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.