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7 imminent challenges for NDA 2.0 on economic front

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BJP led NDA passed the hurdle, elections 2019, with flying colors. Voters have chosen a strong and decisive govt. under the leadership of political wizard Narendra Modi. Defying all odds and artificial criticism created by the Left, which is buried now, BJP has secured a comfortable number of 303. But, what next? Global and internal dynamics pose imminent challenges to NDA 2.0 on economic front. Here, we list the most important ones.

1. Banks’ NPA and unsound health of NBFC                                                                                           
Over-enthusiastic lending, large chunk prior to 2014, coupled with twin balance sheet problem inflated NPA to 10 lakh crore. Govt. decision to infuse 2.11 lakh crore, in October 2017, and RBI’s close vigil has helped it to come down to 8.5 lakh crore. Still, Government and RBI has to be proactive to mitigate this problem. Capital infusion and prudential lending must work in tandem to lower down NPA to comfortable level. Power sector is the most  fiscally distressed, timely interventions by the Govt. and RBI would help.Recently, IL&FS was seen making rounds in news world for wrong reasons. Debt crisis of 91,000 crore has badly impacted the growth of NBFC sector in India. Unsustainable investment in infrastructure compounded the debt to equity ratio of 18.7. Strict monitoring by govt. and RBI’s timely intervention will avert future crisis in NBFC sector.

2. Agriculture                                                                                                                                                     
In India, 60% of gross cropped area is rainfed. Last year, Marathwada in Maharashtra, Northern Karnataka, Bihar, Odisha, Jharkhand, Andhra Pradesh faced drought like situation. Incidents of farmers committing suicides were also reported. NDA govt. took a historic step to provide Rs. 6000/year to 12 crore families of farmer under the scheme PM-KISAN. This is going to be very vital for the primary sector, which involves 60% of workforce and contributes around 16% to GDP.Irrigation projects, land reforms, abolition of APMC, wider domain of MSP, soft lending, need based support, incentivizing exports are some of the steps that can be taken by govt. to ensure prosperity in primary sector.

3. Maintaining growth rate of 7% & above                                                                                               
Global economic slowdown, attributed to US-China trade disputes, can retard the growth rate conceived by government. UN, recently, cuts India growth rate from 7.6% to 7%. India with other countries, at global platforms, can mediate to diffuse the volatility. Meanwhile, India must tap the potential and strive to boost trade ties with associations like ASEAN, BRICS, SAARC & Central-Asian countries.

4. Fiscal deficit target of 3.4% of GDP for 2019-20                                                                                  NDA deserve huge applause for sustaining growth rate of 7% with fiscal deficit well under 4% ; UPA achieved similar growth rate but by compromising fiscal prudence and once fiscal deficit worsen to 6.46% in 2009.NDA govt. has been fiscally more prudent than UPA, but NDA has to shift the target of achieving fiscal deficit of 3% of GDP for FY 2020-21. With populist schemes like MUDRA & PM-KISAN, it would be interesting to see how NDA 2.0 manages it.

5. China’s ambitious BRI                                                                                                                               
China’s “Belt & Road Initiative” envisages to connect China with 152 countries for trading network. India is not a part of it, and oppose CPEC as it passes through POK. Observers thinks BRI is a tool for global dominance. With heavy investments in Asia and Africa(pledged to invest $60 billion in Africa, in Sept 2018), China is shrinking trade space for India as well as other states.Collective effort would be required to counter China and its exploitative aspirations. WTO can exercise its power to check and thwart any move that leads to subjugation.

6. Trump’s path to protectionism
“Tit for Tat” tariff approach, which started with China, has also seen removal of GSP for India. GSP is a preferential tariff system that aims to encourage exports of developing countries. Last year India exported goods worth $5.6 billion. It is being said that it won’t affect India much as the benefits under GSP was to tune of $190 million annually. But, it must be kept in mind that the US dragged India in WTO on accusations that India is incentivizing exports, and it doesn’t augur well. Price capping by India on medical equipment imported from US is also a bone of contention.Trade surplus of India with US reached all time high to touch $23 billion in 2017. Trump’s path to protectionism will definitely hinder exports. India needs to, amicably, find a solution with US.

7. US sanctions on Iran                                                                                                                                  US president, Donald Trump, unilaterally revoked JCPOA, commonly known as Nuclear Deal. Oil waiver given by US to India expired on 2nd May, which has driven India to stop crude oil import from Iran. Now, India needs to find the substitution, but the point of concern is that India can’t afford an unstable Iran. Unstable Iran would jeopardize the investments made in Chabahar port and the gates to Afghanistan & resource rich Central-Asia would be closed.Other permanent members of UN & Germany, which are signatories of JCPOA, are finding alternatives. India with these countries can strike a deal to save its trade related prospects.

Rishabh Raj

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