Economy: Changing lanes - Livemint
Economy: Changing lanes
Official view from the Red Fort ramparts
Mumbai: These past seven years have been a roller-coaster ride for the Indian economy. Here is Prime Minister Manmohan Singh speaking at three Independence Day celebrations in New Delhi. The change of mood is evident.
15 August 2006: “The going has never been as good for India in the past as it is now. Our economy has been growing at an impressive pace of over 8%. Such rapid growth over three successive years is unprecedented in Indian history. Wherever I go, I see our nation on the move. Our industry and services sectors are showing impressive growth. I see a reassuring confidence in our industry in being able to take on the challenge of the rest of the world. The growth of the manufacturing industry has touched 11% in the last quarter, generating many jobs for our youth and workers. I see our service sector competing with the best and earning valuable foreign exchange.”
15 August 2009: “I know that in the last few months high inflation has caused you difficulties. It is the poor who are the worst affected by rising prices, especially when the prices of commodities of everyday use like foodgrain, pulses, vegetables increase. It is for this reason that we have endeavoured to minimize the burden of increased prices on the poor. Today, I do not want to go into the detailed reasons for high inflation. But, I would certainly like to say that we are making every possible effort to tackle this problem. I am also confident that we will succeed in these efforts.”
15 August 2013: “In the recent months, there has been much discussion on the fact that last year our growth rate came down to 5%. This is indeed true and we are trying our best to remedy the situation. However, it is not only our country that is facing economic difficulties. The last year has been difficult for the world economy as a whole. Major European nations are experiencing a slowdown these days. All over the world, there has been a slump in export markets. All developing countries have slowed down. I believe that this phase of slow growth in India will not last long.”
The perilous road to recovery
Realism makes a comeback when hubris get punctured. The rather airy claims that India would coast to inevitable global dominance have thankfully dissipated. They have been replaced by glum assessments that India will be trapped in its current sluggishness for many years to come. The reality is somewhere in between.
Economists use several sophisticated statistical techniques to estimate how fast an economy can grow. A more pedestrian—but also useful—method is to look at the historical record. The Indian economy has grown at an average rate of a little under 7% a year since it began to accelerate in 1980—or over a long period of 33 years that encompasses several business cycles. It is quite likely that the Indian economy will revert to this growth trajectory in the future, somewhere between the stratospheric flight during the boom years and the deep dive over the past couple of years.
The World Bank has recently estimated that the Indian economy will once again see a flight path of around 7% in 2016. It is hard to say for sure given the global turbulence. But there is a lot of work to be done before a robust economic recovery is in place. Some of the key challenges: bringing rampant inflation under control, getting corporate investments back on track, addressing the public finance mess, building infrastructure and putting economic reforms back on the agenda.
Economy: Changing lanes
Official view from the Red Fort ramparts
Mumbai: These past seven years have been a roller-coaster ride for the Indian economy. Here is Prime Minister Manmohan Singh speaking at three Independence Day celebrations in New Delhi. The change of mood is evident.
15 August 2006: “The going has never been as good for India in the past as it is now. Our economy has been growing at an impressive pace of over 8%. Such rapid growth over three successive years is unprecedented in Indian history. Wherever I go, I see our nation on the move. Our industry and services sectors are showing impressive growth. I see a reassuring confidence in our industry in being able to take on the challenge of the rest of the world. The growth of the manufacturing industry has touched 11% in the last quarter, generating many jobs for our youth and workers. I see our service sector competing with the best and earning valuable foreign exchange.”
15 August 2009: “I know that in the last few months high inflation has caused you difficulties. It is the poor who are the worst affected by rising prices, especially when the prices of commodities of everyday use like foodgrain, pulses, vegetables increase. It is for this reason that we have endeavoured to minimize the burden of increased prices on the poor. Today, I do not want to go into the detailed reasons for high inflation. But, I would certainly like to say that we are making every possible effort to tackle this problem. I am also confident that we will succeed in these efforts.”
15 August 2013: “In the recent months, there has been much discussion on the fact that last year our growth rate came down to 5%. This is indeed true and we are trying our best to remedy the situation. However, it is not only our country that is facing economic difficulties. The last year has been difficult for the world economy as a whole. Major European nations are experiencing a slowdown these days. All over the world, there has been a slump in export markets. All developing countries have slowed down. I believe that this phase of slow growth in India will not last long.”
The perilous road to recovery
Realism makes a comeback when hubris get punctured. The rather airy claims that India would coast to inevitable global dominance have thankfully dissipated. They have been replaced by glum assessments that India will be trapped in its current sluggishness for many years to come. The reality is somewhere in between.
Economists use several sophisticated statistical techniques to estimate how fast an economy can grow. A more pedestrian—but also useful—method is to look at the historical record. The Indian economy has grown at an average rate of a little under 7% a year since it began to accelerate in 1980—or over a long period of 33 years that encompasses several business cycles. It is quite likely that the Indian economy will revert to this growth trajectory in the future, somewhere between the stratospheric flight during the boom years and the deep dive over the past couple of years.
The World Bank has recently estimated that the Indian economy will once again see a flight path of around 7% in 2016. It is hard to say for sure given the global turbulence. But there is a lot of work to be done before a robust economic recovery is in place. Some of the key challenges: bringing rampant inflation under control, getting corporate investments back on track, addressing the public finance mess, building infrastructure and putting economic reforms back on the agenda.
