Modi Govt @9: The Big Bets

The Indian Economy has come a long way in the last 9 years. Here's how pm modi's major moves have paid off

- Ashutosh Kumar

IN JANUARY 2014, Morgan Stanley clubbed India into the group of fragile five nations along with Turkey, Brazil, South Africa and Indonesia. Coming after years of high inflation, interest rate spiral, sliding GDP growth, depreciation of the rupee amidst U.S. Federal Reserve taper of 2013, policy paralysis and a twin balance sheet crisis waiting to gnaw at banks and corporate sector, the sobriquet of fragile five was a new low for the Indian economy.

Macroeconomic indicators favoured the Morgan Stanley thesis. Real GDP growth had slipped from a peak of 9.28% in FY06 to 6.37% in FY14, while retail inflation zoomed to 9.38%, bolstered by skyrocketing food inflation, which peaked at 12.09% in FY14. Between May-August 2013, the rupee depreciated over 15% as foreign institutional investors liquidated both equities and bonds. The shockwaves from the U.S. curtailing the Treasury Bill-buying programme meant to pump-prime its economy out of the 2008 slowdown caught Indian policymakers unawares. No amount of marathon meetings between then finance minister P. Chidambaram, economic affairs secretary Arvind Mayaram, and RBI governor D. Subbarao could salvage the rupee. Monetary tools available were deployed and interest rates were raised. The repo rate went up to 8% in January 2014. Economic growth was a natural casualty.

As India went to polls in April–May 2014, the Bharatiya Janata Party (BJP)-led NDA came to power with the first clear majority in Lok Sabha in 25 years and Narendra Modi took over as India’s 14th Prime Minister. In the run-up to elections, Modi’s poll plank had been economic growth, reforms, and banks’ non-performing assets (NPAs). The motto: Perform, reform and transform.