Questions on India's economy that Modi and Gandhi should answer
law-backed MSPs, agriculture economist Ashok Gulati said, was rejected by Manmohan Singh of the Congress when he was PM. Gulati was chairman the official body that recommends MSP hikes during Singh’s tenure. Has the party disregarded Singh’s position on this subject or has he had a change of heart? Either way, the Congress must explain how price discovery can take place in farm markets if a legal MSP is made binding on all buyers.
The fallout inescapably would be excess supply of MSP products and shortages of others. How will supply respond to demand in the absence of price signals? The PM, in turn, should explain his government’s modest record on macro-economic policies and the urgent changes they need. Three of the four engines of GDP growth—private consumption, private investments and exports—are out of steam.
Increased welfare spending and ‘laabharthi’ economics haven’t quite fired consumption spending. Wages are not growing. Labour’s bargaining power is not improving.
The government cut corporate tax rates and is making its capex sweat. But private investment remains sluggish. Economists at a conference on India’s economic growth at the Indian Statistical Institute last month debated if the fiscal multiplier is working at all.
Has the relationship between public and private investment snapped? The fiscal stimulus administered by the Congress-led UPA government to help the economy recoup from the shock of a global crisis had sent the deficit rising. It was almost 6.5% of GDP in 2009-10 at its peak, after which the UPA reduced it by cutting spending and sacrificing GDP growth in the process. It bequeathed a fiscal deficit of almost 4.5% of GDP to the BJP government in 2014.
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