SLOWING OF THE ECONOMY OF INDIA SINCE LAST 5 YEARS
Karuna Nayak
Manager Fintech [ MBA FA]
Aircrews Aviation Pvt . Ltd
REASONS FOR SLOWING OF THE ECONOMY OF INDIA SINCE LAST 5 YEARS
1.UNEDUCATED PM
The Indian economy has been in doldrums since 8 pm on 8 November 2016, and the Narendra Modi government has finally begun to admit there’s a problem.
The strongest admission yet came Thursday when NITI Aayog vice-chairman Rajiv Kumar “Nobody had faced this sort of situation in the last 70 years where entire financial system was under threat.”
He added that the root cause of the problem lay in the UPA-2 years: “The entire episode started with indiscriminate lending during 2009-14 leading [to] rise in non-performing assets (NPAs) post-2014.”
Yes, Manmohan Singh left the economy in a mess in 2014, we know that. If everything was fine, why would people have voted out the UPA? Modi’s job was precisely to fix the economy, and he contested the 2014 election on that very issue.
The good days will come, he promised. Instead, Modi took a bad situation and made it worse.
Today, there is only one root cause for the economic crisis we are facing: the poor leadership of PM Narendra Modi. Here are some of Modi’s acts of omission and commission directly responsible for bringing the Indian economy to a point of crisis.
1. Letting banking crisis fester
2. Not moving projects
3. Gimmicks as policy
4. Demonetisation
5. Vilification of business
6. Messing up GST
7. Unprepared for NBFC crisis
8. Keeping inflation too low
9. Not making disinvestment a priority
10. Valuing bureaucrats over economists
11. Commanding heights mindset
12. Tax terrorism
13. Fudging data
14. Living in denial
15. Indifferent budget
2.UNQUALIFIED FM
India's economy toppled to 5 per cent GDP growth rate—a 25-quarter low—during the first quarter of 2019 fiscal. Days before the data was published, the government took a step back to announce rescue measures to revive the sectors hurt by the economic slowdown and reverse decisions on surcharge for high net-worth individuals. The finance ministry's stimulus package was aimed at addressing two main concerns of the Indian economy—fall in consumption and private investments.
1. Demonetisation
2. Consumer demand slump
3. Real estate slowdown
4. Lesser jobs
5. Lower investments
3.CORRUPTION
Corruption refers to the act of misuse and abuse of power especially by those in the government for personal gains either pecuniary or a favour.
The menace of corruption is pervasive in India, from petty bribes demand by the policemen to multi-crore scams at the highest political level like 2G scam. It is not only limited to government authorities but can be seen within the private sector as well, for instance, the Satyam scandal. In the Corruption perception index of 2016 India stands at 79th place out of 176 countries. It not only hampers the economic growth but also undermines the rule of law in the country.
More than 50% people in India have accepted giving bribes while accessing public services. Though recently held protest under the banner of ‘India against corruption’ brought corruption at the centre stage of the political discourse and led to passage of Lokpal Act, it ended up merely as a political gimmick with little progress seen in reforms on the other fronts such as electoral and administrative.
Reason for corruption in India:
1. Political:
· Use of black money in elections: According to various studies, a Lok Sabha election candidate ends up spending at least 30 Cr. as against the legal limit of only Rs. 70 lakh. In the last 10 year the declared expenditure has increased by more than 400% for the LS elections(1) while 69% of their income came from unknown sources(2). This rising expenditure is rather seen as investment by the candidates who then misuse their power to amass the illegal wealth. Assets some MPs have even seen a jump of more than 1000% between successive elections
· Criminalization of politics: More than 30% of the legislators in the country have pending criminal cases against them. When law breakers become the law makers, rule of law is the first casualty.
· Crony capitalism: With the economic reforms undertaken in the aftermath of the BoP crisis of 1991, private sector has become a prominent player in the market earlier monopolized by the state. This has led to growth of unholy nexus between Politicians and businessmen. The recent amendment in to RPA that allow the corporates to keep their donation secret further strengthen the veil of secrecy around such a nexus.
2. Economic:
· High share of informal sector: In India more than 80% of the workforce is in the informal sector and therefore do not come under the ambit of tax or labor laws. Such enterprises usually bribe the officials to keep out of the ambit of laws where the compliance is costly and complex
· Ease of doing business: The plethora of approvals required to start and run a business with no transparency and legal accountability related to matters such as time limits force the entrepreneurs to overcome the red tapism through bribery.
· High inequalities: In India 1% of the rich hold about 60% of the total wealth. At the upper income levels it leads to crony capitalism, at lower income levels it forces people to bribe the officials even to get their basic needs fulfilled. This is so because poor lacks the purchasing power to buy the services from the market and therefore depends mostly on public provisioning of the basic services such as food from PDS shops.
3. Administrative:
· Criminalization of politics and politicization of bureaucracy presents the perfect cocktail for the misuse of state power. Example of honest officers being witch-hunted like Ashok Khemka and Amitabh Thakur are the indicators of the bigger malaise. Misuse and lack of autonomy for enforcement authorities like CBI, ED, IT-Dept, ACB also undermines the deterrence value of the law
· Colonial bureaucracy: The bureaucracy essentially remains colonial in nature characterized by 19th century laws e.g. Police Act 1861, complex rules, wide discretion, secrecy, moral responsibility devoid of legal accountability and the ivory tower attitude
· Failed reforms: Lack of political will and resistance from within the bureaucracy has led to failure of major reforms like citizen charter, RTI and e-governance.
· Low wages: The remuneration in the public sector remains below par with the private sector along with poor career growth opportunities for those working at the lower levels and harsher working conditions.
· Judicial failure: The judiciary has failed to bring to book the corrupt officials including politicians. The excess protection provided under Article 309 and 310 of the constitution to the civil servants and need of taking the government permission before the prosecution of civil servants further compounds the problem
Social and Ethical:
· Changes in lifestyle: Increasing shift towards individualization and materialism has led to increased penchant for a luxurious lifestyle. To earn more money people are willing to adopt even the unethical means with no consideration of others.
· Social discrimination: The poor and marginalized due to their lack of awareness and high dependence on the state become the easy target of exploitation by corrupt officials
· Failure of education system: The value education has failed miserably in India to inculcate the value of empathy, compassion, integrity, equity etc. in the young generation. The lifestyle changes induced by the globalization have further degraded the moral fabric of the society
4.UNEMPLOYMENT:
High unemployment indicates the economy is operating below full capacity and is inefficient; this will lead to lower output and incomes. The unemployed are also unable to purchase as many goods, so will contribute to lower spending and lower output. A rise in unemployment can cause a negative multiplier effect
· A rise in unemployment If productivity is growing at 3% a year, then new technology will enable firms to produce more output with fewer workers.
· Effect on living standards.
· Pressure on public services and government borrowing.
Karuna Nayak
Manager Fintech (MBA-FA)
Aircrews Aviation Pvt.Ltd
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