New Delhi: The Prime Minister’s Economic Advisory Council (EAC-PM) will hold its first meeting on Wednesday, amid a sense of urgency about the state of the economy. The mandate of the council is to analyze all critical issues, economic or otherwise, and advise the PM accordingly.
Here are the issues that are likely to be on the agenda:
State of the Economy: This may be the overarching theme around which all other issues are framed. Growth has slowed to a 3-year low, employment creation is anemic and export growth is faltering. Further, demonetization and GST affected the economic momentum, as detailed in a World Bank report. The council will have to come up with ideas on how to kick start the economy.
Banking Sector: The crisis in the banking sector continues and unless this is solved it will act as a drag on the economy. The total pile of Non Performing Assets increased to a record high of Rs. 9.5 lakh crore, a Reuters report said. The government has already set in motion a process to recover as much of these bad loans as possible. However, the resolution of bad loans will have to be fast tracked in order for banks to start lending again. This will ensure that firms can access capital for investments.
Exports: Export growth has stalled. This is also because of weak global demand, but increasing exports is also important for the success of the PM’s Make in India programme. Exports will also give a fillip to small and medium enterprises (SMEs) which in turn will boost employment. The government last week relaxed some GST norms for exporters, with an eye to providing some relief. Growing exports will also help shrink the Current Account Deficit (CAD), one of the key indicators of fiscal health.
Employment: Not only has employment growth stalled, but on a net basis, jobs are being shed. The IT segment, construction and other sectors are reporting job losses. Agricultural incomes have declined and there are reports of distress coming in from different parts of the country, which affect rural jobs. Employment generation was a key promise of Prime Minister Modi, and it will have to be dealt with on an urgent basis.
Fiscal health: Finally, the committee will also gauge the fiscal health. Most commentators are calling for a fiscal stimulus in order to boost the economy. However, this means that some of the budget numbers that the government laid out may have to be relaxed. An increase in government spending will increase the Fiscal Deficit, which the government is loath to do. The EAC will have to analyze the numbers and give the government policy options.
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