Opinion-Editorial
Positive news on economic front, Govt must keep spending
New Indian Express-Editorial Dt.23rd Oct.2021
The weather has its seasons and so do economic forecasts. The latest round, coming on the back of a Chinese economic slowdown, beats the drum of optimism and India’s potential of regaining the world’s fastest growing economy tag. If the scorecard from the World Bank to the IMF to private forecasts place the FY22 growth rate at a conservative 9.5% and thereabouts, the government believes it’s about to crack double digits on the year. If that happens, the achievement will be praiseworthy and efforts must focus on thawing national output not to its pre-pandemic levels, but to pre-slowdown state and lower unemployment rate—which shot up to frightening levels owing to the Covid-19 pandemic.
Forecasts peg India to be at the start of a large capex cycle, which can ensure a sustained real GDP growth of 7% in the medium-term. Several factors appear to be contributing to this belief, including rising exports and robust tax collections. The government initiatives such as asset monetisation and the recent privatisation drive raised hopes of disinvestment proceeds picking up steam. While bank credit growth remains a concern, the resolving bad loan situation is comforting. While booming corporate profits are welcome, private investments are still sore and so is capacity utilisation. Yet, some like Morgan Stanley expect that a virtuous cycle is in the offing, supported by strong capex. This cycle, they believe, will be unlike the past decade and more like the one seen during 2003-07, allowing strong growth rates while keeping macro stability risks at bay.
Rising capex lifts employment and boosts income and consumption, creating a virtuous cycle. But until private sector investment picks up, the government must continue holding the spending baton. States too must weigh in and increase expenditure, particularly on healthcare and education. All said, the risks to the positive sentiment from external factors cannot be completely avoided or escaped. Be it in the form of US interest rate hikes and capital outflows or volatility in crude, energy and commodity prices can cause an upheaval and knock down India’s growth story once again.
Source-New Indian Express
https://www.newindianexpress.com/opinions/editorials/2021/oct/23/positive-news-oneconomic-front-govt-must-keep-spending-2374677.html