Dinesh Kamath's Editorial 'Election spending poses a challenge to the economy' that was published in Newsband

Election spending poses a challenge to the economy

As per the estimate of Central Statistics Office, the GDP growth rate for the full year is projected to be at 7.2%, which is significantly higher than the growth rate of 6.7% achieved last year. Many sectors of the economy are projected to do better than they did last year in the aftermath of demonetisation and the rollout of the Goods and Services Tax. The CSO’s growth estimate for 2018-19 is lower than the estimates made by institutions such as the Reserve Bank of India and the World Bank.

A worrying trend in the economic data is the recent sequential deceleration in growth over consecutive quarters. According to the CSO, growth is likely to slow down considerably from the average of 7.6% recorded during the first half of the current fiscal year to around 6.8% in the second half.

Ahead of the general election, the government may wish to help growth by boosting spending, but any such move would be ill-advised. The government cannot crank up spending without severely affecting its finances, along with investor confidence in the economy.

Announcements and advertisement rhetoric do not mean achievement of development, harmony and peace. Socio-economic reality of India is that there is no significant unemployment, even though there is lot of manifest underemployment, low and uncertain wages and economic, old age and health insecurity. Jobless Growth is persisting and whatever employment is created all that is in the unorganised sector, what with even the government coupled with corporate sector is engaged in outsourcing sectors of production and service to informal employers; adding to the economic misery of the poor and less skilled. Technological changes have been consistent in replacing labour by machines, robots and AI. Though Agriculture is losing out on incomes and employment, albeit proportionately and not absolutely, it still holds the best hope for expansion of employment at the lowest rural levels. Multi cropping, use of dung manure, leveling of land, rain water harvesting, economy in irrigation in India! Jai Hind!

Big corporates money to all political parties must be paid digitally with income tax GST deductions. No mainstream party is interested in economy: every politician is trying to gain votes by any means. Congress goes on promising huge farm loan waivers across states for the upcoming election. That's a significant drain on the economy and a political mischief. Any temptation to bestow an expensive favour on the farming community should be firmly resisted.