THE BIG BOUNCEBACK

A GDP of over 7 per cent despite the pandemic and the wars augurs well for the economy, even though sustaining the momentum could be a challenge

THE POLICY PARALYSIS IN THE FINAL TWO YEARS of the UPA-II government led to the flight of both capital and investments. Perhaps why the NDA’s narrative of higher growth, more investment and more jobs—achhe din, in short—resonated with the electorate and propelled Narendra Modi to power in 2014. But despite the reforms push to get private investment going and lowering corporate taxes, growth remained moderate in the initial years of the Modi regime. The Covid-19 pandemic was a further setback in its second term, with the GDP plunging to negative territory—right down to -23.9 per cent in the first quarter of FY21, and -5.83 per cent for the year.

The clawback from that economic abyss was slow, with consumer-contact service industries like travel, retail, hospitality and tourism the last to revive. But India did recover, on the back of high government capital expenditure. Growth bounced back to 9 per cent in FY22, albeit on a low base. FY23 provided a better picture of recovery, with GDP growth at 7.2 per cent. The Centre’s ‘White Paper on the Indian Economy’ claims that while the average GDP per capita was $3,889 (Rs 3.2 lakh) between FY05 and FY14, it was

Consecutive years of 7 per cent growth are a good sign, but growth so far was driven by public investment. That is not sustainable at the same pace in the next two years

AJIT RANADE, V-C, Gokhale Institute of Politics & Economics

$6,016 (Rs 4.99 lakh) between FY15 and FY23. A Mumbai-based economist contests it, though, saying the periods can’t be compared, “as base years (to compute GDP data) have changed and the past series are extrapolations and, thus, prone to error”.

Latest government estimates predict 7.6 per cent GDP growth in FY24. A more optimistic Shaktikanta Das, Reserve Bank of India governor, says growth could exceed government expectations, and sustain through FY25. India’s chief economic advisor V. Anantha Nageswaran, in his preface to the two-chapter ‘The Indian Economy - A Review’ thinks likewise. “If the prognosis for FY25 proves right, that will mark the fourth year post-pandemic the

Indian economy will have grown at or over 7 per cent, testifying to the resilience and potential of the Indian economy.”

Economists applaud the achievement, but say more needs to be done. “Two consecutive years of 7 per cent growth is a good record and a good sign,” says Ajit Ranade, vice chancellor, Gokhale Institute of Politics and Economics, “considering we were up against recessionary events and a war. The growth so far has been a lot driven by public investment. That is not sustainable at the same pace in the next two years. Private investment has to replace public investment.”

External factors pose a threat too, chiefly the wars in Ukraine and West Asia and the disruptions in the Red Sea. ■