Across the aisle: Taking stock at beginning of year | The Indian Express

Across the aisle: Taking stock at beginning of year | The Indian Express

Written by P Chidambaram |Updated: January 20, 2019 2:01:34 am

P Chidambaram is former Finance minister of India.

Across the aisle: Taking stock at beginning of year

Four months from today, a new government will be in office (according to the people’s verdict). Nothing that the present government will do between now and April 30 will alter the state of the economy radically.

The government did not meet the targeted fiscal deficit (FD) last year and is unlikely to meet the target of 3.3 per cent in 2018-19. (Representational)

The Christmas-New Year-Pongal/Sankranthi holidays and festivities must have rejuvenated the hard-working people of India (except members of Parliament who were called to work during many of those days!). A new year effectively began on January 15. I have a hunch that the year will mark a turning point for the polity and the economy of the country.

Four months from today, a new government will be in office (according to the people’s verdict). Nothing that the present government will do between now and April 30 will alter the state of the economy radically. Hence, the position at the beginning of 2019 is likely to be the position when the next government takes office. So, let’s take stock of the economy.

Fiscal Stability

The two most commonly used indicators are worrisome. The government did not meet the targeted fiscal deficit (FD) last year and is unlikely to meet the target of 3.3 per cent in 2018-19. It is apparently falling short on net direct tax collection and the Centre’s share of GST. It hopes to garner some money by dipping into the GST compensation reserve, by faux-disinvestment and by ‘persuading’ the governor of the RBI to part with Rs 23,000 crore as interim dividend.

The current account deficit (CAD) is a lost battle. As against a CAD of 1.9 per cent of GDP in 2017-18, it will certainly be between 2.5 and 3.0 per cent in 2018-19. Merchandise exports in December grew by only 0.34 per cent, imports declined by 2.44 per cent, yet the trade deficit was USD 13.08 billion.