The year 2019 has ended on a rather depressing note. Among the many ominous economic developments we saw last year were a record low in GDP growth, dwindling tax kitty, drying consumer demand, an across the board fall of industries led by automobiles, shrinking exports, lack of private investments, rising inflation and joblessness to boot. Most part of the 2019, the NDA government found itself preoccupied with pushing its specious political agenda. Now that there is no immediate political goal to score, it is believed the government may focus on the ways and means to stem the falling economy. This could be the reason why Finance Minister Nirmala Sitharaman unveiled a National Infrastructure Pipeline (NIP), unveiling projects worth `102 lakh crore to boost economic growth and help the economy reach the $5-trillion target by 2014-25. The NIP has identified projects across 23 sectors and 18 states and Union Territories, which will be funded over the next five years by the Central and state governments as well as the private sector.
However, year 2020 will be full of challenges for the government given the enormity and variety of challenges it confronts. Air India, the state-owned airline, may not exist after June 2020. The government is trying hard to see if it could be sold to a private airline. But none wants to board the public airline yet – a headache for the government that may linger for most part of this year. The closure of Air India will mark the end of a saga in India’s civil aviation history. A month from now, Finance Minister Nirmala Sitharaman will present her second Union Budget. The Budget, in fact, will give a clear indication of the government’s approach to how it wishes to tackle the economic slump. Whether the government would do so by raising expenditure, as Sitharaman has set out to do early this week, or by cutting taxes keeping in mind the need for fiscal consolidation will be known once the Budget is tabled. We have to wait till then to understand the true state of the government’s finances. GST Council meetings will become contentious going forward. With the BJP having lost two more state governments such as Maharashtra and Jharkhand, it may find it difficult to steamroll its decisions in the GST Council. The Centre has a 33 per cent say in the Council with the rest lying with the states.
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India’s economic growth has been slowing steadily over the past several quarters and forecasts suggest there is very little chance it will pick up in the foreseeable future. The Bharatiya Janata Party’s footprint has shrunk from 71 per cent of India’s land-mass to 35 per cent after the loss of Jharkhand. The powerful grip of the BJP on states has been weakening with the loss of state after state. The Prime Minister squandered the opportunity afforded by his powerful grip on states to push through the tough economic reforms such as on land and labour laws needed to offer India a sustainable growth momentum. Going forward, things will be getting only more difficult. The International Monetary Fund (IMF) has listed reform measures that might help the country regain its growth momentum. The banks’ balance sheets must be cleaned up along with strengthening governance in PSU banks and sharper monitoring of non-banking financial companies. Although the government has infused dollops of capital into PSBs, there is zero movement in terms of governance reforms. Fiscal consolidations must be aligned with the Fiscal Responsibility and Budget Management Act. The government should bring down its debts to at least 60 per cent of the GDP from nearly 70 per cent now. A significantly higher level of government borrowing will push up the cost of money. This would call for raising savings through rationalization of subsidies and jacking up of revenues by expanding the tax base – a tough task for the government. Also, to boost growth, there is no getting away from long pending labour and land reforms.
