Do we need an economic repair now? Well, yes. Indian economy has seen major, major blows after ground breaking reforms made to ‘revitalise’ how India works, now these moves might prove to be helpful in future, but nobody can deny the fact that they have depicted a disruption in present economy. And to save the falling system, Centre is planning for, well, a striking stimulus package.
As per recent GDP stats, the growth of Asia’s third-largest economy has slowed down to three-years low record with a rate of just 5.7% for the June quarter. The fall is an outcome of the ‘transitory phase’, thanks to demonetisation in November 2016. These reforms have changed the way of how people used to use money and spend cash – hurting consumer demand and ultimately disrupting the consumer-manufacturer ecosystem. To our surprise, post demonetisation figures show that the RBI has re-introduced 99% of demonetised amount of cash back in market, which means just 1% was curbed back as black money, fake money and terror funding?! Somehow that one seems to have failed beyond imagination.
Adding to the reeling economy, which had just begun to pick up eventually – post demonetisation, the Centre rolled out the Goods and Service Tax Bill. Now, the GST blanket covers entire nation under one single tax regime, it is systematic, it is beneficial in long terms and quite a move – but the point is Indian economy wasn’t quite ready for another major blow yet. Common men were already struggling after cash clampdown to get back to normalcy, and they were hit by the GST big-bull. And the sluggish GST implementation system gave nothing but complications to many companies, especially the small and medium business sector.
So it is basically high time for the government to consolidate the falling economy and boost the overall performance of this fiscal year – or it might show up in form of number of votes in Election 2019. With this in mind, Finance Minister Arun Jaitley has come up with a rescue plan – a stimulus package worth Rs 50,000 crore, which will be spent on bank recapitalisation, rural job programmes and rural housing. This means the banks might get richer – which could capitalise funding for exporters and business loans, rural employment might get better and there is also buzz about Centre’s funds for developing the railways; after PM Modi’s nod to the stimulus package.
This extra mega-expenditure is expected to widen the federal fiscal deficit for 2017-18 fiscal year which will end in March 2018. With high hopes of launching a stimulus package that would savage the economy amidst rising inflation, higher current account deficits and the sluggish GDP growth rate, Modi government is likely to give a nod to the mega-savage-plan. But well, the effectiveness of this package can only be known after its implementation – because it is India, things here – generally don’t turn out as planned.