Monday, May 20, 2019

High Growth, Low Inflation, Strong Fundamentals and a Resurgent New India

By Dr. Sumeet Bhasin


This article is a response to a factually incorrect article by a very senior political leader Sh. Manish Tiwari stating that BJP’s rule has been bad for the economy. Looking at the article, my daughter who has turned just 18 urged me to put the record state and hence, I thought a rebuttal was much warranted.

My initial response to the article was in the form of a series of tweets however, I figured a much more direct and focussed rebuttal would be instrumental to debunk the narrative around the Indian Economy. Manish says that the Indian Economy has been mismanaged under the current government, but I am unable to understand what leads him to such a claim. His entire hypothesis is around the fact that retail petrol prices have increased despite the crude oil prices being lower than what they were during their high times under UPA-II.

The problem here is that he compares international crude oil prices and retail prices without factoring in the Dollar-Rupee exchange rate. Interestingly, he mentions that the rupee has been falling but what he doesn’t take into consideration if the REER or the real exchange rate. The rupee has weakened only against the dollar but if I compare it with 2014 levels of Euro or GB pounds, the rupee has actually strengthened over the last four years. The fall in rupee is largely due to the strengthening of the dollar and due to correction in the nominal rates.

On LPG, I believe he is simply revealing half-truth by stating that the price of a cylinder is Rs. 879. In reality, for those who’re eligible to the LPG subsidy get it at a discounted price as the subsidy amount is directly credited into the bank accounts through the DBT mechanism so the net price that the consumer pays is less than the 879 figure that he is quoting. Besides, does he imply that we should give the subsidy to everyone for LPG irrespective of their income levels? Need I remind him that it is his government that proposed the cap of first 9 and then 12 subsidized cylinders per connection due to fiscal compulsions? But then again, what does facts, truth and data have to do with any of the arguments that present day CONgress leaders make?!

He mentions Current Account Deficit which I found quite cute actually so I thought let me just present CAD in a table so that people can see and compare the performance of UPA and NDA on their own.

He mentions IL&FS and on NPAs but he forgets that the problem of NPAs and of IL&FS originated due to the bad economic policies that originated during the UPA-II era. Most of the current NPAs are caused largely due to bad lending decisions being taken during their regime or by the general slowdown they caused in the economy thanks to their policy paralysis. It is the current government which is in fact resolving some of these long stranding issues that he mentions about.

On the rural sector, he mentions that there is agrarian distress but how can there be an agrarian distress when the consumption growth of rural sector outpaces the consumption growth of the urban India? If there was no growth, no income within the rural economy then why is there such a strong demand for automobiles and other consumer durables from the rural economy? His entire narrative fails to presents us with even one fact on why he believes that the economy is under a state of mess.

The record of UPA-II on the economy is so bad that they have no moral authority make statements such as BJP’s rule has been bad for the economy. However, their low bar is not what we set as our benchmark and we are not striving to do better than them. Our focus is more towards ensuring fast and rapid development of our country and it is that focus which has led us to an impressive 8.2% Q1 y-o-y growth result which was better than what most commentators had anticipated.

The FDI inflow is the highest in the economy due to the great investor confidence and the strong and robust demand suggests that the consumers confidence is also at an all time high. The focus towards development of infrastructure and making India more investor friendly has started yielding rich dividends in terms of growth and job creation while governance reforms and better targeting of subsidies has been instrumental in freeing up much needed resources which are being used for important services such as healthcare and education.

India’s improvement in HDI far supersedes our improvement in our ranking in per-capita income levels which suggests that India is now experiencing a much more broader, inclusive growth which is significantly improving the social aspects of development be it infant mortality rates or life expectancy. The governments focus is on empowering Indians to create a vibrant, dynamic and competitive economy and it is that focus that has brought Indian Economy out of the Fragile Five tag that MMS gave us as now India is the World’s fastest growing major economy. India today is seen as the engine of global growth and not as a risk to global financial stability. Structural reforms such as GST, RERA and demonetization have led to masisve formalization that has benefitted thousands of workers across sectors while schemes like Pradhan Mantri Awaaz Yojna is ensuring that every Indian can get a home to live with dignity.

To list out all our achievements would require a full series of articles as would it take to list out all the sins and failures that were commited by UPA-II in which Manish Tiwari served as a minister. For now I will just put the record straight, NDA-II has laid the foundation for a sustained-long term growth path for a vibrant future of the New India- something that even my 18 year old daughter understands but leaders of CONgress fail to believe in.

Dr. Sumeet Bhasin is Director at Public Policy Research Centre. He tweets @sumeetbhasin.



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