The Slowing Economy Will Remain So For Some Time

Will the Narendra Modi government announce a populist Union Budget to arrest the economic slowdown? Will Budget 2020 offer tax sops and income tax relaxation to stimulate demand? Unlikely, says Bibek Debroy, Chairman, Economic Advisory Council to the Prime Minister (EAC-PM). Debroy tells Business Today’s Joe C. Mathew that a stimulus is neither feasible nor desirable and a clear and credible roadmap for fiscal consolidation is the need of the hour. Edited excerpts:

- Joe C. Mathew

How bad is the economic slowdown? Is the lack of structural reforms the root cause?

This year we are going to have GDP growth of about 5 per cent. I expect next year to be about 6 per cent. If one is talking about structural reforms, there are all kinds of people, particularly from my fraternity, who keep coming up with an agenda for structural reforms. If you look at those items, they have been on the reform agenda since 1991 or 1993. So, no one is denying the importance of those structural reforms. They have been pending, and there are reasons for that. Most of the pending reforms are actually state subjects, and there are legislative issues with some others.

There was a period when India grew 9 per cent for four successive years. If you look at those years, the export to GDP ratio was about 20 per cent, and exports grew some 15 per cent in dollar terms. A back of the envelope calculation would say exports added at least 3 per cent to GDP. If you take out that 3 per cent, you are doing 6 per cent (in GDP growth).