Despite the gloom prevailing over the economy, Nirmala Sitharaman has tried to kindle hope. She expects growth to pick up this year, as a result of structural reforms, and with credit available for investors. She expects that the already announced cut in corporate tax should leave more money in their hands for investing, and the cut in the interest rate should encourage them to borrow more for investment. Indeed, the rise in crude oil prices is a worry for her, but she is keeping her fingers crossed over that.
The real GDP growth had fallen from 6.8 per cent in 2018-19 to 5 per cent in 2019-20. But prices at the shop counters had remained within the lakshman rekhas. The world is still betting on India, she feels—for proof, she cites the boost in foreign direct investments and the all-time high pile of 457.5 billion dollars in the reserve vaults.
The confidence in India, she feels, has been lifted by several of last year's measures —farmers were given higher support prices, corporate tax was slashed, cloth mills, handicraftsmen and electric car-makers were given policy lollies, new businesses were given tax waivers, banks were given loan guarantees for buying up assets of non-banking finance companies, a few public banks were given fresh capital, stalled housing projects were given funds, tax cuts were offered on home loans, and so on. With all this, Sitharaman expects GDP to have grown at 5 per cent in 2019-20, though the earlier bets were on 6.8.
The biggest plus factor perhaps was in the farms. Rice, wheat and other grains farmers reaped 19.2 million tonnes more than they had in every one of the last five years. With the hike in government-fixed prices, and other measures, farmers are thought to have earned one and a half times more than what they had spent. The shopper, too, was happy with the prices—food prices were going up slower than earlier thanks to curbs of export, and allowing import before any item became scarce.
If the sun was shining on the farms, it was admittedly gloom in the factories. Factory output grew at a sluggish pace; coal, crude and natural gas industries were stagnant or even producing less than earlier. Businesses sold less merchandise to the world and earned only 239 billion dollars in April-December which was 2 per cent less than during the same months a year earlier. But on the happy side, imports, too, had fallen.
So, the India story isn't ending - is what Nirmala wants the world to believe. The World Bank has found that it is becoming easier to do business in India than ever before. Direct investments are coming in—24.2 billion dollars in April-November compared to only 21.2 billion in the same months of 2018—and this “is a reflection of a global sentiment that increasingly believes in India's growth story and reform measures being undertaken by the government.”
