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Economic growth, stability and correctives

Friday, March 08, 2019
By Ranajoy Sen

With the onset of increased campaigns for the parliamentary election, the issues at stake are essentially political stability, economic amelioration, security, and a potentially stable, democratic progress ahead. Political parties might strive to prove that their agenda is a tad if not much more better that that of the others. Coalitions, present and past, in the offing or in progress to be formed, would and are being brought out into the open. They are intended to become suitable options before the electorate in casting their respective preferences during the time of voting. But, what would possibly really matter is the extent of economic amelioration achieved by the country.     

The growth rate is basically fluctuating between 6 to 7 percent, at the given state of time. Inflation, exports, and manufacturing have all been of a nature which need not be gloated about. Essentially, exports appear to have taken a somewhat sluggish trend. The country’s import bills have tended to surpass export bills more often than not, during the past five years. Even then, however, this is not to insist that there have been no notable steps on the economic front. On the contrary, the current NDA regime has been prompt in trying to push through suitable reforms in various sectors. The emphasis has been toward a constructive reform path, although allegations of not being fully up to the mark has been heard from certain quarters, during the time span of the nearly past five years or so.

Some disquiets in the agricultural sector
However, one aspect is certain. The economic reforms narrative has not been allowed to be relegated to a secondary position in any time. It seems that the country has finally decided to bid adieu to the pattern of intermittent reforms and its absence, which was sort of there even say, two decades back. But, there have been challenges in certain crucial matters.

The country’s agricultural sector is apparently in need of a thorough, thoughtful re-thinking, re-structuring, and in certain matters, rectification of practices and habits. It appears that that constructive, accountable market forces are not being allowed a proper opportunity, at various times. The principal woe of many Indian farmers has been that market selling prices are not profitable to the production cost of certain crops and dairy products. There have been instances where the annoyed Indian farmer or groups of farmers have deliberately destroyed agricultural produce as a mark of protest against dissatisfactory monetary returns to their work.

The debate has been whether the government should eagerly proceed to declare minimum support price for a range of agricultural commodities or whether the market should be more structured, organized and disciplined to prevent or reduce to a minimum the ineffective and unscrupulous practices, which are yet to be rooted out of the country’s agricultural economic system. There are some who insist that the proper play of the market forces should be the prime motivator of the economy, while the government should form policies which would come in good stead in the event of a pressing or crucial situation.

Whatever might be the scenario, an acceptable pattern seems yet to come up. But, that does not mean that there has been no improvement in the system of agricultural production, procurement, and its marketing. The role of unscrupulous agents appears to have been whittled down to notable extent, although the rectification in it is not yet complete. But, various facilities for the benefit of the farmer have been made, in various parts of the country. It has been done by government as also by various private entrepreneurial entities.  

Contentions surrounding certain tariffs
In exports, a crucial issue India grapples with, at present, is that of the tariffs. It has been a contentious issue, in particular with the United States. The issue is being dealt in a way, so that frictions in other matters do not arise. Nevertheless, it is yet to be narrowed down, if not be removed altogether. The US states that certain of its own products face tariffs, while relevant, reciprocal tariffs are not imposed on Indian products. This country has brought up the issue of apt trade practices, while promising to see to it that undue unfair practices in external trade is not given any undue quarter.

What ultimate effect the acts of demonetization and GST create is yet to be seen. In any case, it has been stated that their potentially positive effects are more for the near future than immediate. It is more than two years that demonetization has been enacted, while it is about two years that the GST was given effect. Surely, the uncalled for paper work and the scope of sharp practices therein would have been reduced from it. But, before the elections, GST rates for certain commodities have been revised for the apparent benefit of consumers. Would it remain so, even after the elections? That would be answered with the passage of time.

Whatever the effects of it, it is no gainsaying that the country’s fiscal and monetary policies are, at present, both geared toward taking the country’s economic normal toward greater heights. The country’s managed floating exchange rate is a good reality check on the country’s present exchange rate and foreign exchange reserves position. There are no reasons to infer that even if there are hints of instabilities or economic shocks, the country’s economic institutions would surely manage such challenging situations with a measure of success.

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