"There were two expectations that were formed as soon as the new government came to power. One was that economy will turn around quickly and second, we could see big-bang reforms because this was the first year of the government. And, I think there has been some disappointment on both the counts," Crisil Chief Economist Dharmakirti Joshi told reporters here on Tuesday.

"Since the government came to power, it has not been able to use the monetary and fiscal instruments because of the legacy issues." The rating agency on Tuesday released 'Modified Expectations', a report evaluating the economy-related performance of the Modi government as it completes one year in office.
    
Joshi said the current government inherited high fiscal deficit and inflation, which limited its functioning. "The monetary policy has only turned favourable recently and very few banks have passed on the little reduction in interest rates. The transmission is very weak.

So, monetary stimulus is not there," he explained. He said fiscal policy is rather restrictive as public spending is restrained by the legislative mandate to bring down fiscal deficit-to-GDP ratio. Joshi further said "In the first year of the government, the macro indicator has turned green, growth-inflation mix improved, the current account deficit is in check, which is a result of good policies, and one of the major gains is on the inflation front, which has eased."
    
The government has also fast-tracked the decision-making process, improved ease of doing business, energised bureaucracy and taken some steps to raise growth potential of the economy. The rating agency, however, believes that the quick turnaround in the economy is very difficult at this juncture.     "The government can’t push demand up in the short term because there is no monetary and fiscal silver bullet," Joshi pointed out.
    
He said poor demand is one of the key issues that is holding up private investments. "That is why the recovery is slow, that is why investments are going take some time to pick up," he added. The report analysed results of 411 companies from NSE's CNX 500 index, excluding those from BFSI and oil and gas sectors.

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