GDP downgrade is hasty

The downward revision of India’s GDP to 7.4 per cent from 7.8 per cent in 2015-16, by the Asian Development Bank, seems somewhat hasty. This added pressure on the stock markets, which were down because the European markets opened in the red and closed 541 points down on Tuesday. The positives mentioned by ADB include declining inflation, a drastic fall in crude oil prices leading to lower import spend and tax revenues, and robust foreign direct investment. It harps on the same old reasons for the downward revision, like debottling stalled investment projects, domestic reforms in taxes, land acquisition and labour laws.

In fact the situation on these various fronts are much better today for growth than when the ADB put India’s growth at 7.8 per cent earlier. Moody’s had last month pared India’s GDP to 7 per cent and DBS of Singapore pared GDP to 7.4 per cent from 7.6 per cent. The government, however, is confident of topping 7.5 per cent growth this fiscal and is going ahead with reforms that do not need legislative approval. This does not mean that the Modi government does not face challenges, both domestic and global.

The weakness in the global markets is expected to remain for some time, impacting India’s export growth. But the domestic challenges should be handled with the same urgency as shown recently. Union finance minister Arun Jaitley will have to show statesmanship and some humility in mending fences with the Congress, which persists in derailing the economy. It is hitting back at the government, which behaved in the same cussed manner when it was in the Opposition.