IMF says India is in the midst of a significant economic slowdown, urges action. Slightly off the mark. India is in the midst of a significant governance slowdown, and the action that is needed is on that front. The economic indicators are the effect of a deeper problem.
The governance slowdown is the result of two things - the first is a top-heavy structure for decision-making which has curtailed the states' ability to drive the economy, and the second is unpredictable ad hoc policy stuff that disrupts the rhythm of the formal economy.
We have reached the limit of what can be achieved by Centre-led action on the economy. Apart from trade deals disinvestment of PSUs and energy import-substitution, there's not a lot New Delhi can do. On these 3, it is unwilling and slow, and on other things its impact is limited.
A greater share of public expenditure needs to shift to the states and even more so to the local bodies. This is the main 'action' that needs to be taken. And future tax cuts, if any, should be directed towards the bottom half of the economy.
The slowdown is also in independent action by institutions. With many supposedly independent institutions now taking their cue from the Centre, we keep hitting the pause button on progress repeatedly. Our liberties are accelerators of good things, we should leverage them.
