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4:53 pm - Monday November 20, 2017

Decline in Growth Rate

The second part of the Economic Survey has overruled the growth rate expectations of 7.5 per cent in the first part of the Economic Survey of India. The downslide attributed to Farm loan waivers, decline in the profitability in power, telecom and agricultural sectors. The RBI Governor and top executives of commercial banks are from the very beginning warning the state governments that it would put the economy of the nation in jeopardy.

The farmers will become habitual of expecting loan waivers during elections. The other sector of the society may follow or demand it. The economic and financial sectors termed it as vicious circle and trap. The Union Finance Minister Mr.Arun Jaitley has also told the states that Centre would not provide any financial help to states on farm loan waivers.

Now the Economic Survey has recorded as testimony to banking sector warning that increasing trends of states doling out farm loan waivers could reduce aggregate demand in the economy by as much as 0.7 per cent cutting off 1.1 lakh crore from GDP.

The Survey apprehends that other states could follow the Uttar Pradesh model and on that basis total loan waiver in India would mount upto 2.7 lakh crores. Strangely the BJP in power at the Centre and also in U.P. The Central Economic Survey warning against farm loan waiver and its U.P. State Government indulging in it that has affected the growth rate.

Hats off to the Madhya Pradesh Chief Minister Mr.Shivraj Singh Chouhan who point blank declared that he would not go for the farm loan waiver but would help the farmers in other ways. The Survey suggested the Government should undertake path-breaking reforms such as abolition of stock limits for traders and adopting direct cash transfer to farmers instead of minimum support prices for crops other than wheat and rice.

The stock limits end up curtailing the demand for farm produce and its price. There is need to lift all permit-license requirements, stock limits and restrictions on movement of agricultural produce. The Survey pointedly said that it would be ideal situation to do away with the stock holding limit in the grain trade.

There has been decline of 20 per cent in cash holding in business and by individuals after the demonstration but the number of tax payers has gone up by 45 per cent and it is bound to increase the revenue collection by the Central and State Governments.

Posted in: Editorial

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