Source: The Hitavada      Date: 23 Jan 2019 12:38:42

THE International Monetary Fund’s (IMF) latest report on world economic outlook has endorsed what Prime Minister Mr. Narendra Modi had, the other day, asserted that India, in the last four and half years, has progressed from a sluggish economy to a vibrant one and is the fastest growing among large five economies of the world. The IMF’s projections on Indian economy for the period 2019 and 2020 and that of the Price-water Cooper (PwC) earlier, show that the Indian economy is the fastest growing in the world. PwC in fact has predicted that India, along with France, is poised to replace Britain in the world’s largest economy rankings, putting it on the number 5 position. The latest report of the IMF, which is an improvement over the previous one, shows that the Indian economy’s growth will be higher than that of China, the second richest economy in the world after the US, for the next two years on the back of lower oil prices and relaxation in monetary tightening measures as inflation remains at manageable levels. 

Prime Minister Mr. Narendra Modi has reason to be happy that the various economic policies his Government has executed over the last four and half years are now yielding results and the next best thing to happen is the uptick in the economic growth. While world oil scenario is an unpredictable commodity and cannot be relied upon as PwC cautions, the Government’s thrust areas for the coming years would be to consolidate the gains of the measures taken for ease of doing business.

Investors all over the world and even domestic corporate bodies appear to be convinced that now the Indian economy is conducive for investment. Recently a delegation of some corporate bodies had urged the Governor of Reserve Bank of India (RBI) to raise the liquidity level in the system and also repeated the demand for lowering of interests for cutting borrowing costs to spur private investment. Thus the corporate world is eagerly awaiting the next move from the RBI on monetary policy.

The last four and half years saw investment mostly coming from the Government with heavy tilt towards building infrastructure. Now that the Government has cut much of the red tape in according project sanctions, it is time the corporate sector too pitches in and contributes its share to the economic growth of the country. Of course the Government and the Reserve Bank of India have to ensure that there is no choking of credit flow and that the commercial banks, especially the large public sector banks, are adequately capitalised to meet the needs of corporate investment. Frauds and high levels of NPAs have crippled the capacity of commercial banks to meet the credit needs of the investors. It is this area that needs to be addressed on a priority basis as banks are playing critical role in keeping uninterrupted credit flow.

Apart from revival of corporate investment, the other priority for the Government would be job creation. While big corporate houses may not be able to meet employment needs of the teeming millions of educated unemployed, it will be the MSME (micro, small and medium enterprises) sector that should be promoted as driver of job creation. This sector is yet to recover from the shock of demonetisation. It needs immediate help for revival. The fact that the Government is insisting upon commercial banks to meet the credit needs of MSMEs shows that the Government recognises the pivotal role this sector plays in the growth of the economy and employment generation.

But still more important is the agriculture sector for the economy to sustain its momentum. As of now this critical sector of the Indian economy is under great stress and needs much attention. The Government has vowed to double the incomes of farmers. But that will need much efforts at grassroots levels.