Since early 2016, GDP growth has fallen for six consecutive quarters, slumping to a three-year low of 5.7% in the April-June quarter, with India losing the fastest growing economy tag to China for the second straight quarter. Apart from a falling GDP growth rate, exports are facing strong headwinds and the industrial growth is the lowest in five years. The current account deficit (CAD) – the difference between inflow and outflow of foreign exchange – rose to 2.4% of GDP in April-June. It really seems odd to witness that India was not many months ago touted as a rare bright spot in a gloomy global economy, with GDP growth outpacing a slowing China.
But let us not forget the fact that all economic indicators are under pressure due to the disruptive process initiated by the government, which is consistently moving on the reform agenda. And the situation is not too bad either as another important number – inflation is still within the statutorily fixed monetary policy target of 4%. Retail inflation hit a five-month high of 3.36% in August which is not alarming as during the monsoon period, vegetable prices generally go up. When it is 3.36% in the spike period, it is under control as per the traditional Indian standard.
At least three prominent ex-ministers are hitting the central government and mainly the finance minister over the above numbers. Ex-Finance Minister P Chidambaram has all the rights to attack the government’s policies being in the opposition. After being in obscurity for long, another former Finance Minister Yashwant Sinha also came out in open writing a hard-hitting article where he attacked the minister more than his policies. He concluded “The prime minister claims that he has seen poverty from close quarters. His finance minister is working over-time to make sure that all Indians also see it from equally close quarters.” A sentence that was in a very poor taste. Former Union minister Arun Shourie has also called demonetisation as the “largest money-laundering scheme ever”. It seems every ex is now driven with the passion to save India’s economic misfortune. Opponents of the government are calling their outbursts ‘exemplary courage’ to stand up and point out.
Everyone has a right to express his or her opinion in a democratic set up. But all the three gentlemen forget that so far Indian leadership (except PV Narasimha Rao to some extent, of which he didn’t get the credit) never had the guts to adopt a disruptive practice. All the major decisions the government has so far taken, be it demonetisation and GST were long overdue. Demonetisation is the greatest step ever taken by democratic India. The singular benefit is that those who used to buy power with black money have been disciplined. In the resultant good and honest work culture, money will flow to the poor. Reacting to the temporary symptoms caused by the strong antibiotic injected into the Indian economy through demonetisation and GST is not the right way of analysis. These were essential to protect the economy from tax evasion and the black market. The much publicized earlier economic boom was the result of huge black money transactions and tax evasion by unscrupulous small and medium sector companies.
The NDA government is a functioning government and can’t be accused of policy inaction. Many radical moves have been attempted. It’s high time Modi critics should come out of their fascination with economic numbers. The benefits will sooner than later far outweigh the slowing down of GDP growth. The noise is pointless and unproductive as economic indicators don’t always tell the truth.