It is only post 1991 that the Indian economy was taken seriously by the rest of the world. The economy’s honeymoon period began soon enough with the growth of the service sector. Growth rates took off and suddenly India found itself among the world’s fastest growing economies. Under the policies of the Narsimha Rao led government and the able financial expertise of Manmohan Singh, the economic turnaround was successfully overseen. Then came the Vajpayee led NDA which practically did wonders for the economy. Vajpayee’s national highway project was lauded throughout the nation and created the kind of infrastructure that the Indian economy needed.
The economic sanctions after the Pokhran tests hurt India quite a bit. However, the country bounced back on the back of pro-privatization reforms pushed through by Vajpayee. Then, in 2004, a change in government brought the Congress-led UPA to power. This was the Indian economy’s honeymoon period. Growth reached a staggering 9 % and it was balle-balle for the Indian economy. However, it wasn’t entirely due to the policies of Congress. This government had the advantage of an economist Prime Minister and they were riding high on the seeds sown by the Vajpayee government. Growth did reach record highs but the infrastructure was put forth by Vajpayee’s vision. The erstwhile government had to merely steer the economy along the right paths.
In 2008, just a year before the general elections, the global economic meltdown began with the Lehamnn brothers bankruptcy. India survived the worst stage and people thought we were on our merry way again. However, that was not to be. As the Congress-led UPA got re-elected, the economic doldrums began. It exposed UPA-1’s lack of policy review and a subsidy-rich regime which had its effects on the exchequer. The farm-loan waiver scheme, brought forth as an election sop, has had lasting effects on the fiscal deficit.
Slowly but steadily, India’s image as the poster boy collapsed. With a rising fiscal deficit and a sky-rocketing current account deficit (CAD), the Rupee tumbled to record lows. Since then, growth has slumped and in 2013, the finance ministry found it hard to tackle the CAD crisis. Sensex and Nifty were also affected by the downturn as India was declared behind nations like Pakistan and Nigeria on the Ease of Doing Business Index. A weak finance ministry and a feeble Prime Minister’s Office were unable to tide the country over the downturn. It was only after the Congress top brass realized that the subsequent elections would be fought on economical basis and provision of jobs; its archaic license-raj measures were eased. Despite having an economist Prime Minister (perhaps the most able economist considering the 1991 reforms), the Congress led UPA converted the economy to the global underdog.
Recently, on the back of favourable predictions for BJP’s business friendly Modi, the Sensex and Nifty have climbed to record highs. Even the Rupee has become South Asia’s best performing currency with foreign inflows. Foreign investors have shown an optimistic approach towards the economy which in 2013 was downgraded by prominent rating agencies. What India needs though, is a stable government, first of all. Secondly, one that is business friendly, arguable the current BJP. The subsidy regime must be ended with high expenditure on the Food Security Bill and the subsidy on LPG cylinders. The next government must realise that jobs entice the public more and dearer than subsidies. The best way to earn votes in the current scenario is ensuring growth and jobs for the youth. Good Economics is indeed Good Politics!