion that the slowdown that has been prolonged to first quarter of this fiscal year could be transient or short-term in nature — without explicitly saying that it could drag on for long.
In a sense, India’s economic growth is behaving a bit like an unreliable boyfriend, giving mixed messages of where it’s headed. GDP grew at a world-beating 7 per cent in the first two years after the NDA government came to power in May 2014, but appears to be in a free-fall since — for the past six quarters.
From a low of 4.7 per cent in FY14 under the UPA reign, growth picked up fairly well, but then, the government shot itself in the foot subjecting the frail economy to two exogenous shocks namely — demonetisation and GST.
Currently, all key growth engines like exports, government investments, private consumption and private investments have lost appetite and the damage inflicted via demonetisation appears irreversible. But all hope is not lost, as economists believe firing on all cylinders of public expenditure can give a booster dose to the economy.
“Need of the hour is to spend to grow more. We believe the government should consciously expand spending and fiscal deficit, without disturbing the borrowing math,” reasoned Dr Soumya Kanti Ghosh, Chief Economist, SBI Research.
He went a step further advising the government to invoke the clause in the Fiscal Responsibility and Budget Management Act that provides for a 0.5 per cent slip in fiscal deficit target. Rating agencies termed such excess borrowing ‘fiscal profligacy’ last fiscal, and even threatened to downgrade the country’s sovereign rating to junk.