Indian economy had a rocky ride in the last five years. Initially, a clear mandate and a strong government in the centre bolstered hopes that the economy would be on a steady rising graph. But those were soon quashed by the government’s disruptive economic policies. In September 2018, India earned the sixth largest economy tag in the world by overtaking France. Though, just two months later, France pushed India back to the seventh place on the IMF ranking chart.

Modi government’s claim of becoming one of the fastest growing economies in the world, with GDP growth higher than China’s 6.6 per cent growth, occurred in the backdrop of trade wars and declining global growth. The GDP growth rate during the five years of Modi administration never matched up to the double-digit growth rate achieved under the previous Manmohan Singh government.

Even as the UPA-II government had officially crossed the 10 per cent mark, the Modi government’s recalibrated data brought it down to 8.5 per cent, which itself is still a tall order for the government to achieve. India’s GDP rose to 8.2 per cent in 2017, its highest in the last five years.

On the jobs question, the government has come up with little data and stunning silence. Even though it had earmarked jobs quota for the economically backward upper caste, the effects of the policy are yet to take shape. The jobs question had led to outbursts from those in the government time and again.

Former chief economic adviser Arvind Subramaniam had indicated that jobs data is quite varied and that the NSSO’s job sampling data would be an ideal indicator. Former chief statistician of India’s office, under T.C.A. Anant, is learnt to have sent the NSSO data for revision at least a dozen times to the National Statistical Commission. “I cannot comment by when the data would be ready,” said Pravin Srivastava, the present chief statistician of India.

In fact, now India is likely to witness its slowest growth in the last five years. In the 2019 fiscal, India is estimated to register a 7 per cent growth lower than the 7.4 per cent earlier estimate of the CSO. “The decline is most likely to come from a slower farm growth. Industries growth, too, has therefore shown some degrowth,” said Himanshu, associate professor at Centre for Economic Studies and Planning, Jawaharlal Nehru University.

Farm sector growth this year had slowed to 2.7 per cent this year compared to 3.8 per cent a year earlier. Growth in the sector, which creates half of all the jobs in the economy, had consistently dropped from 7.2 per cent in 2014. Two factors—back-to-back drought or bad monsoon years in 2015 and 2016, and oversupply of farm produce—had caused a spate of distress sale and farmer agitations in the last five years.

“Government has responded well to tackling bad monsoons by introducing crop insurance and backing micro-irrigation. But it is yet to learn how to respond to an oversupply situation,” said Sachchidanand Shukla, chief economist, Mahindra Group, one of the largest tractor manufacturer in the country. In the last five years, tractor sales in the country had remained muted, forcing large manufacturers like Mahindra to observe ‘no production day’ at their tractor plants on certain days of the month.

While 8 per cent plus inflation had dogged growth during the previous UPA government era, in the recent five years the country witnessed chilling impacts of deflation. The trend triggered by lower food prices due to over-production by farmers impacted other sectors like mining and industries, which too showed deflationary trends. By January 2019, inflation had lowered to 1.9 per cent. This recovered to 2.53 per cent in February, but still lower than the RBI’s estimate of 2.8 per cent inflation for the year.

Lower prices, however, have proved a bane for most and impacted the profitability of companies. “The real inflation for us is the still very high bank interest rates in India. This makes our manufacturing uncompetitive and restricts growth outside of India,” said K.E. Raghunathan, president, All India Manufacturers Organisation. According to Raghunathan, the manufacturing sector had shrunk massively in the last five years and access to capital has become difficult.

He indicates that surveys conducted by AIMO showed that more than 35 lakh jobs were lost after demonetisation and close to 85,000 businesses shut shop. “The real worry is that most of these businesses or jobs had not restarted since. It may take another five years for manufacturing to revive fully in India,” added Raghunathan.

But not everything has gone south during the Modi government tenure. “Green shoots are visible in the services sector. Exports in the services sector has also risen considerably as Indian service providers are not facing similar cost challenges as in the manufacturing sector,” said Dharmakirti Joshi, chief economist, CRISIL Ratings.

Services export expanded by 22.3 per cent over the last year as the government seems to have taken a number of initiatives to ease tax burden and loan availability for medium and small industries. With elections around the corner, the government is now focussing on lowering oil price, which had not softened despite falling crude oil prices, and on advocating a lower interest regime.

On April 4, the Monetary Policy Committee reduced its key lending rate by 25 bps and brought it down to 6 per cent. Earlier, economist Surjit Bhalla, a former member of the Prime Minister’s Economic Advisory Council, had told THE WEEK that India has among the highest interest rates in the world. The RSS-backed Swadeshi Jagaran Manch, whose convenor S. Gurumurthy is one of the RBI directors, had advocated interest rates to be lowered to 4 per cent. For now, as the industry and demand in the economy remain squeezed, this seems to be the only way to breathe growth.




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