Economic encomium: On the Finance Ministry’s 10-year review of the economy

A glowing 10-year report card must not stoke complacency on what remains undone

Ahead of the Interim Budget for 2024-25 on Thursday, the Finance Ministry’s 10-year review of the economy with some forward outlook (the likely future situation), serves as a proxy (a written document that officially gives someone the authority to do something for another person, for example by voting at a meeting for them) to the annual Economic Survey. The review signals GDP will grow close to 7% in 2024-25, with scope to go ‘well above’ 7% by 2030. From about $3.7 trillion this year, India’s economy will expand to $5 trillion in three years, making it the world’s third largest, and could hit the $7 trillion dollar mark by 2030, it reckons. Splicing India’s growth story into two phases — 1950-2014, and a ‘decade of transformative (causing a major change to something or someone, especially in a way that makes it or them better) growth’ since 2014 — the review stresses that the state of the economy was ‘far from encouraging’ when Prime Minister Narendra Modi ‘assumed (to accept something to be true without question or proof) power’. Growth was hobbled (to limit something or control the freedom of someone) by structural constraints (something that controls what you do by keeping you within particular limits) such as tardy decision-making, ill-targeted subsidies and a large informal sector, while inflation was unpalatably high. Post-2014 reforms have restored the economy’s ability to grow healthily with “longer and stronger” economic and financial cycles, and made India the fastest growing G-20 nation, it argues. The review asserts that India’s 7% growth when the world is growing 2%, is ‘qualitatively (in a way that relates to how good or bad something is) superior’ to 8%-9% achieved when the global economy grows 4%, perhaps, hinting at a few years of the UPA era. This is debatable (not clear or certain because different people may have different opinions) as India’s economy is generally delinked (break the connection between (something) and something else) from the world with domestic activity driving growth more than exports.

Now that the twin-balance sheet problem inherited (to begin to have responsibility for a problem or situation that previously existed or belonged to another person) from the UPA days has turned into an ‘advantage’, as the review stresses, it must translate into a wider private investment revival. That would hinge on a broad-based consumption rebound (to bounce back after hitting a hard surface) rather than the K-shaped recovery the government vehemently (in a strong and emotional way) dismisses. Four years of 7%-plus growth, post-pandemic, would be commendable (deserving praise) indeed. However, India needs to grow faster to create jobs at the scale its youth need and ensure that a rising growth tide lifts most boats, if not all. The review expects an ‘all-inclusive welfare approach’ to help enlarge the consumption base by expanding the middle class. But those dependent on handouts, such as the 800 million that need free food by the Centre’s reckoning, must progressively shrink for growth to be meaningful and equitable. The report rightly mentions reforms in learning outcomes, health, easier compliances (slowly over a period of time or a distance) for smaller firms, as priorities, with some critical changes at the ‘sub-national government’ level to accelerate growth. It is also essential that flaws in reforms such as GST are fixed and some of the blunt policy tools deployed, for instance, import licences and price controls on deregulated (to remove government controls or rules from a business or other activity) products, that send convoluted (very twisted) signals about India’s ‘open market with predictable policies’ pitch, are reconsidered.

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