A self-inflicted economic slowdown -Puja Mehra
The government has failed to heed recommendations made by economists and bureaucrats on turnaround measures
One of the visitors to pay a courtesy call on Prime Minister Narendra Modi after his re-election this summer was a former Secretary to the Government of India holding a high-profile constitutional office. During the conversation, the Prime Minister asked: “Arthvyavastha ka kya karna chahiye? (What should be done about the economy?)”
The former bureaucrat , who had studied economics at college, replied: “All of that listed in the presentation I made to you in 2015,” referring to the marathon brainstorming sessions the Prime Minister’s Office (PMO) had held nearly four years ago to set the policy agenda for Mr. Modi’s first term. It was a sharp remark to make. For it implied that Mr. Modi’s government had made little progress on translating agenda into action.
Ending the paralysis
Back then, the economy was still in recovery phase. In the final 18 months of its 10 years, the Manmohan Singh-led United Progressive Alliance (UPA) government had moved the economy into repair phase.
For all its faulty handling of the economy, the Manmohan Singh-led government did manage to end the parliamentary paralysis and pass its land and food Bills in 2013, the choice of legislative action dictated by ideological inputs, rather than the wisdom of the then Prime Minister expressed by his key economic aides. A mechanism for handling projects which had been stalling for both economic and administrative reasons was set up in the Cabinet Secretariat and the PMO. The economy that had been named as one of the so-called ‘Fragile Five’ was no longer counted so and had exited the ignoble clubbing.
The policy paralysis —an administrative and political bottleneck — had ended. The fiscal and current account deficits had been compressed, and GDP growth was slowly picking up momentum year after year, a recovery that continued till 2016-17, the year of demonetisation. Inflation remained out of control, also, in part, due to the sharp uptrend in global crude prices. In May 2014, after Mr. Modi’s Cabinet was sworn in, it was made clear to the new government that purposeful steps would strengthen this recovery. Without reforms, though, the recovery would be difficult to sustain.
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