It was just oil all along, not policies.

"What went wrong with the economy?" asked M Chakravarty. "The economy started going downhill from the June 2016 quarter..." Economic growth was 7.27% in the March quarter of 2015, rose to over 9% in mid-2016 and then dropped off to 5.72% in the June quarter of this year. Why? The real question is not that growth has slowed down but why it was buoyant in 2015-16, despite investment as a proportion of GDP falling since 2011-12, export growth falling or growing in low single digits since 2012-13 and agriculture suffering 2 years of drought in 2014 and 2015. So, what caused the economy to grow in 2015-16? It was the price of oil. "The price of Brent crude fell from $114 per barrel in mid-June 2014 to $54 by the end of March 2015. It then fell further to $39 by the end of March 2016." Low oil prices, along with good monsoon and the huge rise in the salaries of civil servants led to a consumption boom which fell off with demonetization in November last year and the Goods and Services Tax, or GST, this year. The Reserve Bank is under pressure to reduce policy rate which, it is felt, will make it easier for companies to start new projects by reducing borrowing costs. The RBI regularly makes wrong inflation forecasts on the higher side, based on which it sets its policy rate, wrote S Jain. If interest rate is too high why was private consumption booming? "Even as India's total bank credit to GDP ratio declined by about 100 basis points over FY12-17, the 'retail credit' to 'private consumption' ratio rose by about 150 basis points over the period," wrote Mukherjee and Shekhar. Retail loans and loans against property have been growing, giving rise to fears of defaults. If consumer demand is so strong why is investment so weak? Because increased demand is being met by increasing imports, which grew by Rs 650 billion year-on-year, in the June quarter. "The vast majority of Indian businesses are in the informal sector. The Sixth Economic Census found that 94.6% of non-agricultural establishments in the country employed five workers or less," wrote M Chakarvarty. GST is intended to bring all these establishments within the formal sector and increase tax collection. No one is asking why the formal sector will take over these business sectors when it did not do so all these years or why rising prices due to new taxes will not increase imports. The share of indirect taxes is the highest in India when compared to other nations, while the savings rate is dropping, compared to China. India is missing out on global trade recovery, wrote T Kundu, and if commodity prices rise it could get worse. Should have saved the windfall from low oil prices. Too late.