The surreal drop in automobile sales in August is highly misleading. It is unlikely that passenger car demand will drop in any month by 41% without an extraordinary event precipitating it. Nor will two-wheelers drop by 22%, and commercial vehicles by 39% year-on-year. This kind of crash would imply that India’s consumption story is over and we are heading for a deep recession and not just a slowdown.

The most probable explanation for this sheer drop would be a deliberate postponement of consumption, not an actual demand collapse. Ask yourself: If TV channels and newspapers are daily bringing us a barrage of stories on falling car and property sales, and sector leaders are busy petitioning the government for duty cuts, it would take a particularly ill-informed consumer to go ahead and buy a car or book a home today, unless his need is so urgent that he cannot afford to wait.

Also, in a situation of falling demand amid expectations of a duty cut, dealers and manufacturers will be busy clearing inventories in the pipeline, which may be accelerating the sense of a demand collapse.

This will also be true of the real estate industry, where expectations of a cut in cement levies might be prompting builders to delay projects already underway, as lower cement prices will impact profitability substantially. Stated differently, expectations of further goodies may be needlessly accelerating a slowdown that is anyway obvious.

The simple lesson for the government to draw from this is that policy announcements in dribs and drabs are damaging short-term consumer demand, as people postpone purchases in pursuit of a better deal in future.

The case for a big-bang revival package, led by direct and indirect tax cuts, has never been stronger. If an out-of-turn rate cut can also be whispered into the ears of the Monetary Policy Committee, October can well mark a turning point for the Indian economy.

The Goods and Services Tax (GST) Council meeting scheduled on 20 September offers us a good date for big-bang announcements on all fronts. It is an ideal date, as it would come just ahead of the festive season in October, and tax cuts will have an immediate impact on sales.

While the government would be diffident about letting go of revenues at a time when its fiscal deficit looks like careening out of control, if ever there was a reason to temporarily shelve the fiscal consolidation road map, this is it.

Logically, personal and corporate tax cuts can be front-loaded ahead of the new direct tax code’s implementation. The promised 25% top corporate tax rate should immediately be extended to all companies, and the top personal tax rate cut reduced to the same level. The budget proposal to impose a surcharge on those earning above 2 crore should also be withdrawn. Loss of face should not be a reason for doing the right thing at the right time.

When it comes to personal tax rate cuts, the government can actually protect future revenues by giving the rate cuts this year and the next as a rebate, as it did in the interim budget for those earning up to 5 lakh. This way, if revenues don’t start rising even after this fiscal stimulus, the rate can return to its original levels from 2021-22 onwards. For the rest of this year and the next fiscal, the government should opt to borrow more to spend on infrastructure aggressively.

If needed, a sovereign bond offering worth $20 billion will bring in additional resources of more than 1.4 trillion without impacting domestic bond yields too much. The world is heading towards low or even negative bond yields, and a sovereign bond issue may not be badly timed in the second half of this year.

This is the world we are entering, where new monetary theories are being propounded, including one called Modern Monetary Theory (MMT), according to which governments facing serious recessions can endlessly print money as long as inflation is within a range. Like the Keynesian fiscal theory that evolved during the Great Depression of the late 1920s and early 1930s, MMT may well be the ruling ideology of the coming decade, as more politicians get elected on the promise of reflating flagging economies.

India need not go that far, but in a situation of benign inflation and sagging economy, relying on past economic dogmas is no longer an alternative for politicians who are accountable to the people. Conservative economists may wring their hands in despair at this kind of note-printing folly, but unusual circumstances may require unusual remedies the world over, and here too.

Like the proverbial frog that fails to jump out of a tub steadily being heated because it can’t feel the gradual temperature change, it is shock treatment the Indian economy needs, not steadily rising levels of small stimuli announced in weekly or even monthly doses.

The year 2019 may not be a repeat of 2008, but it would be foolish for any government to assume that globally weakening confidence in a revival will not result in another blowout. The finance minister and Prime Minister need to get a move on, and in one giant leap.

R. Jagannathan is editorial director, ‘Swarajya’ magazine

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