If everyone is right what do we do?

The slowdown in the Indian economy, with the International Monetary Fund predicting a growth rate of 6.7% this year, is being hotly debated. Prof D Nayyar has his own views on "Why the economic slowdown, and how to fix it". Faced with criticism the government has responded in 2 ways. "There is a denial mode that dubs critics as Cassandras or prophets of doom. There is a damage-limitation mode that seeks to mollify people with doses of populism, such as the cut in excise duties on petrol and diesel or goods and services tax (GST) reliefs and concessions to small businesses and exporters." Rural demand is down, the share of the manufacturing sector is falling, private investment is down and exports are down. So what is the remedy? "The way forward, then, is to allow the fiscal deficit to rise by 0.5% of GDP, using that to finance public investment, and to drop interest rates in steps by at least 2 percentage points, which would help the exchange rate depreciate. Together, these would would stimulate investment and promote exports, to revive economic growth." The government has spent 96.1% of the fiscal deficit by the end of August, so a fiscal stimulus is already on. If it continues at this rate the deficit will rise to 4.9% of GDP, 1.7% higher than the 3.2% promised in the budget, wrote V Kaul. The government should lower taxes instead. Trouble is that revenue deficit till the end of August was 133.9%, compared to 91.7% last year. Reacting to enormous pressure the government reduced fuel prices by Rs 2 per liter, having increased excise duty 11 times, as the price of crude fell from $110 per barrel to below $50 a barrel. We are paying taxes of around Rs 40 per liter of petrol. Rural demand has slumped because of falling wage growth and there is a great need for a rural stimulus, wrote Prof Himanshu. Economic growth was driven by private consumption, driven by credit, which has risen 150 basis points in the last 5 years, wrote Mukherjee and Shekhar. But this is not likely to last because it has not been supported by investments, consumer confidence has fallen to a new low, households savings has dropped to 19% of GDP and the rise of bad loans at banks. Personal consumption is supported by 8.9% growth in outstanding credits on credit cards. As for reducing policy rate by 200 basis points to weaken the rupee, the rupee has fallen from 7.5 to the dollar in 1966 to around 65 today. We should be the highest exporting nation in the world. Apparently, the Real Effective Exchange Rate of the rupee is some 18% overvalued. Is the government pressuring the Reserve Bank to keep it high? Only the government gains from a strong rupee, while the nation loses, wrote TK Arun. The more the experts the more the confusion. Politicians laugh.