A day after India’s economic growth hit its lowest level in more than six years, Prime Minister Narendra Modi said the first six months of the National Democratic Alliance government since its re-election were “phenomenal for the rise of a new India” and that “historic steps” were taken from the end of Article 370 to economic reforms and productive Parliament sessions to a decisive foreign policy.
Pointing out that more measures would be taken for development, a series of tweets and posters published by Modi’s account said numerous decisions had been taken to push the country’s development. The list includes the Code on Industrial Relations, a sharp reduction in corporation tax rates, mega mergers involving 10 public sector banks, and strategic disinvestment of the government shareholding in five public sector enterprises along with management control. The tweets and messages were, however, silent on the weak economic growth numbers released on Friday.
Finance Minister Nirmala Sitharaman also joined in and defended the Centre’s economic record in the last six months. “Several significant steps in structural reforms have been taken in these months. Responses and interventions addressing the needs of the economy will continue,” Sitharaman said, hinting that more steps could be in the offing before the 2020-21 Budget.
According to officials, additional measures could be aimed at non-banking financial companies (NBFCs) and micro, small and medium enterprises (MSMEs).
On Friday, the official data showed that gross domestic product (GDP) rose 4.5 per cent for the July-September quarter (Q2). This was a 26-quarter low and even worse than the 5 per cent for the April-June quarter.
Sitharaman laid out steps that had already been taken on the supply side in the real estate sector, banks, NBFCs, MSMEs, auto industry, and others.
Most of these measures were announced in August and September, and a top official told Business Standard on Saturday that had it not been for some of these measures, the growth figures could have been worse.
The data on Friday had showed that for ‘public administration, defence and other services, the gross value added, at the 2011-12 base year, for the July-September 2019 quarter grew by a staggering 11.6 per cent compared to growth of 8.6 per cent for the same period last year.
The key indicator of this sector, namely, the Union government’s revenue expenditure net of interest payments excluding subsidies, grew by 33.9 per cent compared to 22.2 per cent for the same period last year.
Soumya Kanti Ghosh, chief economic advisor at State Bank of India, had said after the GDP data that excluding defence, public administration, and other services, the GVA growth would have been merely 2.8 per cent, instead of 4.3 per cent.
The official said that not just in revenue expenditure, but even for capital expenditure, there was a push from the government. “Ministries and state-owned companies were told to clear pending dues and spend whatever was allocated in terms of capex,” said the official.
Among her many announcements, Sitharaman had said that PSUs and government departments had been told to clear Rs 60,000 crore worth of pending payments to goods and service suppliers, and that departments and PSUs would not let up on capex plans.
Officials said the steps taken, including the corporate tax cut and outreach programmes by banks, were aimed at increasing liquidity in a system starved of it due to the NBFC crisis, and to boost investments again. These will enable a recovery in the second half of the year, they said, an assessment some analysts disagreed with.