We know what to do, but how?

Votes in India's general election are being counted and the National Democratic Alliance (NDA), which includes the Bharatiya Janata Party (BJP) of Prime Minister Narendra Modi, is leading as expected. "The two most important items on the NDA agenda should be reflation and reform -- the two 'R's," wrote R Jagannathan. "Modi's first term, despite official gross domestic product (GDP) numbers showing robust growth, had deflationary tendencies." It is another matter that government figures are suspect and, "Economists and investors are voting with their feet - by using alternative sources of data and in some cases creating their own benchmarks to measure the Indian economy." Like, China's Li Keqiang index. "What the economy needs now is calibrated loosening of fiscal and monetary policies in the short term, and a focus on reforms." Sure, but how? "With retail inflation below 3% and real interest rates above 3%" the Reserve Bank (RBI) can reduce interest rate, but will it stimulate demand? Consumer demand for fast moving consumer goods (FMCG) is down. Household savings have dropped to 17.2% of GDP from 23.6% in 2011-12. Car and two-wheeler sales are down. People take loans to buy vehicles but not to buy toothpaste or shampoo so reducing interest rate is not going to increase private consumption which contributes 62% to the GDP. With demand falling, manufacturing activity slowed down in April after slower growth in March. Services sector activity also dropped in April. The services sector contributes 54.40% to India's gross value added (GVA), while manufacturing contributes 29.73%. A Finance Ministry report admitted "declining growth in private consumption, slow increase in fixed investment and muted exports". Weak consumption means a fall in new investments and that means fewer jobs. "Indian companies, both public and private sector, announced projects worth Rs 1.99 trillion in the quarter ending March 2019, 16% lower than what was announced in the quarter ending December 2018, and 46% lower than the year ago period." So, what about some " "Keynesian pump-priming" by increasing government spending? The government has already resorted to "massaging the fiscal deficit" to achieve the predicted figure of 3.5%, wrote V Kaul, and has to balance its books before spending any more. The interim budget in January was a long list of handouts and once these are started they cannot be stopped. India is a big importer of commodities but it exports very little so any increase in the price of oil is going to result in a huge hole in government finances, wrote N Rajadhyaksha. Brent crude is trading at $70 a barrel, compared to $30 in 2015. India should have a fiscal council to improve its budget calculations, wrote P Bhattacharya. Fiscal stimulus is impossible and monetary stimulus will not work. If only wishes were horses.