As the National Democratic Alliance's (NDA's) second successive term in office comes to an end-with every expectation that re-election is on the horizon - it is worth considering how it has dealt with five relatively tumultuous years, at least in terms of economic management.
This column's opinion of the first five years of the NDA government was not entirely positive. It had two major reform successes: The introduction of the Insolvency and Bankruptcy Code, and the formal institution of an inflation-targeting regime at the Reserve Bank of India. What should have been the third, the rollout of the goods and services tax, or GST, was marred by an excessively compromised final version and sequential cuts in the rate that meant it was likely not revenue neutral. Enormous advantages such as a sharp fall in global energy prices. were largely squandered; programmes like "Make in India" turned out sadly to be more about hype to woo investors than substantial, on-the-ground reform. And there was, of course, the enormous self-inflicted wound that was demonetisation.
The global climate in the next five years was not so positive. While the economy - particularly the informal sector was still struggling with the after-effects of the GST introduction and demonetisation, the pandemic hit. The broad trend towards fiscal consolidation in New Delhi since 2013 could naturally not survive this once-in-a-century event. Yet the first major achievement of the second NDA administration was unquestionably the macroeconomic management of this event. The Union finance ministry chose to use a system of guarantees and targeted welfare rather than opening the floodgates of fiscal spending for a more generalised boost to demand. This turned out to be a wise choice. The deficit did not expand as much as it could have. While the pace of consolidation since could and should have been faster, the deficit's downward direction is clear and credible.
Denne historien er fra March 25, 2024-utgaven av Business Standard.
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Denne historien er fra March 25, 2024-utgaven av Business Standard.
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