NEW DELHI :
The government does not recognize that there is an economic slowdown at hand, impeding the chances of finding a credible solution to the problem, former prime minister Manmohan Singh said on Wednesday.
“We have today a government which does not recognize that there is a slowdown. It is not good for the country because if we don’t recognise the problem that we face, we will not likely find credible answers to take corrective action. That’s the real danger," Singh said while releasing the book Backstage:The Story behind India’s High Growth Years by former Planning Commission deputy chairman Montek Singh Ahluwalia, who was brought into the government by Singh.
The former prime minister said Ahluwalia has pointed out in his book that the $5 trillion economy by 2024-25 is wishful thinking. “There is no reason to expect that farmers income can be doubled in three years," he added.
Singh said while 8% growth is a feasible proposition, this will require reshaping the role of fiscal policy and deeper tax reforms in a much bolder way. “The real fiscal deficit of Centre and states combined is as high as 9% and that’s not good for satisfying our ambition of having a dynamic economy growing at the rate of 8%," he added.
“Fiscal reforms, tax reforms and also increase in expenditure in the direction in which it should be increased such as infrastructure, education and defence—all these activities require much greater attention than they have received in the past," Singh added.
Ahluwalia said running a modern economy requires fresh thinking. “The modern economy is much more complex. In a way, the 1991 reforms were simpler. The economy was relatively simpler and the challenge was simpler. Now, running a much more complex economy interacting with the world, we need a policy framework and fresh thinking," he added.
Ahluwalia said there is a lot of despair because the growth rate is very low. “It is less than 5% now and unlikely to go above 5% next year. The $5-trillion target we have set requires 9% growth rate in real terms. Compared to the targets, we are nowhere near it," he added.
Ahluwalia said India has faced several phases of such economic crisis, but has bounced back because of corrective policy measures. “When I look back, the situation looked pretty bad in 1979, it also looked pretty bad in 1990. But the economy was brought back on track. So this economy has the capacity to respond if we put in place the kind of policies that will allow that response to take place. There is enough expertise in the country to know what needs to be done. You just have to bring the expertise together and listen to them," he added.
The International Monetary Fund estimates the economy to grow at 4.8% in 2019-20, an 11-year-low.
Moody’s Investor Services earlier this week pared down its growth forecast for India for 2020 calendar year to 5.4% from 6.6% projected earlier, apprehending a shallower recovery.