Boosting the paralyzed economy is no easy task. Laid down rules and proven measures can surely direct the future actions; however cannot assure success until the present drawbacks and threats are addressed to. Yet another year of sub-5 percent growth rate in 2013-14 has added to the curse. The sufferers are not just the corporate houses and the affluent section of the society, the paralyzed economy augmented the gap between the present workforce and work prospects, beyond widening the difference between earning capacity and inflated prices of products/ services. Problems have been discussed a lot; let us now look upon some workable solutions.
What shall be the foremost area of attention? I am sure that the visionary capability of Mr. Modi would look for measures to enhance the productivity. It is known to all that vital projects, embracing power and technology, are waiting commencement of operations owing to the lack of executive decision making of the past government and ministers. The outcome is the incremental capital-output ratio that has halved over the span of five years. The delay has added to the cost of these projects and the factors of production are now extremely demanding. The new ministers will have to accelerate the pace of clearances and decision making.
I am sure that curbing the ever-high inflation would remain a topmost priority for the Modi-led union government. Herein, the subsidy regime will also have to be considered, which is almost 4 percent of the GDP and hence accounts for more than USD 80 billion of funds being extended to programmes that are incapable to yield equivalent output. The basic law of economics states that this cash results in excessive demand, which in turn creates supply-demand disequilibrium and augments the rate of inflation. The public distribution system demands prompt attention, along with curbing of subsidy on diesel, and better supervision of food stocks.
The private sector has suffered high debt-servicing conditions owing to the prevailing inflation and the laidback attitude of the past government. Something that can prove a blessing is the positive real rates. The positive real rates will be capable of shifting the domestic savings to financial assets rather than physical assets. Also, the recapitalization of public sector banks would enhance the deposit ratio of banks, which in turn would assist the banks to step into a much better and growth-oriented milieu. Plus, the real rates would appeal the investors to move towards the capital market, hence adding to the borrowing power of the corporates.
The economists believe that the country would need to grow at more than 8 percent every year so as to sustain the global reputation and influx of foreign funds. Growth is the only factor than can assure dignity of work to the workforce that upsurges by 10 million new entrants per year. The support extended by the general public to the Modi-led BJP in the general elections of 2014 depicts the outlook of the residents. For sure, the households are expecting realistic prices for goods of basic necessity, and the youth is anticipating better and secured work prospects. I am quite sure that the Modi-led union government would get matters sorted out, sooner than later.
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