Can They Jumpstart The Economy?

The prime minister and his team need to act quickly and decisively to put the tottering economy back on track. The job, however, is riddled with challenges.

- Shwweta Punj & M.G. Arun

Even as Narendra Modi was taking oath as India’s prime minister for a second term, along with 57 central ministers on May 31, came the grim news the next day on the Indian economy. India’s GDP grew just 5.8 per cent in the January to March quarter of 2018-19, lower than market expectations and behind China for the first time in two years, a ringing reminder to the new government of the immense task at hand. Growth for 2018-19 was 6.8 per cent, lower than 7.2 per cent in the previous financial year. India had just handed the world’s fastest growing major economy tag to China.

THE PRESSING ISSUES

But many had seen this coming. Nearly all economic indicators were pointing towards an economic slowdown. Growth decelerated at a worrying pace—from 8 per cent in the April-June quarter of fiscal 2019 to 7 per cent and 6.6 per cent, respectively, in the next two quarters. Former chief economic advisor Arvind Subramanian said in a research paper that India’s GDP growth rate has been overstated by about 2.5 per cent from 2011-12 onwards, casting a shadow on the country’s over 7 per cent growth claims. While Subramanian is yet to make the details of his research public for further scrutiny, the government has defended the GDP calculation, saying the GDP estimates have been done on accepted procedures.