Would the Indian economy experience a majestic Economic rebound in FY18??: - Prof.Prasenjit K. Yesambare
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2 June 2017 - 13:02, by , in News and Events, Uncategorized, Comments off

Well a real food for thought. Something to ponder on!!!

As the Euphoria associated with the Modi Government tends to streamline in its third year of formation, a cross section of economists, analysts and policy experts have given an in principle thumbs up for the way the economic reforms have picked up the pace from the ill forgotten leftovers of the UPA era. The demonetization shock, the digital payment wave, the thrust on the Jan Dhan Yogana Scheme and the passing of the Goods and Services Act (GST) are the key contributors to the reform agenda of the incumbent regime at the Centre while a steady pick up and accelerated roll out of Aadhar and it’s well-developed synergy with the implementation and use for KYC in addition to doubling of the POS terminals installed are the other icings on the cake for the Government. So, finer as the Indian economy moves ahead to put fingerimprints on the Global economic landscape, it is imperative that we need to take a stock as would she do the magical economic rebound which every economist is dreaming of ???

Surely, it will but to attain it one needs to address the challenges which are humongous across the changing Socio-economic- Political landscape that plays a pivotal role in defining the trajectory which the Indian economy needs to undertake in chalking it’s growth path. The incidence of abject poverty, rising unemployment and a disappointing fall in literacy levels across Rural India in last three years have overshadowed a steady rise in Foreign direct Investment (FDI) and Foreign Institutional Investment (FIIs) flows on the economic front during the same period. A steady and an impressive rise in foreign exchange reserves, a strict check on the fiscal profligacy levels, the CPI Inflation remaining benign for most of the year, a record high in food grains production and a very significant improvement in the Balance of Trade (BOT) figure are among the key positives of this present day Government. The possibility of a rate cut by the Reserve Bank of India(RBI)in the second quarter considering a sharp fall in headline inflation measured by WPI in last three months of the past fiscal signals the creation of a congenial scenario for the Industry to execute a larger credit off-take, thereby, creating favourable conditions for Capital formation and an increase in productive capacity thereby propelling the economic engine. Meanwhile, based on revised estimates, the United Nations(UN) has projected a downward GDP growth forecast to 7.3 % in 2017 but has projected a very healthy GDP growth of 7.9 % in 2018 which is something to cheer about for the Industry and the Financial Markets as well. So in spite of temporary disruptions emanating from the demonetization policy, the economic roll outmilieu in India remains fundamentally strong owing to a right synthesis of the monetary and fiscal policy mix and a spate of solid economic reforms initiated by the Centre.The most notable being the proll-outof the Goods and Services tax (GST) that proposes the creation of a unified indirect tax regime paving the way for the creation of a single national market by July 1,2017. However, stressed balance sheets in the banking and corporate sectors and a virtual bloodbath on the Job market owing to massive layoffs originating out of strong uncertainties associated with the future prospects of the domestic Information Technology (IT) Industry are the key dampeners which can put a serious strain on the nation’s economic growth in the middle of 2017.

 

So in conclusion, though the Indian economy is resilient and vibrant and quite capable of digesting external shocks owing to slugglish Global GDP growth and economic uncertainties associated with OECD nation states and stagnating Chinese economic engine, there exists multiple challenges at the macro level to maintain the GDP growth rate at sustainable levels. The bigger ones include the strict maintenance of fiscal disclipline, kick starting the process of financial intermediation, diverting the funds towards infrastructure and job creation and creating a favourable scenario for attracting the Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) flows into the economy and the Stock Markets.

– Prof.Prasenjit K. Yesambare