INDIAN ECONOMIC REVIVAL – LACK OF EFFECTIVE GOVERNMENT INITIATIVE
The Indian economy which has been growing at the rate of more than 8-10% per annum for last about 5 years met a road block and the growth has severely slowed down. The manufacturing sector has
shown a negative growth in the recent months besides substantial downfall in demand for automobiles, textile, exports, information technology, cement and steel. The real estate and infrastructure sector is witnessing a very severe cash flow issue due to sudden halt in investment inflows. Most of the housing and commercial real estate projects implementation has significantly slowed down. On the other hand the banks are not eager to lend money to manufacturing sector, infrastructure sector, real estate sector, housing sector and even to service sector. The banks are flush with funds, in view of diversion of most of the public savings towards banks fixed deposits. The banks are neither giving credit nor have been able to reduce the lending rate significantly. In the international market, to curb recessionary tendencies, US federal has reduced the federal interest to almost near to zero whereas Bank of England has reduced its reference rate to 1% , lowest in last 300 years. The foreign exchange rates, more particularly US dollar is moving upward and has created a new record high. The reason for demand supply gap is to be diagnosed. The American and European economy are still moving downwards and are expected to reverse their trend only in next 6 to 9 months. The reduction of inflation rate to 2.43% (7 years low) indicate a threat of deflation & increasing money supply (M3) at this stage is crucial to address this major risk. The Indian economy is apprehensive to get into recessionary mode due to lack of sincere efforts and initiative on the part of Government of India. The Government has taken a laudable step to reduce excise duty rates and service tax rates but has failed to withdraw multiple central taxes and has also not been able to convince State Governments to significantly reduce VAT and other state levies to provide a push to
the Indian economy. The Government has also not undertaken any major capital expenditure on infrastructure, power and manufacturing sector, which is very necessary to provide demand push into the economy. Massive rural, irrigation & infrastructure development projects can be started by the govt. Revenue spending by govt. need to be reduced significantly. Only large advertisements for
inaugurating certain major initiative are seen regularly in the newspaper and in the media. However, no significant amount has been spent or even committed to indicate the seriousness of the Government. No major contracts have been awarded. The availability of sufficient credit at reasonable cost has to be ensured by the Government. The announcements reducing interest rate on new housing loans and car loans are elusive, in the absence of enough borrowings due to lack of confidence. The larger size, medium size as well as small sector industries are severely suffering due to difficulties in financial closure and lack of resources. The capital market has already dried up. The private equity investors have become apprehensive. The Government can consider equity funding of PPP projects in various sectors and can also incentivise and convince the banks to lend for all genuine
projects and borrower needs. The distress sale of real estate projects as well as inadequate implementation of projects under progress will only add perils to the current economic outlook.
The export of textile, handicraft & other item have fallen sharply. The govt. has failed to support the export sector. The non-resident Indians can be approached with aggressive marketing to invest in India as a safe heaven. The investing & working conditions are to be improved significantly by infrastructure & fiscal support. The Indian economy is at a stage that things can become positive very fast, provided the Government is able to bring back the confidence into the economy. Our dependence on the international economy is limited. The Chinese economy has already shown certain sign of improvement and India can follow. We need a strong and active political leadership to lead us back to growth. Indian public is in the election mood and we convey our best wishes for the right selection of right candidates and political parties, who can take adequate strategic action.
shown a negative growth in the recent months besides substantial downfall in demand for automobiles, textile, exports, information technology, cement and steel. The real estate and infrastructure sector is witnessing a very severe cash flow issue due to sudden halt in investment inflows. Most of the housing and commercial real estate projects implementation has significantly slowed down. On the other hand the banks are not eager to lend money to manufacturing sector, infrastructure sector, real estate sector, housing sector and even to service sector. The banks are flush with funds, in view of diversion of most of the public savings towards banks fixed deposits. The banks are neither giving credit nor have been able to reduce the lending rate significantly. In the international market, to curb recessionary tendencies, US federal has reduced the federal interest to almost near to zero whereas Bank of England has reduced its reference rate to 1% , lowest in last 300 years. The foreign exchange rates, more particularly US dollar is moving upward and has created a new record high. The reason for demand supply gap is to be diagnosed. The American and European economy are still moving downwards and are expected to reverse their trend only in next 6 to 9 months. The reduction of inflation rate to 2.43% (7 years low) indicate a threat of deflation & increasing money supply (M3) at this stage is crucial to address this major risk. The Indian economy is apprehensive to get into recessionary mode due to lack of sincere efforts and initiative on the part of Government of India. The Government has taken a laudable step to reduce excise duty rates and service tax rates but has failed to withdraw multiple central taxes and has also not been able to convince State Governments to significantly reduce VAT and other state levies to provide a push to
the Indian economy. The Government has also not undertaken any major capital expenditure on infrastructure, power and manufacturing sector, which is very necessary to provide demand push into the economy. Massive rural, irrigation & infrastructure development projects can be started by the govt. Revenue spending by govt. need to be reduced significantly. Only large advertisements for
inaugurating certain major initiative are seen regularly in the newspaper and in the media. However, no significant amount has been spent or even committed to indicate the seriousness of the Government. No major contracts have been awarded. The availability of sufficient credit at reasonable cost has to be ensured by the Government. The announcements reducing interest rate on new housing loans and car loans are elusive, in the absence of enough borrowings due to lack of confidence. The larger size, medium size as well as small sector industries are severely suffering due to difficulties in financial closure and lack of resources. The capital market has already dried up. The private equity investors have become apprehensive. The Government can consider equity funding of PPP projects in various sectors and can also incentivise and convince the banks to lend for all genuine
projects and borrower needs. The distress sale of real estate projects as well as inadequate implementation of projects under progress will only add perils to the current economic outlook.
The export of textile, handicraft & other item have fallen sharply. The govt. has failed to support the export sector. The non-resident Indians can be approached with aggressive marketing to invest in India as a safe heaven. The investing & working conditions are to be improved significantly by infrastructure & fiscal support. The Indian economy is at a stage that things can become positive very fast, provided the Government is able to bring back the confidence into the economy. Our dependence on the international economy is limited. The Chinese economy has already shown certain sign of improvement and India can follow. We need a strong and active political leadership to lead us back to growth. Indian public is in the election mood and we convey our best wishes for the right selection of right candidates and political parties, who can take adequate strategic action.
0 comments:
Post a Comment