Much has already been said about the economic slowdown. Some important facts about the matter are: India is experiencing a growth slowdown where the GDP continues to grow, albeit at a falling pace. A slowdown is not the same as a recession in which case there is negative growth or a net reduction. Even while a negative GDP growth is highly unlikely in developing nations like ours due to our vast economic potential, in the situation where an economy continues to experience a slowdown for two or more quarters, the odds of it falling into a recession are heightened. Among other early signs of a recession are: increasing unemployment, rise in the number of non-performing assets (NPAs) and a sharp decline in revenue and demand. As per these indicators, a recession is on the horizon.
As a consequence, a few urgent questions come to mind: What ails our economic system? And, what can we possibly do about it? These are also rather big questions and I hope to advance simple suggestions–ones that do not require a deep engagement with statistics or an expertise in economics for two obvious reasons. First, often it is the simpler ideas that resolve complex issues and second, arguments for a better economy should be debatable and comprehensible by everyone, not just experts.
I began my search for simple answers by exploring the intellectual history of the subject. Economics, presently considered the ‘science of everything’ was originally referred to as Political Economics. The older name is far more telling and accurate about the workings of the subject, since it is mostly about the political management of economic matters. It was–and to an extent, still is–commonly acknowledged that politics is at the heart of economic policies. In the present context, this is manifest in the ongoing US-China trade war, which was motivated largely by Donald Trump’s promise of ‘getting America a fair deal’. Naturally, when two of the world’s biggest economies limit trading, there are serious repercussions. Today, markets everywhere, including India, are suffering in some shape or form because Trump’s aggressive politics of nationalism and protectionism has infiltrated US foreign policy and trade. In India, a fine example of economic policy gone awry is the demonetisation of high value currency notes in 2016, motivated purely by political logic and proving catastrophic for the economy.