In The Media ⁽⁴⁰⁰⁾

Read full article Abstract: Reviewing the fascinating book Progress by Swedish economic historian Johan Norberg, the Economist recently wrote, “People are predisposed to think that things are worse than they are, and they overestimate the likelihood of calamity. This is because they rely not on data, but on how easy it is to recall an example. And bad things are more memorable.” These words aptly summarise the nature of the recent debate on growth in India. During 2014-15 to 2016-17, the real gross domestic product (GDP) at market prices grew 7.5% on average. This growth came on the heels of below-6% average growth during the last two years under the United Progressive Alliance (UPA) government. However, when the Central Statistics Office (CSO) first released its estimate of robust 7.4% growth in 2014-15, most commentators including many of our leading economists rejected it arguing that it did not match their own assessment of reality on the ground. The common refrain was that the economy did not “feel” like it was growing at such a high rate. Citing collapsing corporate profits and…

While the government must be vigilant, it should avoid overreacting to critics. Any claims of weakness in the economy are so far unsupported by data.Read full article Reviewing the fascinating book Progress by Swedish economic historian Johan Norberg, the Economist recently wrote, “People are predisposed to think that things are worse than they are, and they overestimate the likelihood of calamity. This is because they rely not on data, but on how easy it is to recall an example. And bad things are more memorable.” These words aptly summarise the nature of the recent debate on growth in India. During 2014-15 to 2016-17, the real gross domestic product (GDP) at market prices grew 7.5% on average. This growth came on the heels of below-6% average growth during the last two years under the United Progressive Alliance (UPA) government. However, when the Central Statistics Office (CSO) first released its estimate of robust 7.4% growth in 2014-15, most commentators including many of our leading economists rejected it arguing that it did not match their own assessment of reality on the ground. The common refrain…

Read full article Abstract: Few disagree that when the present government took office three years back, the economy had been in great difficulty. Going by the new GDP series, growth had fallen to 5.6% in 2012-13 and 6.6% in 2013-14 compared to 8.3% during the preceding nine years. Inflation and the current account deficit were high. There was deep paralysis in decision-making, infrastructure projects were stuck in all areas, corruption scandals had been breaking out all around and investors were terrified of retrospective taxation. Today the decision making process has been unblocked, infrastructure building has gained momentum, corruption has been reined in and fears associated with retrospective taxation have been assuaged. As a consequence, growth has been restored. The economy grew 7.2% during 2014-15, 7.9% during 2015-16 and 7.1% during 2016-17. Alongside, inflation has dropped from 8% during the first four months of 2014 to below 4% currently. Foreign direct investment during the three financial years of the government has summed to $156 billion with the flow during 2016-17 alone being a record $56 billion. These indicators do not reflect…

A concerted effort has been made to improve the ease of doing business at the level of the states. The government has repealed 1,175 redundant laws.Read full article After a pause of 10 years, economic reforms returned to the policy agenda in 2014. In the last three years, the Narendra Modi government has moved on nearly all fronts: macroeconomic stability, infrastructure, energy, corruption, direct and indirect taxes, foreign direct investment (FDI), closure of sick units, disinvestment, agriculture, urban development, cooperative federalism and social spending. Perhaps the most consequential reform since the new telecom policy launched by Prime Minister Atal Bihari Vajpayee has been the goods and services tax (GST). The reform replaces myriad indirect taxes, currently imposed by the Centre and states, by a single countrywide tax. It also ends the cascading of tax, whereby the current system imposes a tax on tax in many cases. The largest gain from the reform would come from the unification of fragmented localised and regional markets into a single national market for most products and services.

Read full article Niti Aayog turned two years old yesterday. The anniversary offers an opportunity to reflect on how the new institution differs from its predecessor, the Planning Commission, and what functions it performs. Two key activities of the Planning Commission had been to prepare and implement the Five Year Plans and to allocate financial resources to states. Neither of these activities forms a part of the mandate of Niti Aayog. The Twelfth Five Year Plan, which will conclude on March 31 this year, will be India’s last Five Year Plan. Likewise, Niti Aayog does not allocate any financial resources to states. The 14th Finance Commission raised the share of states in the divisible pool from 32% to 42%, leaving no additional funds for allocation to states through Niti Aayog. The annual resource allocation exercise that brought state chief ministers to the doorstep of the Planning Commission is now a thing of the past. Among many functions that Niti Aayog performs, three stand out: promotion of cooperative, competitive federalism; assisting the central government in policy making; and serving as the…