oppn parties Where Is The Economy Headed?

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  • The government says Covid-19 is still in local transmission stage in India
  • Government scotches rumours of extending the lockdown beyond April14. Says no such plan
  • Centre asks states to give shelter and food to migrant workers to stop them from taking to the streets
  • RBI cuts repo rate by 75 bps, the steepest in 10 years
  • Centre writes to states regarding laxity in monitoring people who had arrived from abroad between January and March
  • Kerala reports a spurt in new cases
  • With 124 fresh cases on Friday, the number of reported cases in India stand at 854
  • Five of a family, including a 9-month-old-baby test positive for Covid-19 in Nadia district in West Bengal on Friday
  • The Pakistani army is reportedly forcibly moving all Covid-19 patients to PoK and Gilgit
  • Untimely azaans in J&K mosques spark panic gathering
  • Stocks rise - Sensex up by 1400 points and Nifty goes above the 8600 mark
  • Rahul Gandhi says the economic package is "the first step in the right direction"
  • The government announces wide-ranging measures to help the poor overcome the economic hardship caused by Covid-19
  • G20 leaders to hold a virtual meeting today to explore ways of fighting Covid-19 in a coordinated manner
  • The Delhi government orders testing of all medical staff after the positive test on a Delhi mohalla clinic doctor
Death toll reaches 27 as Covid-19 cases across India reach 974 on Saturday
oppn parties
Where Is The Economy Headed?

By Ashwini Agarwal
First publised on 2018-06-18 08:41:09

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.