A new report by the SBI Research has contradicted the BJP President Amit Shah saying that the slowdown in the Indian economy was not due to ‘technical reasons,’ as concluded the later recently.
This is the third warning within a week after similar assessment by from former prime minister, Dr. Manmohan Singh and Rajya Sabha MP and BJP leader, Subramanium Swamy, on the Indian economy possibly heading towards a depression.
SBI Research has come up with a new report indicating that the economy had been on a downward journey since September 2016. The report further said that the slowdown was real and not technical while calling for more public spending to arrest the slide.
“We certainly believe that we are in a slowdown mode since September 2016 and a slowdown that has been prolonged to Q1 of this fiscal year is technically not short-term in nature or even transient,” PTI quoted SBI Research’s report.
The report also said that continuing slowdown had “raised the spectre of whether the slowdown is temporary or not” but stopped short of answering the question.
The note comes as a direct contrast and days after BJP president Amit Shah attributed the slowdown in GDP growth for the sixth quarter in a row to hit a three-year low at 5.7 per cent in the June quarte to “technical reasons.”
Shah had said that the growth had gone up to 7.1 per cent after falling to 4.7 per cent in FY14 when the UPA was in power. However, Subramanian Swamy in his recent interview categorically quoted that the GDP figures were way below than what has been communicated.
The report advocated upping of public spending by the government as a solution to the problem at hand.
“Need of the hour is to spend to grow more,” it said.
“We believe the government should consciously expand spending and fiscal deficit, without disturbing the borrowing maths,” the report added.
It can be noted that in the past, such moves by the government were termed as “fiscal profligacy” by rating agencies, which had also threatened to downgrade the country’s rating to junk if the Centre continued with such policies.
The report admitted that after the 2008 global credit crisis, there was a surge in spending, but was unequivocal in not paying much heed to the rating agencies. “Let’s not chase the rating upgrade mirage.
India has had a solitary net rating upgrade in the last 25 years. The economy is in urgent need of a fiscal push now to shore up growth,” the report said. The government can use a clause in the Fiscal Responsibility and Budget Management Act that provides for a 0.5 per cent slip in fiscal deficit targets, it said.
Elaborating on how to keep the net borrowings in check, like the way the government has done in the current fiscal at Rs 3.4 trillion, it recommended the government to do more buybacks and switches in G-secs.
It also called for exploring the short-term borrowing route more, saying ” short term borrowings could be increased from the current levels, as movements in short-term rates depend crucially on liquidity.” Manmohan Singh, had been critical of unplanned demonetisation and GST implementation and has cautioned that the economy is likely to slide down further in the coming days, leading to massive job losses.