KOCHI: Noted economist Ila Patnaik has said that despite India’s potential for growth, the current status of the economy points to a slump with no signs of recovery in the immediate future.
Analysing the puzzling aspects of India’s growth projection, with it being rated among the fastest growing economies in the world, Dr. Patnaik said India was on a firm footing given the growth potential of the drivers of long-term GDP growth namely, labour, capital, and productivity.
The labour force is poised to be more literate, with more graduates to join in the next few decades; healthier and with enhanced productivity. Despite the difficulties, India has managed to add to the capital stock, which, of late, has slowed a bit, while catalysts like infrastructure growth and urban transportation maintained the growth momentum. “So, there is great growth potential, but can we afford to be complacent?” she asked. Dr. Patnaik, former Principal Economic Adviser to the Government of India, who is a professor at the National Institute of Public Finance and Policy, New Delhi, was delivering the quarterly lecture organised by the Centre for Public Policy Research (CPPR) on ‘Economic Growth in India: Trends and Cycle’, in the city.
Looking at the current state of the economy, she said the quarterly GDP growth had declined, industrial production had shown a downward trend, net sale of firms had remained subdued after an initial uptake, and bank credits had slumped. “There is also a slump in projects under implementation with no fresh announcements being made. We are a country with great potential for growth, but we are at a downward business cycle, and the pick-up has still to happen,” she said.
Dr. Patnaik added that while the government was able to give a push to public investments in the last two to three years, especially in 2016, it had failed to crowd in private investment, critical to economic upswing. “The projects announced by the private sector have also shown a decline deterministically. If they failed to pick up, the growth of the economy could taper off. Then there is this uncertainty brought about by demonetisation followed close on the heels by GST, with the environment made further uncertain by the state of tax administration, law and order issues and the like, which have added to private investment remaining at bay,” she added.
“It is a disturbing trend and while none, neither the government nor the critics, has a magic solution, we can’t afford to be complacent,” Dr. Patnaik said.
