ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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The Macroeconomic Malaise

The Macroeconomic Malaise

The Modi government has little to show after three years of grand announcements.

Forty months after coming to power, the Narendra Modi government has had to acknowledge that the Indian economy is in a state of despair as is evident from the recent and belated constitution of an Economic Advisory Council (EAC) to the Prime Minister. The government is now left with one full union budget for all practical purposes. It has to face elections in 10 states comprising 1,214 Vidhan Sabha seats that overlap with 129 Lok Sabha constituencies before the general elections in 2019. Understandably, there is a sense of urgency for the government has woefully little to show for all the grand announcements and propaganda it has deployed in its term so far.

Months after this government assumed power in May 2014, international crude oil prices reduced drastically. This helped reduce inflation, a politically explosive issue in the high-pitched election campaign, for which the government was quick to take credit. Since then oil prices have remained subdued, and the government has gained higher revenue during this period by increasing duties on petroleum products. The price of the Indian basket of crude oil has now been rising marginally, although it is not expected to reach anywhere near its former peaks. Furthermore, agricultural output benefited from relatively favourable monsoons. The food and beverage index of the Consumer Price Index (CPI) rural–urban combined, averaged around 6.5% in 2014–15, and 5.1% in 2016–17, but there was price rise (pulses around May–June 2015, for instance), notably in July 2016 and January 2017. However, these favourable conditions were not built upon.

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Updated On : 29th Sep, 2017

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