oppn parties Where Is The Economy Headed?

News Snippets

  • In reply to a question in Parliament, the government says it is empowered to lawfully intercept, monitor or decrpyt information stored in a computer resource in the interest of sovereignty or integrity of India
  • Police stop a 12-year old girl on her way to the Sabarimala shrine
  • In Karnataka, the JD(S) indicates that it might support the BJP government if it falls short of numbers after the bypolls
  • Congress pips the BJP in local body elections in Rajasthan, winning 961 wards to the BJPs 737
  • After Airtel and Vodafone-Idea, Jio also indicates that tariffs will be raised from December
  • Sources in Shiv Sena say that they might revive the alliance with the BJP if it offers the 50:50 deal
  • A miffed Sanjay Rout of the Shiv Sena says that it will take "100 births" to understand Sharad Pawar
  • Mobile operators Vodafone-Idea and Airtel decide to raise tariffs from next month
  • Sharad Pawar meets Sonia Gandhi and says more time needed for government formation in Maharashtra
  • Justice S A Bobde sworn in as the 47th Chief Justice of India
  • Supreme Court holds hotels liable for theft of vehicle from their parking area if parked by valet, says "owner's risk" clause is not a shield from such liability
  • Finance Minister says she is receiving feedback from many sectors that recovery is happening as there is lower stress
  • Sabarimala temple opens, but police bar the entry of women below 50 years
  • Finance Minister Nirmala Sitharaman says Air India and BPCL to be sold off by March
  • Media person Rajat Sharma resigns as DDCA president
Two Muslim litigants in Ayodhya refuse to accept the Supreme Court order, say review petition might be filed
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Where Is The Economy Headed?

By Ashwini Agarwal

The economy is showing signs of revival and it is reflected in the industrial production figures that grew 4.9 percent in April after reaching a five-month low in March. This means that demand for goods and services is rising and that it out hope for creation of jobs, one thing that the present government has not managed to bring on track. But this good news is also tempered by extremely low or negative growth in sectors like agriculture, fishing and mining. While mining is suffering from the effects of large scale corruption in licensing and the resultant court cases, if agriculture – the sector that provides jobs to nearly half of the workforce – does not take off and if farm distress continues, jobs created in factories or the service sector will not be enough as a large number of people will be rendered unemployed from agriculture. The only ray of hope is that the Met has predicted a normal-to-good monsoon and it might help in reviving the sector and lessening farm distress.

On the other hand, hardening of oil and commodity prices have meant that the consumer price index (CPI) is rising faster than expected. As producers battle with rising input costs, they are unable to absorb it in the face of thin margins and product prices are increasing across the board. Couple this with rising prices of daily essentials and farm produce such as vegetables and fruits and the problem being faced by households is clear. In fact, most households surveyed by the RBI expect the CPI to rise faster in the coming months and reach its peak during the festival season in September-October.

The government has to work fast in introducing further reforms. It also has to step up investments in the renewable energy sector so that reliance on fossil fuels is decreased. If inflation rises beyond a comfortable level, the RBI will have to follow a tight money policy to suck out excess cash from the economy. Prices are not likely to fall soon because even if the monsoon is good and the farms produce more, the effects will show only during September-October. By that time, the festival season will push up demand to bring us back to square one.