Revive the animal spirits, investment will follow

In India, income uncertainty and the desire to hold on to the money was in all probability triggered by demonetisation and later, by initial hiccups of the GST plan. Macroeconomic policy, however, was more in tune with the Chicago school. That is, zero tolerance for inflation without concern for the possible impact on employment.

nirmala sitharaman press conference, finance ministry announcements, indian economy, indian economy growth, nirmala sitharaman, finance minister nirmala sitharaman, niti aayog, rajiv kumar niti aayog, rajiv kumar on indian economy, economy slowdown, Indian Express — There is a little doubt that we are on the downward slope of a business cycle.

Now that the euphoria over the projected $5-trillion GDP number has calmed down, let us look at some ground realities. These could not be better summed up than by Harish Damodaran (‘Death of enterprise’, IE, June 29). To quote: “Since around October, even the big guns have been feeling the heat, with sales of everything — from cars, two-wheelers and trucks to consumer staples — slowing down. Worse, nobody knows when growth is returning. The slowdown, now clearly visible, could be the cumulative result of an extended investment famine, which, together with demonetisation, GST, agrarian distress and high real interest rates, has taken a toll on incomes and spending.”