Read the following passage carefully and answer the questions that
follow.
There is now no denying that the new government takes office amid a
clear economic slowdown. The first macro data set released showed an
under-performing economy with GDP growth falling to 5.8% in the
fourth quarter of 2018-19 and pulling down the overall growth for the
fiscal to a five-year low of 6.8%. Growth in gross value added (GVA),
which is GDP minus taxes and subsidies, fell to 6.6% in 2018-19, pointing
to a serious slowdown. If further confirmation were needed, the growth
in core sector output - a set of eight major industrial sectors -fell to
2.6% in April, compared to 4.7% in the same month last year. And finally,
unemployment data, controversially suppressed by the Union
government so far, showed that joblessness was at a 45-year high of
6.1% in 2017-18. These numbers highlight the challenges ahead in
drafting the Budget for 2019-20. The economy is beset bya consumption
slowdown as reflected in the falling sales of everything from automobiles
to consumer durables, even fast-moving consumer goods. Private
investment is not taking off, while government spending, which kept the
economy afloat during the last NDA government, was cut back in the last
quarter of 2018-19 to meet the fiscal deficit target of 3.4%. The gooр
news is that inflation is undershooting the target and oil prices are on the
retreat again. But the rural economy remains in distress, as seen by the
2.9% growth in agriculture last fiscal; the sector needs a good monsoon
this year to bounce back. Overall economic growth in the first quarter of
this fiscal is likely to remain subdued, and any improvement is unlikely
until the late second quarter or the early third. There are not too many
options before the new Finance Minister. In the near term, she has to
boost consumption, which means putting more money in the hands of
people. That, in turn, means cutting taxes, which is not easy given the
commitment to rein in the fiscal deficit. In the medium term, Ms.
Sitharaman has to take measures to boost private investment even as she
opens up public spending again. These call for major reforms, starting
with land acquisition and labour, corporate taxes by reducing exemptions
and dropping rates,and nursing banks back to health. On the table will
be options such as further recapitalisation of the ailing banks, and
consolidation. The question, though, is where the money will come from.
With tax revenues likely to be subdued owing to the slowdown, the
Centre will have to look at alternative sources such as disinvestment.
There may be little choice but to go big on privatisation. A rate cut by the
Reserve Bank of India, widely expected this week, would certainly help
boost sentiment. But it is the Budget that will really set the tone for the
economy.