Festival cheer and beyond: Admirable sangfroid in the face of negative news

The government's recent spate of programmes should be expected to generate some momentum, but the macro-economic numbers are not encouraging, notes T N Ninan

This is festival time, and good news has seeped from the buoyant stock market into the rest of the economy, or the other way round. The continuing export boom, the surge in tax revenue, optimistic industrial production numbers, falling inflation, shrinking pile of bad debts with banks, booming corporate profits and continuing growth in the unicorn tally have encouraged the finance minister to forecast near-double digit growth this year and the next, and rapid growth further into the future.
 
On his part, the prime minister has claimed that no government has been as active as his, which – going by the evidence of the last six months – is certainly true. The heady rush of announcements (Gati Shakti, asset monetisation, sale of Air India, telecom rescue, promotion of electric vehicles, ambitious renewable energy targets, scrapping of retrospective taxation and an expanding list of productivity-linked incentives for chosen industries) has been accompanied by expansive claims of achievements, like 30 million houses built with government assistance. All these contrast with the paralysis of the Manmohan Singh government midway through its second term.

 
Not all government initiatives will succeed, especially given its continuing weaknesses on the policy front, and much of the upswing in economic activity looks impressive because comparisons are usually with the low base of 2020. Thus, in its latest assessment, the International Monetary Fund says India will be the fastest growing economy once again in 2021 and 2022. But bring the previous two years into the picture, and India’s four-year average GDP growth will be no more than 3.7 per cent, against a global average of 2.6 per cent. That’s nothing much to shout about, given that a developing economy is supposed to outpace mature, developed economies. In Asia, over the past decade Bangladesh, China, Vietnam and Taiwan have done much better than India, while Thailand, the Philippines and South Korea have matched it despite being at much higher income levels.

 

Still, there is a perceptible change of mood which could create its own growth momentum as people are encouraged to spend on consumption, and companies to invest. And the government’s energetic pronouncements have served to push into the background the defining images of April-May, such as the oxygen shortages and shallow graves on the riverside. Indeed, after a slow start, the vaccination programme is generally seen as a success story. A third Covid wave may still come, but seems less of a threat than before.
 
The government’s sangfroid in the face of negative news is also to be admired, if that’s the word. Skillful management of legal processes has helped it push the Pegasus snooping scandal off the front pages. Growing international criticism of the erosion of civil rights has been brushed off with typical whataboutery, or a Mao-style conflation of human rights with welfare measures (the “iron rice bowl”). Indeed, even as China squats on large tracts of land in Ladakh, the home minister finds himself able to proclaim that no country will dare intrude across India’s borders. Clearly, the facts are irrelevant. Sometimes, they are simply suppressed (like the drop in consumption that showed up in the latest consumption survey, implying a certain increase in poverty numbers), or ignored (as with employment numbers). Still, the occasional bad news does break through as a reminder that all is not well – like India dropping in the international hunger rankings.

 
The key question is whether the finance minister’s optimism about sustained rapid growth is warranted. The government’s programmes should be expected to generate some momentum, but the macro-economic numbers are not encouraging. Total investment in the economy in 2021 is estimated at 29.7 per cent, down from 39.6 per cent a decade back. The fiscal deficit for Union and state governments combined is 11.3 per cent, up from 8.3 per cent in 2011. The debt-GDP ratio is now 90.6 per cent, up from only 68.6 per cent. The much better indicators of a decade back did not last, and growth slowed. One must hope the opposite happens now, with today’s energy and optimism being sustained.