Why so late?

“With a slowdown in the economy now evident in a sector after sector, and having also seeped into India’s services sector, what the Niti Ayog vice chairman now says is what is the most visible and obvious”

At a recent summit, Rajiv Kumar, the Vice-Chairman of NITI Aayog, the government’s top think tank remarked that India is facing such an economic slowdown for the first time in 70 years and a liquidity crisis wherein the lenders have stopped funding businesses, resulting in a situation where they have to survive on cash.

He said that the government must take steps to handle the ongoing economic slowdown. He pointed out that the entire economic situation has changed after the introduction of demonetisation, GST and the IBC. He said that nobody had faced such an unprecedented situation, where the entire financial system is under threat and nobody is trusting anybody else.

Within the private sector, nobody is willing to lend and everyone is sitting on cash. He said that the government will need to take extraordinary steps to come out of this crisis. He said that the government must do whatsoever it can, to take away the apprehensions of the private sector. He further reiterated that initiatives like demonetisation, GST and IBC had changed the rule of the game, such that cash flows have been hit and there is much less cash sloshing around now. He finally said that the Centre would need to eliminate apprehension from the minds of private players to boost investment.

With a slowdown in the economy now evident in a sector after sector, and having also seeped into India’s services sector, what the Niti Ayog vice chairman now says is what is the most visible and obvious. He gets no marks for it since it is a much-belated remark made after a lot of water has gone down the Ganges.

It is perhaps a realisation across the government now, that the FM announced economic revival measures last weekend and has promised more of them. What is disturbing is that this slowdown that the government now admits was clearly evident at least 18 months ago, but at that time the government was in a mood of utter denial and nor did the likes of Shri Rajiv Kumar even speak about it.

It is because the likes of him did not speak on time, that a problem has become a crisis and that it has become an unprecedented situation. This slowdown should have been spotted and recognised by the government and its think tank at least 6 quarters ago, and if revival measures were taken then, an unprecedented situation that is now affecting the entire nation would not have occurred. And the reasons why the slowdown in the economy were clearly evident are as under:-

1. A continuous slide in the GDP growth rate, quarter after quarter.
2. Unwillingness of the private sector to invest in new projects.
3. Rising unemployment.
4. Falling consumer demand.
5. Continued stress in the rural sector and the MSME sector.
6. Unresolved NPA crisis.
7. Poor growth in fresh bank loans.
8. Falling corporate profits.
9. Deleveraging and downsizing by corporates.
10. Tax collections remaining below target.
11. Languishing growth of the manufacturing sector and the core sector.
12. Make In India was a flop show.
13. The crippling effects of demonetisation and a complicated GST.
14. Rising corporate frauds and failure.

These dots were there for us all to see. The government did not connect the dots and see the large picture, since it was always in a state of denial, for sheer political convenience. It is a clear failure and incompetence on the part of the government, such that a top economist like Rajiv Kumar speaks only now, after the problem became a crisis.