Quite an agenda

EAC-PM should be realistic about the growth deceleration

In its first meeting on Wednesday, the newly constituted Economic Advisory Council to the Prime Minister (EAC-PM) identified 10 themes covering a wide range of broad topics for accelerating economic growth and employment over the next six months. The recommendations of the council will be structured around these themes, which include economic growth, employment and job creation, the fiscal framework and monetary policy. Clarifying on the exact role of the council, its Chairman Bibek Debroy said the entire focus would be on recommendations that were “swiftly implementable”. Its role would thus be different from that of the NITI Aayog, of which both Mr Debroy and another member, Ratan P Watal, are members. The latter’s role will be to provide the bird’s eye view, while the former will focus on providing “critical interventions” to accelerate economic growth and employment over the next few months. However, there were “synergies”, as Mr Debroy put it, in maintaining links with the NITI Aayog. The council also clarified that it stood by the wisdom of the government to stick to fiscal deficit targets. As regards the dip in economic growth, the council members said a turnaround was already under way, though no data was forthcoming.

The meeting of the council came just a day after the International Monetary Fund (IMF) said that India’s economic growth for 2017 and 2018 would be slower than earlier projections because of the lingering impact of demonetisation and the goods and services tax. The IMF projected India would grow at 6.7 per cent in 2017-18 and 7.4 per cent in 2018-19, which are 0.5 and 0.3 percentage points less than its projections earlier this year, respectively. The council, however, chose not to give much weight to this, with one of the members even suggesting that 80-90 per cent of IMF forecasts have been incorrect. But underestimating the severity of the slowdown may not be the best way forward for a council that has been put in place to find ways to bring back the growth momentum. 

In fact, the IMF is not the only one which sees the Indian economy decelerating further. Earlier in the month, the Reserve Bank of India had cut back its forecast for gross value added to 6.7 per cent for the full financial year. Other reputed agencies, too, have concurred. The World Bank, in its South Asia Economic Focus, released on Monday, snipped off 20 basis points from its earlier estimate of 7.2 per cent for 2017-18. For 2018-19, the World Bank’s estimate is lower than the IMF’s at 7.3 per cent. The Asian Development Bank and the Organisation for Economic Cooperation and Development have also reduced their projection for India’s economic growth. The most troubling part of this emerging picture is that India has, within a matter of a few quarters, gone from being the shining model of growth in the world to one of the odd economies that are decelerating even as the rest of the world is looking at faster expansion. It is perhaps too much to expect anything more substantial in the first meeting, but the council, whose mandate is to offer informed advice to the prime minister on economic issues, has its work cut out.