The Economist: Stopping the spiral
IN LAST week’s leader on India’s economy we referred to the government as acting with Brezhnev-grade complacency. That was probably a bit too harsh. In the last few days I’ve listened to two energetic government bigwigs—officials rather than politicians—talk about the slowdown and what to do about it. Here’s what they had to say.
The first official shall remain nameless. He was certainly complacent at times. So for example, the latest GDP figures showing year-on-year growth of 5.3% were probably a statistical error, in his view. “These numbers are probably going to be revised. But it’s too late. What matters is the first number [released], which make an impression.” The scandal over the award of the 2G licences in 2008 was a storm in a tea cup and exaggerated by a “jackass media who are constantly after your blood” (anyone who has read the Supreme Court’s judgment on this scandal is unlikely to be nearly so forgiving of the scandalous parties). The graft scandals surrounding the government were “mostly misrepresentations”. And the government’s medium-term growth targets are likely to remain in the region of 8%. That is well above private economists’ view, which is nearer 6%, and the Reserve Bank of India’s too: it reckons trend growth is probably at about 7%. But there was also realism. Asked what he would do if he had a magic wand, this official replied, “go back to 2009 and start again”. Several things started to go wrong at that point, he said. There was a poor monsoon, hurting farmers. Rather than cutting the fiscal deficit it had run up in to offset the effects of the global financial crisis, the government kept spending freely. “We left it in the system when it wasn’t needed,” the official says of the stimulus. That helped keep inflation high and stubborn….Read More
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