Encouraging moves by re-elected govt

The new Modi government has started off well by recognizing the problems of economic slowdown and poor job creation. It has formed two new committees to finalize policies to push growth, investment and employment with special focus on skill development. The Minister for Commerce and Industries has talked of setting big targets. The Reserve Bank of India (RBI) has cut interest rates and shifted to accommodative credit policy stance with a view to spur growth and investment.

The new committee on investment and growth includes the ministers holding charge of home affairs, road transport and highways, micro, small and medium enterprises, finance and corporate affairs and minister of railways, commerce and industry. The other new committee on employment and skill development consists of ministers from ten different ministries and five other ministers as special invitees. The Prime Minister heads both the committees. The decision to set up these committees followed reports from government authorities dealing with statistics that India’ gross domestic product growth slumped to a 20-quarter low of 5.8 % in the last quarter of 2018-19, with the entire year’s growth slipping to a five-year low of 6.8% and that the government’s measure of unemployment reached a high of 6.1 % in 2017-18. We have to wait and see what action plan these committees draw up and how they get implemented.

Piyush Goyal, the Union Minister of Commerce and Industry, addressing a joint meeting of the Board of Trade and the Council of Trade Development and Promotion urged the representatives of industry to stop depending on crutches of subsidies and grants from the government and strive to make industry more competitive and self reliant. Calling upon all stakeholders to work as a team, he said the time for incremental growth targets has ended and India now needs to leapfrog export performance in order to improve its global standing and ensure that the benefits of growth reach the last citizen at the bottom of the pyramid. The Commerce Ministry has taken a number of inputs from the industry representatives and might formulate and announce the new Foreign Trade Policy in the next few months.   

In the second bi-monthly monetary policy statement, the Governor of RBI noted that global economic activity has not been able to sustain the improved performance seen in the first quarter of calendar 2019 in the face of the deepening slowdown in trade and manufacturing, which has impacted advanced and emerging market economies alike. Inflation remains below target in several economies. It is in this context that central banks across the world have moved to an accommodative stance in setting monetary policy. Financial markets have been unsettled by the acrimonious US-China trade tensions. Crude oil prices remained volatile, reflecting evolving demand-supply conditions and geo-political concerns, he said. The monetary policy committee (MPC) also noted that growth impulses have significantly weakened. Hence, the MPC found scope to boost aggregate demand, and in particular, private investment activity, while remaining consistent with the mandate of flexible inflation targeting. Accordingly, the RBI reduced the policy repo rate by 25 basis points. Much depends on how well and how soon these rate cuts get transmitted in the system so as to benefit the borrowers and investors.

It is heartening that economic growth is finally receiving the attention of the government and RBI.