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Last updated: 26 Sep, 2017  

Rupee.9.Thmb.jpg Stimulus watch

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Bikky Khosla | 26 Sep, 2017
News reports have surfaced that the Centre is considering a stimulus package in the range of Rs 40,000-50,000 crore to halt the ongoing growth slowdown. The basic idea behind fiscal stimulus is that when the overall economic growth is sluggish, feeble or in a state of contraction, the government should increase public expenditures so as to financially stimulate the economy. The theory also calls for measures like tax cuts, interest rate reduction, quantitative easing, to name a few. But economists often debate the merits of a stimulus, and this time too the proposal has not been greeted with open arms by many.

There is little doubt, however, that our economic growth has faltered. Only two years ago, India was touted as a rare bright spot in a gloomy global economy, but since early 2016 growth has fallen for six consecutive quarters. Our corporate investment has remained sluggish with the bad loan crisis continuing to hang like a sword of Damocles over the heads of both banks and companies. Private consumption has fallen and manufacturing and exports have lost steam. Additionally, demonetisation and the GST have further added to the woes. In this situation, a package of short-term measures to address specific problems sounds welcome.

But there are words of caution from several quarters. They opine that the stimulus could have an adverse impact on the near-term macroeconomic stability. In fact, even the long-term prospects could be impacted as it happened after the stimulus undertaken in the wake of the 2008-09 crisis, resulting later in double-digit inflation and wide imbalances, both domestic and international. Economists also point that the impacts of higher spending without a commensurate pick-up in revenues could be negative and private sector investment may not pick up despite higher public capex as it has been evident from the past two years' experience.    

It looks like the Centre has till now done little to figure out the real causes behind the derailed growth story--why three out of the four main engines of the economy have not been working smoothly. Government spending has remained a priority, but it has so far met with little success in driving growth. And now the government wants to inject the economy with a stimulus. The question is, will it work? A lot will depend on how effectively the policymakers identify the real challenges facing the economy, recognize them and take balanced remedial measures based on sound economic logic.  

I invite your opinions.
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Stimulus Watch
SJS RAVI | Wed Oct 4 19:11:12 2017
You have selected a good topic and so already so many Cassandras have sprung up and solutions are coming cascading thick and fast. We keep hearing of the ballooning NPAs of Banks running into over a lac of crore Rupees. Many NPA's are lurking in the woodwork and Banks are scared to bring them out lest there be a chaotic collapse of the Banking System. Some state Govt.s are in competitive mood to waive farm loans which has a potential to quickly double the NPAs. Compared to these figures Rs.40,000 to 50,000 Crores is chickenfeed. How can it counter the NPAs already embedded in the system. Let us not think all NPAs are due to embezzlement and fraud. The more the economy tanks, the more the NPAs will rise as a natural progression. When the economy was already in doldrums where was the need for Demo and GST. Both seem to be diversionary tactics, putting all and sundry in to meaningless hectic activity so the no body can look at the sinking house. The 40,000/- crore stimulus at Rs. 300 per capita will just not work. If we have to stimulate the economy say sorry to the people for having heaped insults and injuries on them and stop stirring the pot since you do not know what is in it. Egos and Bluster cannot bail the economy. Free people from chains of GST and the like. Let them have some latitude to work their core business instead of running around to find means to fill the GST kitty month after month.

Stimulus Watch.
ANIL KAUL -9967650065 | Thu Sep 28 05:16:06 2017
IN the present economic scenario , Private sector companies with large surpluses must come forward and decide to spare some reasonable portion of reserves to invest in the most appropriate field , even if it carries great amount of risk. my premise is based on two assumptions 1- Private sector investor will always be more prudent to invest in productivity linked sector and will always be better managed than government Babus , who have almost no accountability as they use public money. 2- Private sector must have sense of realization that whatever surpluses they have been able to amass till date is the result of profit generation form this great country "INDIA",thus it is their morale duty to rise to this occasions as they are going to help no one else but themselves, in the long run, when everything becomes normal.

