Bikky Khosla | 09 Apr, 2019
With less than a week left for the Lok Sabha elections,
our political parties are gearing up for an intense electoral battle. The ruling
party has, in its manifesto, promised, among others, a major
infrastructure push that would not only ensure efficiency in the economy, but
would also lead to creation of a large number of jobs. The largest
opposition party, on the other hand, has promised to restart the economy, by
removing unemployment and farmer distress. All these sound good.
But the road ahead looks a bit rocky, according
to some experts. They point to some recent macroeconomic indicators, which
signal that the Indian economy may in
fact be moving towards a slowdown. According to a former Chief Statistician, demonetisation
and GST roll-out had hit the non-corporate sector hard, and now that is what is
showing. The argument cannot be ignored, particularly when we look at the
recent macroeconomic readings on auto sales, direct tax collection and
First, according to RBI data, India's household
savings as a proportion of GDP declined to 17.2% in 2017-18. This is the lowest
rate since 1997-98, and a big concern as falling household savings act as a serious
constraint to investment. Second, direct
tax collections have not been as per the target. Reported on April 1, it fell
short by Rs 50,000 crore thereby failing to meet the revised target of Rs 12
lakh crore for 2018-19 fiscal. Third, sales of passenger vehicles in the
domestic market declined by 2.96% on a year-on-year basis in March.
The above indicators are not pointing
to an imminent economic slowdown, but they cannot and shouldn’t be ignored as
well. Particularly, if by any chance there is a hung parliament
after the elections, it will take a heavy toll on the economy. Additionally, we
are yet to get to the end of the bank NPA crisis. In this scenario, it will be interesting to see how the
results of the upcoming Lok Sabha elections will pan out.
I invite your opinions.