When India elected a government with a brute majority in the Parliament, it was expected that it will recognise the worrisome slowdown in them Indian economy and it will take suitable measures to revive the economy. The budget was expected to be the torch bearer of revival reforms, but sadly turned out to be a huge disappointment. The FM’s budget speech was more like an election victory speech, which completely failed to recognise all that was not well with the slowing Indian economy. Failure to recognise the problem meant failure to initiate corrective measures, which the government could have easily done. The stress in the economy is spreading and is best manifested in the auto sector, which has witnessed a dip in car sales for the tenth consecutive month and auto majors like even Maruti Udyog have announced a sharp cut in car production. Due to this, almost ten lakh jobs are expected to be cut in this sector, as manufacturers struggle to survive. So disturbing is the dip in household income that Hindustan Unilever reports a dip in demand even for ordinary soaps.
The slowdown in the economy is continuing and is yet to peak. If the government is unwilling to recognise this crisis on the cards, it will be forced to do so, when the crisis spreads all over, leads to widespread murmur and becomes too big to be ignored. The build up of this scenario is on and will soon catch an alarming momentum. The present record unemployment and struggling MSME and rural sectors, have led to a fall in household income and savings, leading to a dip in consumer spending, due to which growth of industrial and manufacturing production has fallen. The manufacturing situation could worsen faster, also due to China’s desperation to capture Indian markets, to offset a slowdown in its domestic markets and to compensate for loss of the huge American markets, due to tariff wars instigated by Trump. All this would means further job losses in the coming months, a dip in corporate profits, no uptick in investment in fresh projects and a continued decline in the stock markets. While this crisis could reach a peak in the next nine months, it will only result in widespread resentment and unrest in society, because this kind of a crisis will spare no one. An interesting indicator is the sharp fall in billionaires in India last year.
India is a free market and a genuine democracy and thus what the government is failing to accept and correct, ultimately when the crisis reaches an intolerable peak, it is the markets which will bring in the correction, except that the pain will be much more and more prolonged, when the market is forced to do what was expected of the government. But nevertheless, the more we delay the rectification of India’s budding economic crisis and continued slowdown, the more pervasive will its damage be. And when the damage is deep and extensive, the recovery is slow, painful and expensive too. Such a situation will result in a collateral damage, in as much as that with the government being indifferent to the struggles of the economy, the voters will lose faith in electing a popular government with an overwhelming majority.
While what is apparent to the common man at present, does not seen to be visible to the government, there is a likelihood that the murmurs of distress have got louder and have reached the highest powers that be. That’s perhaps reflected in the sudden transfer of Mr. S C Garg to a demoted portfolio. He has been among the most powerful finance secretaries that India has seen in recent times. He was ever willing to pick up fights on behalf of the government, whether with the RBI, SEBI, MPC or any other body, clearly at the instructions of his political masters. He had a key role to play in the drafting of the budget which was a disappointing damp squib. His sudden transfer to a much lower portfolio, gives the impression that he is the fall guy for the government’s failure on the economic front. But then he was not acting on his own volition and was only blindly obeying orders of his political bosses. He fired the gun at their behest and he is the one who now takes the bullet, which should have been taken by others much above him in the hierarchy. And now the news comes that this fall guy has resigned and has put in his papers, only further adding to this sense of crisis.