Demonetisation And GST: Curse Or Masterstroke? Ask, World Bank

바카라�Though the immediate shock, in the economic sense, of demonetisation and GST, is over, the impact of an economic policy shock takes time to die out,바카라� says Rajat Kathuria, director and chief executive of Indian Council for Research on Inter­national Economic Relations (ICRIER). 바카라�The impact of GST on MSMEs (micro, small and medium enterprises) needs to be addressed. More than growth, employment and jobs will be affected.바카라�

Rising risks to global economic growth and weakening domestic investment are the reasons given by the multilateral agencies for the downward revision. 바카라�With the external environment, as poi­nted out by ADB, IMF and the World Bank, becoming more precarious than six months ago, and the fiscal situation worsening, the outlook is not too good,바카라� says Prof N.R. Bhanumurthy of the National Institute of Public Finance Policy, Delhi, who had projected less than 7 per cent growth for 2018-19 last September owing to 바카라�tight liquidity conditions in the global level바카라� and 바카라�downside risks to growth from our domestic policies바카라�. He adds that the government was spending more on ­infrastructure until last year, to boost the economy while striving for a fiscal deficit target of 3.4 per cent, but the increase in revenue deficit has jeo­pardised the objectives.

In its World Economic Outlook, the IMF has warned that continued fiscal consolidation in the near term is needed to bring down India바카라�s elevated public debt. Bhanumurthy is concerned that the government was looking largely at revenue expenditure to boost infrastructure development, whatever the fiscal deficit. 바카라�The fiscal adjustments were poor. It has actually worsened since last September. The actual adj­usted fiscal deficit this year will be close to 4 per cent, while the crisis in the banking sector is expected to worsen and lead to postponement of many new private sector investments,바카라� he says. According to Prof Shashanka Bhide, former director of the Madras Institute of Development Studies, the response to infrastructure spending in terms of expansion of the market for those ­depending on better connectivity, and its spillover effects on demand and ­investments, is still to show.

Over the past few years, there has also been a spillover effect of banking NPAs on investments. Yet, recovery in growth can be expected as capacity utilisation in industries has imp­roved in 2018-19. CRISIL chief economist Dharmakirti Joshi says the slowdown is largely due to the global economy. 바카라�NPAs are coming down and will come down further. Private sector investments would take place when the conditions get corrected,바카라� says Joshi, who expects growth to pick up after the next one or two quarters. It would also depend on whether the next government is one with a strong mandate as that would influence investor sentiments.

바카라�Two consecutive cuts in repo rates by the RBI have brought down the interest rate by 50 basis points and now the government may be able to frontload expe­nditure for this year, leading to some improvement in the first and second quarter,바카라� says EY India chief policy advisor D.K. Srivastava, who has reservations, however, on whether the needed structural changes have happened. For instance, the Make in India strategy did not ­really take off and manufacturing바카라�s share in the GDP has come down in the past five years to 15 per cent. 바카라�So we have to focus more on services, which has been driving our economy for the past 30-40 years. This has to be conti­nued and Make in India limited to ­defence and other strategic sectors,바카라� he says. But the 18 per cent GST for most services is not helping matters either.