Linking economy, politics

Kashmir Times. Dated: 5/25/2019 1:42:40 AM

New government can use its mandate to prioritise economy, which was not a defining issue in General Elections

It is strange that some film professionals appealed to the public to oppose the BJP and allies in the General Elections, other lesser known non-state actors used moving pictures to improve the chances of the ruling party in the election season. The reasons for this campaign are not far to seek because the motion pictures industry looks at the political scenario in the country from a different perspective and their own respective ideological outlook. The film world was also looking at the state economy, which is equally important for them, from a perspective that could improve their earnings and generate revenue for their products in the country within and the world over. But, it is also strange that for any ruling party, the state of a $2.7 trillion economy, in one of the fastest growing nations in the world staring at a slowdown with collateral impact on revenues, growth and jobs, would have been the main issue to be judged in the national elections. It is a sad state of affairs that the economic issues on which a ruling party is judged by the electorate remain a non-issue while hyper-nationalism and religious iconisation became the focus of General Elections and voters were carried away by the BJP for the first time in the democratic history of the country. That the NDA government led by Narendra Modi has managed to buck that trend flies in the face of conventional theories on the linkage between economics and politics. A resounding win, encouraging as it is from the point of view of the financial markets and political stability, may, however, recede from the mind of the voters as soon as the new government takes over. From the agenda that appears to have chalked out by the political managers in the BJP, some steps have been planned to refurbish the economic activity in the country with fresh impetus to the markets and investments in both the public and private sectors for increasing the demand and add value to the products in retail and wholesale markets. One of the main driving forces behind such an initiative will be to ease curbs on Goods and Services Tax (GST) to retain cash in the hands of the consumers to increase their spending power. It should be borne in mind of the government that India's fiscal health is worrying and must be addressed urgently.
Apart from this, it should not be taken for granted that external factors at the international level cannot impact the economic conditions in the country and they can be allowed to heal themselves and provide much needed relief to the common masses. A serious note has to be taken of the fact the combined deficit of the Centre and states now over 8 percent, coupled with a widening current account deficit, a slump in exports and private investment, and the threat posed by the fresh tariff war unleashed by US President Donald Trump, the challenges are enormous. They are amplified by the state of the global economy and the limited leeway for a fiscal stimulus in Indian markets. All these should act as pointers to the urgent need to put in place a good economic management team and to hit the ground running. The Modi-led NDA government's economic agenda in its second term should be dominated by policy measures to boost private investment, a progressively cleaner GST regime with just two rates, a quick one-shot recapitalisation of PSU banks to ensure greater flow of credit and governance changes, tightening of the provisions in the new insolvency law to make sure that timelines are met, flexibility on labour laws to enhance competitiveness, privatisation of bleeding state-owned firms in competitive sectors and addressing of the crisis in the farm sector. The Modi-government has the comfort of numbers on its side again. But falling short on economic management this time around will resonate with both domestic and global investors. The economic costs or fallout will be severe in the near future unless remedial measures at taken on urgent basis.

 

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