ECONOMIC CHALLENGES FOR THE NEW INDIAN FEDERAL GOVERNMENT

Economic de-growth coupled with increasing unemployment, widening social and economic inequalities, high inflation, increasing corruption, low wages, etc., are generally the key factors that contribute to growing Social unrest in a society. Unfortunately, the country is gradually and steadily drawn to the brink of social and political unrest with some non economic issues as well with regional bandits and extortionists in the guise of politicians emptying public finances and resources through quid pro deals with shady business houses, demanding large protection moneys from business houses thereby poisoning business climate in the country, instigating social unrest for regional autonomy, injecting racial and seudo-secularistic venom among people, brazenly and overtly supporting (onion, pulses & sugar) hoarders, using autonomous government agencies to settle personal scores and so on.  The new Indian Federal government to be sworn in May or June 2014 inherits bountiful economic, political and social challenges from the inept & corrupt outgoing UPA2 government. Hence, contrary to the demands of investment and business communities for big bang reforms instantaneously after assuming office, the new federal government may not be in a great situation to prioritise the economic challenges ahead of existing political and social challenges.

The key economic challenges for the new government are reviving the economic growth cycle, Fiscal consolidation by boosting tax revenues coupled with sustained reduction of subsidies and non-revenue expenditure, sustaining the improvement in the current account deficit, complementing anti-inflation efforts, improve governance; infusing dynamism among bureaucrats, instil confidence in the government machinery, improving co-ordination among different ministries and government bodies, removing bottlenecks for foreign and domestic investments and credible measures to counter the much- feared impact of El Nino.

However, the new federal government may be in a piquant situation very often subsequent to assuming office, with state governments demanding higher share of revenues to subsidise their populist pre-poll promises as well they may oppose some key economic policy decisions (importantly, the Implementation of GST across the country) which may not auger very well for the revival of the economy. Moreover, if the government choose to expedite capital spending to orchestrate a cyclical turn in the Investment cycle and boost long-term growth, the short-term casualty will be the debt/Gross Domestic Product (GDP) ratio, which is a catch 22 situation for the Federal government.

It is widely speculated that most of the economic data furnished by the government agencies in the recent years is neither credible nor reliable due to possible sovereign rating (by rating agencies) down grading fears. Hence, in the highly optimistic scenario, India can achieve only a REAL growth rate of 4.6% in FY2014-15 and 5.4% in FY 2015-16, considering all the social, political, Economic and natures (El Nino) challenges.