The finance minister, Nirmala Sitharaman, has announced a third tranche of financial measures to revive the flagging GDP growth rate. The government and its arms like LIC will contribute Rs 20,000 crore towards reviving housing projects while a new WTO-compliant export duty rebate scheme may entail the pumping in of Rs 50,000 crore. The question is whether all the measures on easing the purse strings to support the revival of trade and manufacturing adequate to make any difference. The IMF’s warning signals on a dip in the GDP in the coming years are also pointers to the extent of the slowdown. The government will soon run out of money to be able to incentivise the revival on a scale needed to bolster the GDP growth in a $2.7 trillion economy. For instance, the housing sector alone needs about Rs 3 lakh crore of finance to complete all non-NPA and NCLT projects.
The only silver lining is the recognition on the part of the rulers that the elephant in the room is the faltering economy, but only parts of it are being tended to in piecemeal measures aimed at sectors. While no one would begrudge the incentives given to exports — much as China virtually subsidises its international trade — the fact remains this is too little. It has taken the administration too long to recognise the signs that have been around ever since the 2016 demonetisation and the 2017 GST regime. The silver lining is this climbdown signifies a paradigm shift from a government that presented a lukewarm mini Budget before the polls and then a Budget of self-assuring hubris in July that was absurdly censorious of taxpayers and adversarial against people who move the wheels of the economy. How much more a self-aggrandising government mopping up high taxes, like 40 per cent on a motorcar, can do for the economy? Does it have the stomach to bite the bullet and lower the GST rates to spur consumption?