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The fountainhead of India’s economic vitality

“India is the fastest-growing large economy in the world.” Labourers at a construction site on the outskirts of Kolkata.>REUTER

“India is the fastest-growing large economy in the world.” Labourers at a construction site on the outskirts of Kolkata.>REUTER  

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The Modi government has restored the social fabric of trust that had eroded in the UPA years

A new India has risen from the ashes of old India. This new India is bold and forward-looking, an aspirational country soaring on the hopes and energy of 1.35 billion people. And as this new India rises, it leaves behind the corrupt, discredited practices that bedevilled old India.

The stunning rise of new India baffles those left behind. In a recent article, “The fountainhead of India’s economic malaise” (November 18, The Hindu), former Prime Minister Dr. Manmohan Singh states that “The tearing of our social fabric of trust is the fountainhead of our current economic malaise.” In fact, the reality of new India is quite the opposite: the restoration of our social fabric of trust by Prime Minister Narendra Modi is the fountainhead of our current economic vitality. And while Dr. Singh writes about a climate of fear, he surely recognises that those living in fear are the wrongdoers who flourished during his time as Prime Minister.

A rising superpower

I say this not as a member of the party in power, but as a citizen of the country and a student of business. Note that India is the fastest-growing large economy in the world — long-term trend GDP growth rate is steady at about 7%. Inflation, fiscal deficit, and current account deficit have finally been tamed. Primary employment has grown from 433 million to 457 million in the past five years. India’s foreign exchange reserves are at record levels. The country has vaulted from 142 to 63 in the world in the Ease of Doing Business rankings; corporate tax rates have been slashed and are now among the lowest in the world; and India leads the world in new industries such as renewable energy, fintech, and affordable healthcare. The stock market is at a record high, doubling in the past five years, creating more than ₹50 trillion in investor wealth. Foreign Direct Investment is humming along at $40-50 billion per year. Venture capital and private equity are booming, with investments running at thrice the rate during the United Progressive Alliance (UPA) years. Our start-up ecosystem is now the third largest in the world. India has been churning out unicorn companies: there are 20 unicorns right now, and another 30 are expected in the next few years.

Also read: GDP growth down to 6-year low in Q1 of 2019-20 financial year

Growth has moderated recently. This may happen in an open $3 trillion dollar market economy driven largely by private enterprise and buffeted by geopolitical vicissitudes and creative destruction. However, pragmatic business people do not extrapolate from cyclical troughs; instead they build their businesses on the basis of long-term, durable trends. And the trend is clear – India is fast on its way to becoming a $5 trillion economy and is well-positioned to becoming a $10 trillion economy. We will soon be the world’s third largest economy and, quite genuinely, a rising superpower.

Billionaire Raj to People’s Raj

All this has been achieved by Prime Minister Modi’s government in the past five and a half years. India has been transformed politically and economically, but most importantly, the social fabric of trust has been restored. During the UPA years, society had lost trust in government and the rule of law. We began to doubt India’s future. Terrorists attacked the country again and again. Wide swathes of the country were controlled by Left-wing extremists and brigands. Shadowy, extra-constitutional figures ran India. The national government was in a shambles with each Ministry pursuing its own agenda. Government permissions were handed out in hotel lobbies and massive loans granted through phone calls. Crony capitalists feasted on government largesse and there was rampant corruption. Economic growth plummeted while inflation and the fiscal deficit mounted. With India on sale, the UPA years have been labelled the Billionaire Raj. Who dare forget those tragic, desperate times?

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Prime Minister Modi’s government has restored the rule of law, trust in government has been rebuilt, and the country is moving forward with new-found confidence. Banks have been forced to come clean on their bad loans. Rickety business empires based on irresponsible lending are collapsing. Crony capitalists, unable to compete, are failing. Skeletons are tumbling out of the closet as investigations proceed, and the guilty are confronting jail sentences. Those who fled the country to avoid prosecution now face extradition. Note that all these investigations have been undertaken while following legal due process and are fully subject to judicial review. The Billionaire Raj has been dismantled and replaced by the People’s Raj.

The wide-ranging reforms initiated by Prime Minister Modi’s government have transformed the Indian economy and made it more globally competitive. While much of their impact is still working through the economic system, and some disruptions are inevitable, these reforms have already profoundly reshaped economic behaviour. Reforms extend across every aspect of the economy but can be grouped into five major areas: (1) establishing a transparent, rules-based economy free from crony capitalism; (2) restoring and maintaining macro-economic stability; (3) building a robust social safety net; (4) improving infrastructure to world-class levels; and (5) strengthening the financial system. Capital is flowing to innovation-driven businesses and well-governed companies with real cash flows.

Reaching growth targets

Our globally competitive, innovation-driven economy will easily reach its growth targets. With GDP at $5 trillion, GDP per capita will be over $3,600 and at $10 trillion, GDP per capita will reach $6,200 (population growth at 1.2% as per United Nations estimates). At these levels, India will be among other upper-middle income countries. The more prosperous States in south and west India will reach upper-middle income status sooner. India has seen an astonishing reduction in extreme poverty with the total number of such people declining rapidly. There are probably no more than 70 million people living in extreme poverty in India today. With GDP reaching $5 trillion, India will eliminate extreme poverty forever.

Also read: GDP slump will hit $5-trillion economy target, warns NITI Aayog

Prime Minister Modi’s government is set to deliver one of humanity’s most remarkable achievements. We will have brought peace and prosperity to India’s 1.35 billion citizens, lifted everyone out of extreme poverty, resolved long-standing disputes that had cleft the nation, and enabled Indians to live dignified lives. All criticism is welcome in our open democracy, but make no mistake: the Modi decade is enabling India to realise its full human potential and positioning it at the forefront of nations.

Jayant Sinha is the Chairperson of the Standing Committee on Finance in Parliament and a Lok Sabha MP from Hazaribagh, Jharkhand. Views expressed are personal

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Printable version | Dec 8, 2019 3:31:07 AM | https://www.thehindu.com/opinion/op-ed/the-fountainhead-of-indias-economic-vitality/article30131586.ece

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