The year 2015 is likely to be rosy for India. There is no more doomsday scenario awaiting the country on the economic front in the year. There will be problems but India will remain a global giant with its huge, mostly young, population, a big market and vast resources. Since there is no real social safety net, people are resilient and adapt to adverse situations. Political upheavals are thus unlikely.
There will, however, be no spectacular rise in the economic growth because the way things are going, the government will not be able to control either the fiscal deficit (in December 2014, the fiscal deficit had reached 98.9 per cent of the budgeted total) or the current account deficit ( at 2.1 per cent of the GDP in December’14). Managing the twin deficits will not allow the government to keep its tall promises about bringing ‘achche din’ (good days). The economy will grow at 5 or 5.5 per cent which is not high enough for harmonious and equitable growth or a steep reduction in poverty.
First of all, from all indications, the revenue shortfall will be massive (Rs 1,05,000 crore). To bridge the revenue gap the government may have to cut expenditure where it is most needed — in the social sectors. It is already apprehended that health sector will be the first to receive the cut which will of course have its repercussions on the healthcare of the poor. Already, the public healthcare is below par and it will be more so. The poor will be the ones who will have to bear the brunt and sink further into poverty.
Similarly, the current account deficit will remain a problem with the continuing heavy import of gold and flat export growth. Prime Minister Modi’s exhortation to the people to put their money in banks and not buy gold will only work when people are sure about the continuity of low inflation. Even with a fall in petroleum prices, there are problems in imports and more problems in exports. Global markets are not recovering strongly and India’s exports to EU, Russia, Japan and the Middle East will be lower.
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