Editorial: Hope on the economic front

If all goes well and no extraordinary event disrupts life, India is set to grow at a faster clip than the rest of the world. The latest confirmation comes from the near-record collection of the Goods and Services Tax. At Rs1,49,507 crore last month, it was the third highest after Rs1.67 lakh crore in April 2022 and Rs1.52 lakh crore in October. It is safe to assume that a monthly collection of about Rs1.5 lakh crore is now the expected average. Given that in the early months of introduction of the tax in July 2017, the normal collection was a little over Rs1 lakh crore, dipping to a low of Rs90,000 crore in a particularly slow economic cycle, the Rs1.5 lakh crore baseline is a positive development, confirming a robust trend in the economy.

In the post-festival period, with the Covid pandemic mostly behind us, manufacturing and services were both on the rise. Inflation was also showing signs of moderating. And advance tax collections were buoyant, confirming that these may top the budget estimates at the end of the financial year. People are beginning to see the sense in remaining on the right side of law, partly for fear of searches and partly because increasing digitalisation of the economy has made tax theft that much more risky. Besides, the introduction of faceless reviews of tax assessments and appeals has lessened the scope for securing reprieves through bribes.

Without doubt, the Government’s faith in the ‘one-country one-tax’ measure has been vindicated. But removing glitches and imperfections is a continuous process. The demand by a former Finance Minister for a single, uniform rate by doing away with the current multiple slabs needs to be considered, though it is unlikely that at our level of economic development with such huge income disparities a single slab will be equitable. Meanwhile, the corporate sector is bouncing back after the forced slowdown during the two-year pandemic hiatus and the resulting disruption of global supply chains. Certain sectors are doing particularly well. Luxury cars have seen record sales. Electric two-wheelers are the latest growth area. Airlines have seen a surge in recent months with passenger fares, say, Delhi-Goa or Mumbai-Goa, witnessing sharp increases.

One sector which is doing extraordinarily well is public-sector banks. Having cleaned up their books, settling the nagging problem of high non-performing assets, they are ready to disburse credit once again. A persistent worry for the banks, of course, is the small loans to tens of millions of micro, small and medium entrepreneurs as part of the Government’s programme to incentivise self-employment for the vast army of jobless youth. As for the share markets, these have shown resilience, given that global indices are now under pressure due to widespread fears of a recession. Unless there is a major catastrophic event, the bourses are unlikely to fall sharply from current levels, given the robust growth of the corporate sector. Foreign investors are downsizing their holdings in China and looking at India as a safe bet.

The Government needs to inject greater transparency and long-term stability in financial laws and regulations to attract more foreign investment in the share markets and in project development. Given the high current account deficit which shot up to 4.4% of the GDP in the second quarter of this financial year, and the renewed pressure on the rupee following a series of rate hikes by the U.S. Fed, attracting capital flows ought to become easier with a stable policy regime. Piecemeal tinkering with laws dampens foreign investment. As it is, the export sector is seeing a slowdown due to the recessionary currents in Western economies. Meanwhile, the spate of state elections casting a shadow on sound economic management cannot be ruled out. Competitive freebie distribution can play havoc with the economy. The combined deficit of the Centre and States is already a worrying 10%. In short, we may be doing better than the rest of the world, but we cannot lower our guard.