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The finance minister deserves credit for drawing a line in the sand to contain the fiscal and current account deficit, thereby avoiding a sovereign downgrade. However, the United Progressive Alliance (UPA)-II will not be remembered for that.
Economic growth rates had come down drastically in the recent years reaching an abysmal 4.9 per cent in the current financial year. While the fiscal deficit is maintained at 4.6 per cent, it was achieved by reducing capital spending and deferment of subsidies. Even the excise duty reductions on certain consumer goods and automobiles are too little and too late.
The cut in capital spending will have an impact on the gross domestic product growth for next year. So, when the new government comes to power in May, it needs to focus on increasing government spending on creating infrastructure to accelerate growth, while at the same time managing the fiscal deficit, as the deferred expenses of the previous year also need to be accounted for.
The last few years had been a period of scams, strong regulatory actions and judicial interventions, resulting in paralysis of government functioning. The government was also not able to push through important reforms like the Goods and Services Tax and Direct Taxes Code. The government was not able to manage its own allies to push some of these reforms, leave alone the opposition parties. The country to some extent is paying a heavy price for the inaction of the government in the past few years. Job creation in the economy has come down drastically in the last few years, whereas the country needs to create at least 10 million jobs a year.
Overall, the legacy the UPA-II government is leaving is that of an economy under tremendous stress. The new government at the Centre will have its job clearly cut out.
Economic growth rates had come down drastically in the recent years reaching an abysmal 4.9 per cent in the current financial year. While the fiscal deficit is maintained at 4.6 per cent, it was achieved by reducing capital spending and deferment of subsidies. Even the excise duty reductions on certain consumer goods and automobiles are too little and too late.
The cut in capital spending will have an impact on the gross domestic product growth for next year. So, when the new government comes to power in May, it needs to focus on increasing government spending on creating infrastructure to accelerate growth, while at the same time managing the fiscal deficit, as the deferred expenses of the previous year also need to be accounted for.
The last few years had been a period of scams, strong regulatory actions and judicial interventions, resulting in paralysis of government functioning. The government was also not able to push through important reforms like the Goods and Services Tax and Direct Taxes Code. The government was not able to manage its own allies to push some of these reforms, leave alone the opposition parties. The country to some extent is paying a heavy price for the inaction of the government in the past few years. Job creation in the economy has come down drastically in the last few years, whereas the country needs to create at least 10 million jobs a year.
Overall, the legacy the UPA-II government is leaving is that of an economy under tremendous stress. The new government at the Centre will have its job clearly cut out.
V Balakrishnan
Member, Aam Aadmi Party; chairman, Exfinity Fund
Member, Aam Aadmi Party; chairman, Exfinity Fund
