THE GIST of Editorial for UPSC Exams : 19 September 2019 (A self-inflicted economic slowdown(The Hindu) )

A self-inflicted economic slowdown(The Hindu)

Mains Paper 2 : Governance
Prelims level: Not much
Mains level: Claiming policy paralysis is a major setback economic growth

Context

• It seems the government has failed to heed recommendations made by economists and bureaucrats on turnaround measures.

Ending the paralysis

• In the final 18 months of its 10 years, the Manmohan Singh-led United Progressive Alliance (UPA) government had moved the economy into repair phase.
• The policy paralysis —an administrative and political bottleneck — had ended.
• The fiscal and current account deficits had been compressed, and GDP growth was slowly picking up momentum year after year, a recovery that continued till 2016-17, the year of demonetisation.
• Inflation remained out of control, also, in part, due to the sharp uptrend in global crude prices.
• In May 2014, after Mr. Modi’s Cabinet was sworn in, it was made clear to the new government that purposeful steps would strengthen this recovery.
• Without reforms, though, the recovery would be difficult to sustain.

Ignoring advice

• The Reserve Bank of India (RBI) cautioned the government against demonetisation in writing; the former RBI Governor, Raghuram Rajan, did so orally.
• Ahead of the rollout of the Goods and Services Tax (GST), on invitation from the government, well-regarded economist and former Finance Secretary Vijay Kelkar briefed the Prime Minister and key Cabinet ministers on the criticality of avoiding the business-unfriendly rate structure and compliance system that had been worked out for introduction.
• He was invited to the midnight launch in Parliament’s Central Hall of the GST, but his advice went unheeded.
• The consequences of five years of ignoring advice are, well, hard to ignore now: the weak recovery inherited in 2014 has indeed petered out.
• A growth slowdown has been on for three years. The loss of growth momentum in the three years from 2016-17 to 2018-19 is significant: 8.2%, 7.2% and 6.8%. GDP growth hit a 25-quarter low of 5% in the April-June 2019 quarter.
• Scores of private sector jobs are getting axed. Growth in car sales, retail loans and property has plummeted to multi-year lows, as the impact of the slowdown spreads across the economy.

Way ahead

• Several policy pronouncements have been made since the day the courtesy call was paid.
• These include the July 5 Budget and the weekly press conferences of the Finance Ministry aimed at announcing measures for accelerating GDP growth.
• That the measures fall woefully short of the recommendations made by economists and bureaucrats over the last five years is an understatement.
• The government has also failed to take the steps required urgently at this stage of the slowdown.

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Prelims Questions:

Q.1) Consider the following statements about Pradhan Mantri Shram Yogi Mandhan:
1) This is not applicable for agricultural labourers.
2) It is applicable only for unorganized sector workers with monthly income of Rs. 15,000 or less and the eligible age for entry is 18 to 40 years.
3) If the subscriber dies during the period of pension, spouse of the beneficiary will get the same pension as received by the beneficiary.

Which of the above is / are correct?
a) 2 only
b) 2 and 3 only
c) 1 and 2 only
d) All 1, 2 and 3

Answer: A
Mains Questions:
Q.1) When there is a mine of advice sitting in government files, gathering dust for five years, who should be blamed for the unfolding economic slowdown?