oppn parties Signs Of Economic Revival Need To Be Supported By Structural Reforms And Investments

News Snippets

  • PM Modi tells BJP workers that India is in for a long battle against the coronavirus and there is no scope to feel tired or defeated
  • PM Modi asks ministers to focus on exports and new areas and sectors
  • PM Modi asks ministers to prepare business continuity plan post the lifting of the lockdown
  • Corona cases in India cross 4000 and the death toll stands at 124
  • The government decides to double the testing of corona suspects from 10000 now to 20000 in the next three days
  • Flipkart assures employees that there will be no job or salary cuts due to the COVID-19 pandemic
  • Although it was obvious, but the government still clarifies that there is no need to switch off appliances and only lights need to be switched off on April 5 at 9pm after confusion in the minds of some people
  • PM Modi and President Trump decide "to deploy full strength of (Indo-US) partnership" to fight against COVID-19
  • 17 states have reported 1023 cases of coronavirus linked to the Tablighi Jamaat, which translates to 30% of all positive cases in India
  • The government says people should not use alcohol-based hand sanitizers before lighting diyas or candles on April 5
  • The railways say there is no certainty yet when services will resume after the lockdown and a final decision will be taken in the next few days
  • As coronavirus cases multiply in Assam, six north-east states seal their borders with the state
  • Power System Operation Corporation Ltd. (POCOSO) putting all systems and protocols in place at war-footing to ensure there is no grid failure due to reduction in demand on April 5 at 9 pm
  • Power ministry scotches rumours that the power grid might fail due to the 9-minute blackout called by PM Modi on Sunday, April 5
  • Centre asks people to wear home-made masks if it is absolutely essential for them to step out of homes
26 nurses and 3 doctors test positive for COVID-19 at Wockhardt Hospital in Mumbai, facility cordoned off, no entry or exit permitted from the hospital
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Signs Of Economic Revival Need To Be Supported By Structural Reforms And Investments

By A Special Correspondent
First publised on 2020-01-28 08:25:14

In an article on bloomberg.com, Anirban Nag, citing figures for November and December, says that the Indian economy is perking up and might be shrugging off the effects of a slowdown. This will be music to the years of the NDA as it is currently battling negativity from all sides. He says that five of the eight economic indicators mapped by Bloomberg showed signs of recovery for the second consecutive month (which is also validated by GST collections). Thus, he says that the "animal spirit" (or the investors' confidence in taking action, as described by economist John Maynard Keynes) gauge used to measure the movements of economic activity has shown small, but significant upward trend, signaling that the worst is perhaps over and the economy is ready to bounce back.

The article cited that the services sector index moved from 52.7 in November to 53.3 in December while the manufacturing index moved from 51.2 to 52.7. These might seem minuscule and largely insignificant changes to most observers given the size of the Indian economy, but the fact is that in these depressing times, any reversal from contraction to growth is a signal that investor confidence is returning, albeit at a snail's pace. If one sees that for six months before the last two months, the Indian economy was contracting and GST collection was way below Rs 1 lakh crore, these small changes provide immense hope that a turnaround is about to happen.

But for the turnaround to gather momentum, two things must happen. The government must bring about structural changes in the economy and invest hugely, either on its own or through the PPP route. It must also bring viable projects that inspire investor confidence. The projects in the pipeline are not hot enough. Interest in infrastructure must be revived (and not only of the bullet train kind) and there must be a rethink on the funding of power projects through loans. Instead, the market for corporate bonds must be made vibrant and projects with long gestation periods should be allowed to be funded exclusively through this route. This will ease the pressure on banks and maybe reduce bad loans.

The government must take the signs of revival as a good omen before the Union budget. It must announce far-reaching structural reforms to shake up the economy and inspire investors - both domestic and foreign - to start investing again. Even the IMF has said that the slowdown is temporary. But without government intervention, investor confidence is unlikely to perk up and the economy will not be able to return to an 8 or 9 percent growth rate that it can easily achieve, given the fundamental strength and the size of the market.

Read the Bloomberg article here