Economy In Peril, It's Time To Bite The Bullet

India’s neighbours are falling like ninepins. With inflation being a major factor, danger is lurking around the corner. What steps should the government take?

- M R Sivaraman

THE Modi government is smug with the expectation of an 8% growth in 2022–23. However, the environment around us is not currently conducive to this. India’s neighbours, with the exception of Bhutan and Bangladesh, are falling like ninepins with their economic chaos imposing additional costs on our nation.

With inflation being a major factor, danger is lurking in all corners for the country. Foreign reserves have sharply declined from 17 months imports to hardly 12 months and a further fall will follow a hike in Fed rates. Retail inflation at 6.75% is not going to decrease when the full transmission effect of steep rise in fuel costs are taken into account. It will spiral up as seen in the past and currently witnessed in the US, with additional financial costs to the government.

With the noose tightening around the neck of Russia, the dwindling supplies of oil and spares on which we are dependent is pushing us into Chinese hands as can be seen from the steep rise in imports from Beijing.

Our household savings, crucial for investment and now at a little more than 30% of GDP, have to improve to a level of 36% for the economy to grow at 8%.

The state of employment generation has not improved and large industry has shown a decline likely due to the increasing use of AI and robotics. Labour participation rate is down to 40% in 2021.