Across the country, there is a notable discourse regarding economic reforms and the attendant possibilities in bolstering up the country’s economy. Its emphasis is also undertaken through the contextual prism of the Narendra Modi dispensation’s completion of three years of governance at the Centre. Speaking on the occasion of completing three years in power, Union Commerce Minister Nirmala Sitharaman stated that “big-ticket and systemic reforms have been undertaken in a calibrated fashion”, covering sundry sectors such as banking, taxation, real estate and commercial dispute resolution, among others. Notwithstanding perceptible and meaningful progress in economic reforms, certain liabilities continue to hang over the country’s economy.
Organised economic growth is undoubtedly being given a push; but, simultaneously, the country’s Trade Balance — differences between export earnings and import expenditures — continues to rise negatively. While greater export earnings are inspiring, a keen realisation that quantitatively, qualitatively and strategically, there is room for improvement is brought to the fore when import expenditure records for the same financial period eclipses the country’s export returns, thereby continuing the surpassing of national debit than credit, if not temporarily increasing it, on the country’s financial balance sheet.
As a notable amount of financial liability continues to persist and there is more purchasing from the international market than selling, the depreciatory pressures upon the national currency increases as more foreign-currency denominated goods and commodities are purchased from India than selling Indian rupee-denominated products abroad. It thus forces the Indian rupee to depreciate more than before. That this trend is more or less perennial can be inferred from the record for the past decade or so: in 2008, the exchange rate of the Indian rupee was about Rs 45/$; today, it has climbed up to nearly Rs 65/$. A relatively weak currency casts an undesirable impact on economic growth, inflation and on forex reserves.
However, there are dialectics as to whether a temporary accrual of debit and the weakening of the rupee should stir up apprehension. While some amount of manifestation of such attributes need not cause anxiety if there is a corrective being prepared to be implemented sooner than later, there is cause for some alertness, if not a measure of worry, if the trend is continued — even if in an undulating pattern — for a notable period.
A crucial articulation, indicative of the responsibilities ahead, was made in a speech by the Deputy Governor of RBI, Viral Acharya, in Kolkata recently. He stated that the nation’s stressed assets dilemma would not be resolved till various companies — private and public — geared up to reduce their debts. It entails that the prevailing sets of growth, income and expenditure equations in India are occasionally skewed as expenditures are not leapfrogged by earnings. It creates gaps in the volume of desirable and recorded production in various sectors of the economy. Better output — quantitative and qualitative — effective financial management and pressurising credit records to surpass debits would contribute significantly to fully realising the potential of undertaken and expected economic reforms in the currently $2 trillion-valued Indian economy.
There are undoubtedly creditable attributes of the economic reforms narrative for the past few years. While the overhaul of various sectors has been undertaken, the emphasis has been on efficacy and results. Foreign Direct Investment (FDI) has poured into India uninterruptedly, signalling the gaining confidence of overseas investors in the country’s economic structure, policies, potential, and resilience; the past three years have seen an almost 40-per cent increase in FDI equity flows into the country than before.
Expenditure and investments need to be complimented well with gainful returns and shrinking debts. It would raise the level of economic normal and make successful reforms enduring.
Source: dnaindia.com