DNA Edit: Growth back on track

The BJP government seems to have finally put the disruptions that ensued in the wake of demonetisation and GST behind it. Some evidence of the same comes from the GDP growth rate figures for the second quarter of the current FY, which show that India’s economy managed to break free from a five-quarter slide and climbed to an impressive 6.3 per cent. Compared to the corresponding quarter in the last year, the GDP growth rate seems to lose it lustre given that the government had clocked in a formidable 7.5 per cent.

However, there has been a sea-change in the policies underpinning the economic and fiscal landscape of India. Demonetisation unleashed in early November and GST unveiled in July delivered two systemic shocks to the fiscal and economic framework of the country. Contrary to the arguments of the nay-sayers, a number of benefits have accrued from both the disruptions; a major one being the dramatic expansion in the formalisation and digitisation of the economy. Additionally, the tax base of the country has seen a significant expansion.

Over the course of the year, many critics have shouted themselves hoarse decrying the deleterious effects of the GST, while turning a blind eye to the incremental changes that the government has been introducing in the GST mainframe. Slowly but steadily, the feedback emanating from the community of traders, entrepreneurs, manufacturers is being considered and requisite changes are being made in the existing IT infrastructure and reporting compliances under the GST.

As per the data released by the government, in terms of Gross Value Added (GVA) at basic price, agriculture, industries and services registered a strong growth rate of 6.1 per cent vis-a-vis the  corresponding quarter growth of 5.6 per cent last year. It was the mining and quarrying domain that saw a tremendous boost in the second quarter number rising to 5.5 per cent from an absymal degrowth of 0.7 per cent in the corresponding quarter in the last year. Even manufacturing registered a strong spike of 7 per cent growth vis-a-vis the same quarter in the last FY.

Evidently, India, once again, can lay a claim to the sound macroeconomic fundamentals that will help propel it into the higher growth orbit of 7 per cent and above. Over the last three years, India has consistently managed to record one of the highest GDP growth across the world. Going forward, the challenge will lie in overcoming the twin-balance sheet problem which continues to retard corporate growth in India. A large pile of toxic NPAs, somewhere in the ballpark range of 10 to 11 lakh crore by latest estimate, continues to afflict the Indian banking domain. What’s more, the resolution of the cases of a number of toxic accounts, especially the 12 large accounts that constitute a sizable chunk of the NPAs has not proceeded at a steady clip. Unless, these roadblocks are eliminated, hopes of an immediate recovery should be shelved.