Three key changes to counteract global slowdown goi should privatise reform agri market & reduce customs duties

Three key changes to counteract global slowdown goi should privatise reform agri market & reduce customs duties

The key takeaway of the April-June quarter’s GDP data is that India has put the economic shock triggered by Covid behind it. GDP growth of 13.5% for the quarter may have fallen short of median expectations but barring some contact-intensive sectors, the rest of the economy has got past the 2019 benchmark. But more significant is that there have been important changes in the global and domestic economic environment since end-June. The most important one being that the global economy has lost steam.

There’s also a domestic constraint in the form of RBI’s monetary tightening. It will extract a cost by acting as a drag on demand but the central bank was left with no choice as inflation is forecast to average over 6% this financial year. These constraints are proximate. India’s medium-term growth prospects remain bright provided GoI and states embark on shelved reforms right away.

GoI needs to overcome bureaucratic inertia in the area of privatisation. In 2016, it embarked on a strategic disinvestment of 35 PSUs. Of the shortlisted firms, 24 are still stuck in the process of sale. Transactions were finished in just a few, of which Air India was the most important. Similarly, there’s tardy progress in the proposed privatisation of two public sector banks of the 12 functioning ones. Concluding the remaining transactions will unlock capital for GoI and boost its infrastructure development plans. In agriculture, the potential of the common platform for a national agricultural market (e-NAM) hasn’t been fully tapped. About 1,000 mandis across 18 states, with over 17 million farmers, are registered on the e-NAM platform. Over Rs 2 lakh crore of trade has been recorded. But realising its potential needs work on logistics and dispute settlement.

On the trade front, the protectionist approach needs to be discarded to get the most out of the PLI scheme. Economic thinktank Icrier’s recent study showed that building on a global scale is contingent on cheaper inputs. FTAs, rather than bilateral trade deals, should be prioritised. GDP data augurs well but only reforms will realise the economy’s potential.