Worry Lines For The Economy

The grim jobs scenario is a pointer to a deeper economic crisis the government must urgently address

- Shweta Punj and M.G. Arun

More than three years into the Narendra Modi government, the economy presents a strange paradox. On the one hand is an economic bullishness in government, which likely springs from government data showcasing overall macroeconomic stability and the fiscal discipline it has practised; on the other are reports put out by the Reserve Bank of India and the mid-year Economic Survey that predict economic gloom.

In the context of a subdued global economy, India is considered a bright spot among the major countries—growing at 7.1 per cent in 2016-17, and projected to grow, as per IMF estimates, at 7.2 per cent in 2017-18. Fiscal deficit (the difference between the government’s revenues and expenditure) as a percentage of GDP has declined from 4.5 per cent in 2013-14 to 3.5 per cent in 2016-17, and seems to be on track to meet the 3.2 per cent target. CPI inflation (price rise of a basket of commonly bought goods and services) remained under control for the third successive financial year, though the wholesale price index (WPI) rose sharply to 1.88 per cent in July, if still way below the government’s inflation target level of 4 per cent. Farm output is setting new records. India’s trade deficit (difference between exports and imports) fell from its highest level of $190.3 billion in 2012-13 to $118.7 billion in 2015-16, while FDI during April to December 2016-17 was $31.2 billion compared with $29.4 billion in the year-ago period. The positive sentiment has rubbed off on the stock exchanges too, which are trading at all-time highs.