Policy-A Slow Climb Ahead

ECONOMISTS AND ANALYSTS SEE A SLOW AND ARDUOUS ECONOMIC REVIVAL FROM HERE. BUT SOME SAY IT CAN BE ACCELERATED.

- DIPAK MONDAL

On November 29, immediately after the National Statistical Office (NSO) came out with the second-quarter GDP growth numbers – 4.5 per cent, a six-year low – the government went into damage control. Atanu Chakraborty, Secretary, Department of Economic Affairs, and K. Subramanian, Chief Economic Advisor, addressed a hurriedly called media briefing.

The government’s usual comforting words were that the fundamentals of the economy are still strong, growth has bottomed out and that the growth rate from the next quarter would improve. A day before the second-quarter numbers were announced, Nirmala Sitharaman told the Rajya Sabha that “if you are looking at the economy with a discerning view, you see that the growth may have come down but it is not a recession yet or it won’t be a recession ever.”

While technical differences between a slowdown and a recession are debatable, the fact that the growth of nominal GDP (measure of goods and services produced at current prices) has fallen sharply to 6.1 per cent in the second quarter, from the Budget target of 12 per cent, should worry the government and people at large.

Even on the real GDP front, if government consumption – which showed a 15 per cent jump in the second quarter and more or less supported overall growth – is taken out of the equation, the situation looks even worse. “For some time there was support from some sectors that are cycle independent like agriculture and government spending. The ex-agriculture and ex-government spending numbers indicate a core trend in the economy which is worse. It is not even 4.5 per cent,” says Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank.