We have welcomed the New Year 2019. Like every year before it, there are a lot of expectations from this year as well. Some of us may be eagerly waiting for the Final Season of Game of Thrones while many others may be expecting to know the future course of politics. With all that said, this year can be economically significant for India. With so many ups and downs so far, 2018 was rather a tough year for the Indian economy with the effects of GST, crude oil price surge, depreciation of the rupee and the tussle between the government and the RBI.
Towards the close of this year, the economy has begun to show signs of growth and expansion. The IMF has predicted that the Indian Economy would grow at a rate of 7.3% in 2019, surpassing the growth rate of China. The ease of doing business in India has also improved considerably over the years. Despite the expansionary trend and the favourable macroeconomic rates at which the year has begun, there is still the large question of how far these benefit the people of the country. Forbes in one of it’s recent articles stated that though the economy has performed well, the standard of living of the people has remained stagnant.
The economy has in front of it a series of challenges that need to be addressed constructively. The financial sector is at a rather troubled state with a liquidity crunch on the Non-Banking sector and the rising NPAs in the Banking sector. The IMF has stated that though some of the major banks have proven to be resilient, the sector as a whole is vulnerable at this point and is restricting the growth of the economy. The change in the leadership of the RBI is yet to show how these issues are set to be tackled in the coming year.
Another very vital area of concern is the state of agriculture. Grand schemes and waivers have just seemed to put aside the issue for a while and with the coming elections, waivers have become rather common. The huge fiscal deficit that this could create and the failure to address the agrarian crisis can be very costly for the economy. Agriculture being the biggest employer is in troubled waters with fluctuations in monsoons and the falling food inflation. 2019 shouldn’t be yet another year of distress for the Indian farmers.
Coming to the area of employment, we are facing an increasing trend in educated unemployment. Skill development is yet another challenge. With the population in the working age expanding, there is a need to generate employment as well suitable skills to reap the benefits of this demographic dividend. The business sector may also see tightening in the credit supply as Moody’s has predicted that the cost of borrowing would increase during this year. This can further the constraints of the small industries that have been severely affected by the implementation of GST.
On a positive note, the prospects seem to be better for the IT sector, a sector that has remained stagnant for the past 3 years. NASSCOM has estimated that this sector would grow at 9% in the last quarter of the 2018-19. Supportive domestic policies that remove barriers can bring about both a growth in employment and domestic revenues. The benefits from the single tax regime under the GST is yet to be felt and is long anticipated. Conducive policy environment is essential for producing sustainable growth in the coming year. The government will have to make interventions with its priorities well organised to favour the people in order to address the concerns of improving their standard of living.
The Parliamentary Elections of 2019 is bound to be the star of this year. With so many expectations surrounding it and the uncertainty of the results, this would be one of the factors influencing and influenced by the performance of the economy. The present government is making a lot of efforts to end their term on a good note in economic terms. The leadership that would come to power in the future does have ahead of it a series of issues that need to be addressed. With the play of politics and the problems ahead, the prospects for the future are mixed and uncertain. We will have to go through this year to know for sure.
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