Stimulus watch
A V CHANDRAN | Thu Sep 28 04:44:34 2017
India has a culture of mixed micros and macros economy whereas existing one in force is closely related to capitalist like Mukesh Ambani as his business grown up to 58% for the last two years whereas Indian GDP stands fallen at 5.7%, imports shoot up and exports recorded worst fall. These are all happened in the absence of Planning Process and continuous review mechanism. The Govt of India must deeply examine the merits and demerits of Planning Process and continuous Review Mechanism of mixed economy. Once it is examined the result will be restoration of Planning Process and Continuous Review Mechanism as both the factors are excellent matching for continuous economic development of the Great Nation! Secondly Govt must ensure that Black Money of Indians in Swiss Banks are part and parcel of the Great National Developments and it is not at all wealth of other countries. Thirdly Non Plan Expenditure must support corresponding Non Plan Revenue and deviation between the two factors will have direct economic repercussion. Once All the above Three factors are in place, excellent economy of the Nation could be managed in all respects.

What are the real challenges?
Ganesh | Wed Sep 27 17:16:40 2017
Very thoughtful analysis, usually. Thanks. Just curious to know, what are the real challenges facing the economy you speak of? While DeMo has been a mega flop, what is the reason growth has been falling even earlier?

NITIN PAREKH | Wed Sep 27 11:49:36 2017
This stimulus, looking at the size of economy, is nothing. Big action like no income tax and introduction of BTT and two rates with simplified procedure GST can bring cheer in economy. Truly liberating from Babu Raj.

Government initiative for Entrepreneurs
Rajiv Kumar Gupta | Wed Sep 27 10:25:51 2017
In my opinion, government machinery ie.DIPP,Invest India/Start up India etc.(are only one ended). At least there has to be revert action and should respond proactively towards the innovative Proposals are being submitted by Entrepreneurs. Even the PMEGP does not provide proper response even though "" promoting Digital platform (e.g:Mail/SMS/E-Mobile Apps/Phone call). Unfortunately,there is ZERO FEEDBACK,which is the ground reality. Government authority should take responsibility to reach out to the individual enabling we Indians to believe and reinforce the confidence of HOPE from what our PM's promises and foresees I AM NEW INDIA in making a virtual vision The ground reality. IT IS A COLLECTIVE JOB TO REACH OUT AND TO EVERY INDIAN EAGER AND LOOKING FORWARD TO CONTRIBUTE TECHNICALLY with their own respective capabilities.Government authorities should take positive initiative to lift the (drowning) moral hence minimize the gap in people's thought process in this present context. MAKE EYE TO EYE CONTACT for the progressive growth together

Stimulus to economy
S P SINGH | Wed Sep 27 05:31:19 2017
The real reason for sluggish economy is the small and medium sector and service related to that which no one is looking for. The current GST also is a death nail to MSME sector. The high compliance cast of GST and its impact will further derail the economy. To boost the economy it is necessary that composite scheme limit to be enhanced to 5 crores so that its cost will reduce. It will not have much impact on revenue, but make a trust between the Policy and small businesses. This limit may be reduced in future but it give boost and confidence to small and MSME sector. To boost economy it is necessary to increase demand and also investment in small and MSME sector, which cane be done by increasing Interest subsidy and higher depreciation and income tax exemption to additional output. It is very unfortunate that the day GST started and on Transition credit special verification drive started by CBEC which shows that Govt. have no confidence or trust on business community. It is important to mention that this kind of attitude is not proper to the economy. It is very unfortunate that no real cause is seen by policy makers. GIVING NEW SLOGAN AND ISSUING NEW POLICY WITHOUT ANY BOOST TO ECONOMY IS NOT GOOD FOR THE FUTURE. Unless manufacturing sector is not boosted economy will not revive. Internet is good for information but bed for health, which can be improved by providing work and food to millions of people by creating new job opportunity.

  Re: Stimulus to economy
ANIL.KAUL-9967650065 | Thu Sep 28 05:28:42 2017
In my opinion, one should adopt holistic approach while looking for a solution to any problem , be it economic , social, religious etc. Similarly, I see no reason that why a SME/MSME entrepreneur should be afraid of or feel obstructed doing business because of GST. It rather helps to do business in orderly manner. The real problem is that , till now , we have been doing business by using accounted means. Thus the problem is of OLD HABITS and as we all know " OLD HABITS HIE HARD". So better we correct our habits and stop crying as no one should be allowed to amass unlimited wealth thereby increasing gap between HAVES and HAVE NOTS, which is bound to create unrest sooner or later.

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