India Marches Steadily
It has become a pleasant trend that India does consistently better in economy than every early predictions by agencies including RBI. This is happening quite often that actual performance is always better than earlier predictions. India’s economy is will grow at 7.3% in the ongoing financial year, substantially above the earlier estimate of 6.5% by RBI. In a report released recently, National Statistical Office has stated this in a release after watching the first 3 quarters of this financial year. At this pace, India will retain its position as the fastest-growing major economy, following its 7.2% GDP growth in FY2022-23.
Moving in highly market-antagonistic policies for decades after independence, India found itself at rock bottom in 1990. This gave opportunity to Narasimha Rao to try ambitious reforms. His able finance minister, Manmohan Singh drastically reduced custom duties, abolished Licence Raj and globalised Indian economy. After this, in Vajpayee’s time economy was further bolstered by managing credit growth, and bringing surplus in current account (in export import). These decade long reforms helped the UPA I government to achieve 7.9% growth in its first four years. However, the slow global slowdown of 2008 brought overall UPA I growth to 6.9%. Economy slowed during UPA2 and it declined to overall 6.7% during this period.
There is a direct relationship between reforms and economic growth. The first generation reforms by Finance Minister, Manmohan Singh and Prime Minister Vajpayee, reforms were given a booster during Modi I rule. During this period, creation of a single national market with GST, introduction of the insolvency and bankruptcy code and direct benefit transfer through Jandhan , Aadhaar and Mobile ( JAM) gave a new impetus to the growth. This period saw the highest economic growth of 7.4%.
Next two years were of global headwinds and once in a century pandemic, bringing economy into deep red. However, just after the Covid from April 2021 the next
two and a half years GDP has grown at an average annual pace of 8.1%. If we remove the two red years, the overall economic growth during Modi’s 7 1/2 years period is 7.5%.
More and more reforms are needed to clear the way for the engine of economy to run. For this it is necessary for India to rollout the world’s leading digital stack. The pace of the transportation infrastructure on land, water and air has to continue. Tax rates, including corporate tax, have to be brought to the international level. Manufacturing is a week link in Indian economy. Therefore all round efforts should be made for the capacity utilisation in manufacturing. Above all Improvement in investment climate is a necessary condition for growth. Production linked incentive scheme should be implemented vigorously to rebound private investment.
Persistent growth is no guarantee to ensure prosperity of every class of the people. The increased revenue of the government must be judiciously used for providing social justice to the poorest of poor. World class education and medical facilities must be provided to all. Short term myopic vision of the political parties,BJP included, should not tempt them to throw away the government exchequer in populist schemes. The schemes should be to empower the economically weaker sections. It is obvious that social justice, as well as capital investment can never be done unless the country generates more and more wealth by fast pace of growth. Fortunately, India is steadily on right track in this regard, but probably its potential is even more.
