Politics Or Economy

The Indian economy is passing through a challenging phase, due to a combination of domestic and overseas factors. Tax collections have been on a decline, as the economy struggles to recover from the twin shocks of the GST and demonetisation. GDP growth, though on the rise, has been spotty, as the country battles the gigantic bank NPA crisis. Government expenditure on the other hand remains untamed, due to which, fiscal deficit is on the rise. With private sector investment failing to take off and growth in household expenditure having receded, the primary way out is for the government is to step up its spending. But falling tax revenues put constraints on the government’s ability to spend itself out of this crisis. The government needs to steps up its capex and infrastructure expenditure, but that would breach the fiscal deficit target of 3.2%, which it is sensitive about. Job opportunities are not upto the mark and if capital investment does not surge, then rising unemployment will unsettle the government and ruin the BJP’s chances in the 2019 elections achat viagra en ligne. The north bound international oil prices have been putting pressure on India’s fiscal deficit (FD) and current account deficit (CAD). It is estimated that every dollar increase in the oil price, leads to an increase of 0.10% in India’s FD and a 0.40% in its CAD. Rising oil prices also mean a buoyancy in inflation and interest rates, both of which are anti growth. The weakness in India’s banking sector, (due to the untamed NPAs) remains a huge drag on the economy.

A growth push needs a step up in spending/investment, but with a shrinking revenue kitty and a private sector unwilling to invest, India’s growth momentum remains uncertain and patchy. At such a time when the government needs to curb its wasteful expenditure, a pre election budget is on the cards. In the post Gujarat election, where the rural voters shunned the BJP, it is evident that the FM will dole out goodies to boost the rural sentiment, allay farm distress and woo the rural voters. That may be good politics, but is bad economics. Populist expenditure in the form of loan waivers, price subsidies, employment dole are anti reform and anti growth too. Blatant populism in the budget will not help the Indian economy and the FM will need to balance both. But experience says that the lure of electoral victory, supersedes all other considerations. ')}

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