The former prime minister of India and an economist – Dr. Manmohan Singh advised PM Modi to concentrate on 5-points remedy for economic growth. As per the recent report of RBI, the slowdown in the economy is cyclical, not structural. Whereas, according to Dr. Manmohan Singh, it is cyclical as well as structural slowdown in the economy. The cyclical slowdown means – a natural slowdown in an economy that takes place after 5-6 years of consistently increasing growth. RBI says, it is just a cyclical slowdown and soon we will see 7-8% of GDP growth in the economy. However, “the Government’s approach towards economy and growth model is not appropriate,” says Dr. Manmohan Singh.
5-points to revive the economy.
1. Rationalization of GST, even if it leads to a loss in revenue in the short term.
Currently, there are four slabs in GST – 5%, 12%, 18% and 28%. Additionally, on the top of 28% slab, a cess is levied on luxury, demerit, automobiles and sin goods. In the 28% slab, the automobile sector has majorly impacted. Companies like Maruti, Hero and Honda has never faced such a slowdown in a decade. Since 2018, we’ve been hearing that GST will have only two slabs 12% and 18% but that has not happened till now. Reduction in 28% slab for at least the automobile sector will encourage people to buy new vehicles. Furthermore, corporate taxes should also be reduced from 25%, as promised since 2015 by Arun Jaitley.
2. Focus on increasing rural consumption and reviving the agriculture sector.
He said Government can take clues from Congress manifesto, which lays down several measures to free up the agriculture market. He refers to the Nayay Scheme to boost rural consumption.
3. Liquidity crisis needs to be addressed.
He urged that not only the public sector banks, NBFCs are also suffering. He advised that the Government should take steps to ease the lending activity.
To fix this, the Government of India has pour Rs. 70,000 crore in public banks.
4. Revive to job-generating sectors.
He says to get off this slowdown, job-generating sectors such as textile, automobile, electronics and subsided housing are needed to be revived first. Easy loans need to be provided, especially to MSMEs.
5. Take benefit of US-China trade war.
He said the government needs to identify new export markets opening up due to the ongoing trade war between the US and China.
These are the five steps to revive the economy by Dr. Manmohan Singh.