Indian Prime Minister Narendra modi faced his toughest year on the economic front in the year 2017. The BBC’s Sameer Hashmi takes a look back on the year of the economic key-moments in order to predict what could look like in 2018.
Only a year ago, it seemed like India was on the way to an important growth engine for the world economy. It is the fastest growing economy in the world in 2016, surpassing even China, which had witnessed a slowdown.
India has been hailed as a bright spot in an otherwise gloomy global economy. But the narrative changed in the year 2017, as India’s economy turned sluggish.
Between January and December 2016, it grew by more than 7% in each quarter compared to the same period of the previous year.
While a quarter of it even touched 7.9%.
But in a quarter (April-June 2017), it fell to 5.7% – the lowest growth in three years.
Two important decisions in economic policy had a severe impact on 2017. The first was the sudden resignation of nearly 86% of the cash in circulation in November 2016 – the effect persisted up to 2017.
Second, the breakdown in the introduction of the biggest tax overhaul since independence, were a unified Goods and services tax (GST) replaced the numerous Federal and state taxes in June 2017.
But 2017 is not only bad news for Mr modes, the Bharatiya Janata Party-led government, which swept to power in the year 2014. There were some great successes, including in India, the 30-points-jump up to the top 100 countries in the World Bank’s “ease of doing business” index.
Then the global credit-rating Agency Moody’s upgraded India’s sovereign credit rating for the first time since 2004.
India’s stock markets were to perform among the best in the world – they grew by more than 30% year-on-year.
India is announced by the Federal government, a $32bn (Â£23.7 bn) rescue plan for India’s public sector banks, have to fight, due to the increasing bad loans or non-performing assets, as they are known.
But overall, it was a difficult year and there are many challenges that Mr modes faces in 2018. The acceleration of growth
The acceleration of economic growth, the Federal government is the most important goal in the year 2018. While most analysts expect the recovery to be slow, there is also a consensus that it will be a better year than 2017.
“There is a recovery, because of the vibrations caused by the cash ban [the Indian rupee and a ban in 2016] and the GST will of course fade with time,” says Sayed Chinoy, chief Asia economist at JP Morgan.
For the optimization of the implementation of the GST, announced by governments, some changes in the last couple of months. It was also a new GST rates for 178 goods and services are revised, after he was criticized for keeping the rates high.
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“2017 was a year of transition for the economy with the GST. These bases were needed for more sustainable growth in the coming years,” says Madan Sabnavis, chief economist at CARE Ratings, an Indian credit Rating Agency.
The International monetary Fund estimates that India’s economy will grow by 7.4% in the next fiscal year (April 2018-March 2017). She had it previously, the growth rate of 7.7% tied.Jobless Growth
Although the economic growth brighten prospects in the next year, the biggest obstacle for the government, the creation of jobs.
India is the world’s second-most populous country and it needs to absorb 12 million jobs every year, its young workforce.
But small businesses were still not recovered from the rupee ban in November of 2016, when you hard again by the introduction of the GST. Many of them closed, what to millions of people, especially in the informal sector, the loss of jobs.
Agriculture, construction and small businesses are the largest employer in India, because they are labour-intensive companies. But to fight all three sectors, jobs that in the past few years.
The creation of jobs is one of the leading red marker, the Mr modes, the economic record of success.
While most experts agree that this is a long-term problem for the economy, they expect the government to take measures, to 2018, with an eye on parliamentary elections scheduled for 2019.
“We can expect the government to be some of the impetus for small businesses, and sectors such as agriculture and construction, some of jobs”, says Mr. Chinoy. Rising oil prices and inflation
Rising crude oil prices and the low level of private investment is a major challenge, according to Mayuresh Joshi, vice-president, Angel Broking, Mumbai-based brokerage firm.
He says that the rising crude oil prices will lead to an impact on the public finances and higher inflation, which has consistently remained below the Central Bank target of 4% over the last year.
India imports more than 70% of its oil in order to cover the domestic demand. With the global crude oil prices rise, the government has two options – you can either pay for the increase in the sales price or the difference.
“With the elections just over a year away, the government is reluctant to pass on, to increase the full price to the consumer. It will move an unpopular,” said Mr Sabnavis.
The year 2017 saw a number of peasant protests throughout the country. The agriculture is struggling with income is dwindling, due to the volatile growth in the last few years.
More than half of the Indian population relies on agriculture for income. Millions of farmers were not able to pay back the loan, the to more not.
Some States, such as Uttar Pradesh in the North and Maharashtra in the West, have announced loan waiver schemes for the farmers, but there were problems in connection with the implementation.
“There is not much to do, the question is, really, because agriculture is subject to a state, and it needs to be addressed by the respective state governments, but it is a problem of perception, for the [Federal] government,” said Mr Sabnavis.
Eight Indian States is the holding of local elections in 2018 – the four a huge rural population.
The Bharatiya Janata party is in power in three of these countries, and so experts believe that if the BJP-led government will not solve the crisis of the agriculture, then it could hurt your chances of getting on the ballot. No reforms in the year 2018?
Since coming to power, Mr modes, the credit for the implementation of critical economic reforms.
But with the economic growth push in 2017 and the elections in India in the year 2019, the people expect him to be careful in the coming year, and avoid the major reforms.
“The government needs to consolidate all the reforms that have been brought, in the course of the last 40 months. It needs to ensure that they are performed correctly. There is no need for further reforms,” says Mr Joshi.
The government is expected to continue to rise, the expenditure for the social welfare systems focused on rural India.
For Mr modes, 2018 will be a decisive year. His government’s handling of the economy is not without impact on its electoral prospects in the year 2019