According to the RBI report, the current Indian economy is facing a cyclical slowdown which is natural and occurs generally if the economy of any country keeps growing in continuously in the past 5 years. Unlike structural slowdown, the cyclical slowdown is for a short period and India will again catch 8-7% GDP growth soon.
Indian economist and politician Dr Manmohan Singh believes the slowdown is cyclical but somehow it is structural too due to improper taxation system, improper growth model and ineffective governance to handle the economy. Dr Singh laid down 5 steps to tackle the situation of economic recession. Let us study each solution provided.
Five solutions to fix economic slowdown ➨
1) RATIONALISATION OF GST
➤Rationalisation of GST even if it leads to a loss in revenue in the short term.
➤The GST system currently has four slabs - 5% 12% 18% and 28% On top of the 28% slab, a cess is levied on automobiles, luxury, demerit and sin goods.
PARADOX OF LOWERING TAX: A report by Kotak Institutional Equities had earlier estimated that a 10% GST cut on automobiles across the board could cost the government Rs 45000 crore in a year.
VOICES FROM THE GOVERNMENT: Transport minister Nitin Gadkari, while speaking at 59th Annual Convention of the Society of Indian Automobile Manufacturer (SIAM), said he would urge the finance minister to pay heed to the industry's concerns, which led to a rallying of auto stocks. Recently, the GST rate for electric vehicles has been cut to 5% from 12%.
2) INCREASING RURAL CONSUMPTION
➤ Focus on increasing rural consumption and reviving the agricultural sector.
➤ Dr Singh said the government can take clues from Congress manifesto, which lays down several measures to free up agriculture market.
3) LIQUIDITY CRISIS NEED TO BE ADDRESSED
➤ Liquidity crisis needs to be addressed. Dr Manmohan said that not only the public sector banks but NBFCs are also suffering.
➤ Rs 70,000-cr capital infusion in PSBs credit positive, to boost the economy: S&P
4) REVIVE MAJOR JOB GENERATING SECTORS
➤ Revive major job-generating sectors such as textile, auto, electronics and subsidised housing. He said easy loan need to be provided for this purpose, especially to MSMEs.
➤ Banks start approving retail loan proposals on 'PSB loans in 59 minutes' portal.
5) FETCHING BENEFITS FROM TRADE WAR
➤ In the first five years of the Modi government, India touched record levels of foreign investments, The growth rate for the economy has also fallen to five years low. So, the foreign minister, Subrahmanyam Jaishankar's list should fix these issues through bilateral trade agreements without compromising India's national interests.
➤ The government needs to identify new export markets opening up due to the ongoing trade war between the US and China.
SO THESE WERE THE 5 SUGGESTIONS FOR STRUCTURAL REFORMS FROM THE FROM THE RENOWNED ECONOMIST DR MANMOHAN SINGH AND HE SAID THESE STEPS REQUIRES IMMEDIATE ATTENTION TO DEAL WITH UNDERGOING ECONOMY SITUATIONS AS GDP GROWTH RATE HAS BEEN DROPPED TO SIX-YEAR LOW OF 5% DURING THE FIRST QUATER OF ONGOING FISCAL.
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