Amid slowdown worries, top ministers brainstorm on ways to boost growth

Blueprint on economic revival to be submitted to PM

The government has swung into action to draw up a blueprint to revive the economy after gross domestic product (GDP) growth slipped to its lowest level under the Narendra Modi government, on the back of a slowdown due to demonetisation and the introduction of the goods and service tax (GST).

On Tuesday, Union Finance Minister Arun Jaitley chaired a high-level meeting with Commerce Minister Suresh Prabhu, Railway and Coal Minister Piyush Goyal, NITI Aayog Vice-Chairman Rajiv Kumar, and senior officials from the finance, commerce and rail ministries to discuss the state of the economy and ways to boost growth.

Officials said this meeting marked the beginning of the process to prepare the 2018-19 Union Budget, expected to be tabled on February 1. More such meetings are expected with various economic and infrastructure ministries before officials take to Modi a detailed presentation on the state of the economy and ways to revive it.

Meanwhile, P K Mishra, additional principal secretary to the PM, would hold separate meetings with ministries and discuss ways to revive investment and activity and create jobs in their respective sectors, senior government sources told Business Standard. Modi was expected to meet Jaitley and other officials on Tuesday. That meeting was, however, postponed. Sources said that the Prime Minister’s Office has told North Block to hold consultations with key ministries to prepare a detailed analysis of the Centre’s revenues, the fiscal situation, as well as measures needed to revive investment and economic growth.

“There will be a meeting with the Prime Minister at a later date, which has not yet been decided,” said an official aware of the developments.

The flurry of activity shows that the top rungs of the government are concerned about the economy and are looking for solutions to arrest the slide in GDP growth.  This comes in the backdrop of April-June economic growth dropping to its lowest under the current administration at 5.7 per cent of GDP and petrol and diesel prices rising to a near three-year high in spite of low crude oil prices and the stable rupee.

All these meetings are focused on the recent GDP numbers, Centre’s fiscal health, GST, impact of the GST and demonetisation on the small and medium sectors, exports, investment, big-ticket infrastructure projects, rural economy, and creating jobs for the millions who join the workforce every year. On Friday last week, Chief Economic Advisor Arvind Subramanian briefed Modi on the economy. The policymakers are also said to have discussed the fiscal space that the Centre has to provide stimulus in the form of higher spending. Apart from ministers and Rajiv Kumar, the meeting was attended by Finance Secretary Ashok Lavasa, Commerce Secretary Rita Teaotia, Economic Affairs Secretary Subhash Garg, Revenue Secretary Hasmukh Adhia, and Rail Board Chairman Ashwani Lohani.

Exports were another issue that was discussed, sources said. Despite August exports jumping 10.3 per cent year-on-year and the country completing 12 straight months of export growth, exporters and economists alike are sure that coming months would prove to be the real challenge for merchandise exports. That is largely because tax refund issues in the GST regime remain two months down the line, exporters are complaining of shrinking liquidity, and the rupee is expected to climb in the coming months. 

India lagged China in terms of GDP growth for the second consecutive quarter. The Chinese economy expanded 6.9 per cent in each quarter.  GDP growth is down from 7.9 per cent in April-June 2016-17. Growth in manufacturing declined to 1.2 per cent in April-June from 5.3 per cent in January-March. Mining and quarrying contracted 0.7 per cent during the quarter after growing 6.4 per cent in the previous quarter. Agriculture growth lost pace at 2.3 per cent against 5.2 per cent in the previous quarter, and 6.9 per cent in October-December of 2016-17. This was despite crop production growing, even as livestock could not keep pace. 

The fiscal deficit data available so far, April-July, show that the difference between expenditure and revenue stands at Rs 5.05 lakh crore, about 92 per cent of the full-year budgeted estimate of Rs 5.46 lakh crore, on the back of massive frontloading of expenditure as the Finance Bill 2017 was passed before the beginning of the financial year. Meanwhile, the Confederation of Indian Industry (CII) said in a statement that many sectors had rebounded after a temporary slowdown following the introduction of the GST. 

The CII is confident that positive developments in the global economy and the upcoming festival season as well as government capital expenditure will contribute to growth. "Care must be taken that public capital expenditure, including by state governments, remains elevated," it said. Lowering interest rates by as much as 100 basis points could inject a huge growth impulse, the CII said. The RBI will hold its monetary review next month.