PM Modi looks for solution to perk up economy

File photo of Prime Minister Narendra Modi, BJP President Amit Shah and Finance Minister Arun Jaitley in New Delhi
The topmost rungs of the Narendra Modi government are looking for solutions to arrest the slide in gross domestic product (GDP) growth. The Prime Minister is expected to meet Finance Minister Arun Jaitley and top finance ministry officials on Tuesday evening to discuss the state of the economy and possible measures to boost growth.

This comes on the backdrop of April-June economic growth dropping to its lowest under the current administration, and petrol and diesel prices rising to a near three-year high in spite of low crude oil prices, and a stable rupee.

Sources told Business Standard the focus of the meeting will be the recent GDP numbers, the Centre’s fiscal health, the goods and services tax, exports and especially job creation. Last Friday, the PM had been briefed by Chief Economic Advisor Arvind Subramanian on the state of the economy.

Tuesday’s meeting is expected to take place at the Prime Minister’s official residence and, apart from Modi and Jaitley, it would be attended by senior officials from the North Block and the Prime Minister’s Office. There is expected to be a detailed analysis on various macro-economic indicators and solutions to kick-start growth, private investment, and create jobs for millions who join the workforce every year.

The top economic policymakers are also expected to discuss the fiscal space that the Centre has to provide stimulus in the form of higher spending. There is also expected to be representation from the commerce ministry to discuss the state of exports. Exporters are facing the issue of refunding taxes under the GST regime. Even then, exports grew by over 10% in August after three months of single-digit expansion.

GDP growth for the April-June quarter plunged to 5.7%, due to demonetisation and destocking by companies because of pre-GST jitters. With this, India lagged China in terms of GDP growth for the second consecutive quarter. The Chinese economy expanded 6.9% in each quarter. GDP growth is down from 7.9% in April-June FY17.

Growth in manufacturing declined to 1.2% in April-June, from 5.3% in January-March. Mining and quarrying contracted 0.7% during the quarter, after growing 6.4% in the previous quarter. Agriculture growth lost pace at 2.3%, against 5.2% in the previous quarter, and 6.9% in October-December of 2016-17. This was despite crop production growing, even as livestock could not keep pace.

According to the fiscal deficit data available so far, April-July shows that the difference between expenditure and revenue stands at Rs 5.05 lakh crore. About 92% of the full-year budgeted estimates of Rs 5.46 lakh crore, on back of massive frontloading of expenditure, as the Finance Bill 2017 was passed before the beginning of the financial year.

As reported earlier, finance ministry officials have maintained that while the Centre will continue pumping in public money into infrastructure to revive the economy, it would be done keeping in mind fiscal considerations. Analysts, on the other hand, say that is not an option anymore, and that the government will have to choose between fiscal discipline and even higher spending.

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