IMF, World Bank give thumbs up to Narendra Modi govt's policies, but critics refuse to smell the coffee

A few days ago, it was the World Bank. And yesterday it was the International Monetary Fund (IMF) which has given a ringing endorsement of the Narendra Modi government’s economic policies especially the much-reviled and demonized demonetization and its follow-up measure goods and service tax (GST). The Brettonwood twins have smelled the coffee but the squeamish among the Indian commentariat and Opposition refuse to, more out of spite than out of any solid economic rationale.

International Monetary Fund (IMF) chief Christine Lagarde has said the Indian economy is on a "very solid track" in the mid-term, days after the IMF lowered its growth forecast for the current and the next year, according to a Firstpost report in what might appear at first blush to be an inconsistent stand.
Describing the two major recent reforms in India—demonetization and Goods and Services Tax (GST)—as a monumental effort, Lagarde said it is hardly surprising that there "is a little bit of a short-term slowdown" as a result.

This is pretty much what Bibek Debroy member NITI Aayog had to say when he shrugged off the slowdown as a ‘mild cold’ when a large section of the Indian commentariat--including the Opposition within like Yashwant Sinha and Opposition without was going hammer and tongs at Modi and his Finance Minister Arun Jaitley.

Let not be squeamish and turn around and say the Brettonwood twins are US stooges or mouthpieces because the UPA government while in power used to preen on the findings of the same multilateral institutions.

File image of Narendra Modi. PTI

File image of Narendra Modi. PTI

The IMF last week lowered India's growth projection to 6.7 percent in 2017, 0.5 percentage points less than its previous two forecasts in April and July, attributing it to demonetization and introduction of the GST.

It also lowered the country's growth for 2018 to 7.4 percent, 0.3 percentage points less than its previous two projections in July and April. India's growth rate in 2016 was 7.1 percent, which saw an upward revision of 0.3 percentage points from its April report.

Those who are ill-disposed towards Modi and the saffron surge are clearly and perversely making a mountain of a molehill, pressing the panic button for a small blip on the economic radar inevitable and predicted by the Modi government itself when these two paradigm changing measures were ushered in one after the other in quick succession.

The Congress party smugly allowed to grow grass under its feet when it had all the time to crackdown on black money and its concomitant, tax evasion. It goes to the credit of the Modi government that it relentlessly targeted black money first through the dubious amnesty schemes only to change tack and crack the whip through demonetization.

Demonetization has had two beneficial effects or fallouts---the hitherto cash sloshing around in subterraneous channels have surfaced into the mainstream and illicit cash have been smoked out. Very soon, those who blithely deposited their ill-gotten cash would be called to justice. Be that as it may, only the bigoted would refuse to acknowledge the mid-term and long-term beneficial impact of the mainstreaming of the Indian economy accomplished by these two measures---black money’s pernicious role would come down and India would be among the tax-compliant countries.

The adverse effects of these two seminal measures would at worst be transient. They would blow over soon, in the next couple of quarters. The GST has set the government’s cash register ringing merrily though admittedly the small traders are facing the heat of the procedural hassles which the Modi government has addressed man-like last week in acknowledgement of the ground realities.

A lot of course remains to be done on the economic front chiefly on the unemployment front. BT cotton has shored up the fortunes of the cotton textile economy in Gujarat as indeed elsewhere. What is required is adoption of modern farming practices in general. This is possible only if large scale corporate farming takes place. Producers’ cooperative a la AMUL on the milk front is of course more desirable but the idea would take time to take roots. Meanwhile corporate farming on a large scale can take off quickly.

Farmers are only too well aware of what PepsiCo and McDonald have done to the fortunes of contract farmers thus disproving critics that big corporations are inimical to farmers’ interest. Policies should be made in such a way that corporate farming is allowed on the condition that food processing industries would come up alongside in order to minimize wastage and provide employment opportunities to rural folks. The mad rush to urban areas would be arrested.

Updated Date: Oct 16, 2017 10:15 AM

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