Nomura Financial Advisory & Securities on Friday said cyclically the economy is clearly slowing down due to domestic and global factors and this slowdown will be seen for at least a couple of more quarters.
In an interview with CNBC TV-18, Sonal Varma, managing director and chief India economist feels that over the last five years two things have happened. When one looks at growth, one sees the trend and the cycles. Over the last 6-7 years, India has not seen any investment cycle recovery. Varma feels this clearly indicates that growth actually has been on the downside. There has also been two cycles, 2014-2015 and 2017-2018 upcycle.
Varma said that the bigger challenge, of course, is that more medium-term trend itself and what one needs to do to reverse that trend as the global factors, of course, are not looking very supportive.
Speaking about unemployment, she said that is a challenge worldwide in terms of being able to create a sufficient number of jobs. In India’s case, it have skipped the manufacturing stage of development and going back to the world that one will get into the next 10-20 years the kind of jobs that will be created.
Further, Varma said that Indians must dial back last five years since the problems we had back then were very different. They was high inflation, legacy and NPA issues. In the last five years, correct spending has allowed macro stability and tried to recognise and resolve the NPA issues. So, the last five years have been more about creating the foundations.
She added that after building the foundation, the next five years needs to get next leg of growth, which is where the focus has to be. Speaking on the fiscal side, most fiscal consolidation in India has historically always been via revenue rather than expenditure compression and therefore, GST has not led to the kind of revenues one has expected. But post elections, one may see better tax compliance and revenues, then it has been revenue driven fiscal consolidation and it cannot be purely expenditure driven fiscal consolidation in India.
