India needs a new economic policy

• The National Statistical Office (NSO) recently released the 2022-23 GDP fourth-quarter growth rate figures.
• This data gives a gloomier picture than what the media publications of the Press Information Bureau present.

The NSO Data conclusions

• In the first COVID-19 pandemic quarter of 2020-21, the GDP growth rate was minus 23.8% when compared to GDP of the same period in 2019-20.
• Three conclusions based on NSO data since 2014-2015 are important for a reality check.
  • The growth rate of GDP, since 2015-16, has been declining annually and has fallen in the fourth quarter - 3.5% growth rate in GDP.
  • Since 2014, Prime Minister’s widely publicised “Vikas” in reality achieved the so-called “Hindu rate of growth” in GDP of what had been achieved in the socialism period.
  • During the tenures of P.V. Narasimha Rao and Manmohan Singh, GDP growth rates rose for the first time to between 6% to 8% per year over a 15-year period.

The Alarming Situation

• The serious and continuous decline in GDP growth rates which began in 2016 is alarming.
• This decline continues even now.
• However, no policy structuring has been presented.

The Steps Needed

• There ought to be a strategy on what should be incentivised and what should be deleted or discontinued.
  • For example,it is essential that personal income tax is abolished and Goods and Services Tax scrapped to incentivise investors and earners.
• Resources by the government should be mobilised through indirect taxes and also by liberal printing of currency notes.
• The annual interest paid on fixed-term savings in bank accounts should be 9% or so to increase purchasing power of the middle classes.
• Interest rates on loans to small and medium industries should be no more than 6% of the loans to increase production of these sectors, and thus employment.
• Democratic institutions have to be empowered to guard against public disorder arising from rapid de-regulation as it happened in Rulssia post-1991.

New Economic Policy

• India urgently needs a new economic policy.
• It needs to be a policy that is
  • Based on clear objectives, priorities
  • Have a strategy to achieve targets
  • Spell out an intelligent and transparent resource mobilisation plan to finance policies.

Conclusion

• The trade-off between the public sector and de-regulation and the sale of loss-making units, increasing employment are essential to create a stake for the poor in the system.
• This creates a level-playing field in a competitive system.
• It ensures transparency, accountability, trusteeship and corporate governance which drives the market system.
• Such steps reduce monopolistic tendencies and help in the formation of a democratic and harmonious society.