While the COVID-19 pandemic and the Ukraine war have hit hard-hit advanced economies as well as low- and middle-income countries, India’s strong economic fundamentals, under a strong political leadership, have ensured it survives global uncertainties. Be a bright spot in time.
During this turbulent time of global uncertainties, the whole world is looking at India with great hope as the country has strong economic foundation, strong political leadership, unwavering will for reforms and implementation of welfare schemes unparalleled in its scope. is, scale and effectiveness.
The Union Finance Ministry in its latest report for September 2022 has rightly said, “At the halfway point in FY 2022-23, growth and sustainability concerns for India are less than for the world at large.” As measured by the PMI Composite Index, the economic activity level for India during April-September 2022 was higher at 56.7 compared to 51 for the world. Retail inflation for India during these six months was 7.2%, lower than world inflation of 8%. , as represented by the average inflation of major economies, it said.
During the same period, the rupee depreciated 5.4% against the US dollar, lower than the 8.9% depreciation of the six major currencies in the DXY index. The six currencies in the DXY basket are the Euro, the UK Pound, the Canadian Dollar, the Japanese Yen, the Swedish Kronor and the Swiss Franc. Therefore, the panic about rupee depreciation by a section of so-called experts, including a former finance minister, is more optics and politics than economics.
There is no doubt that major countries, including advanced economies, are facing major constraints – initially due to God’s will (the COVID-19 pandemic) and later, largely because of them (the sanctions against Russia). Large-scale supply chain disruptions that made food and fuel unaffordable for poor countries, including some developed countries). Whether war was inevitable or cases could have been spread is a big debate – it needs to be examined separately. But, as far as the impact of Ukraine war is concerned, it is devastating for all, especially for low and middle income countries, but due to its robustness and strong fundamentals, it affects the Indian economy the least. Can do.
Like others, it was a bolt from the blue for India when the Covid-19 pandemic hit the country in the second half of March 2020. But, the Narendra Modi government was well prepared with mature transformational reforms like Noah had the vision to build a ship. In nearly eight years of rule, PM Modi made many small and big changes, but five of them were crucial to save Indians during this disastrous time and helped the economy bounce back faster than anyone else. They were – digital revolution through the JAM trinity (PM Jan-Dhan accounts, Aadhaar identification and mobile connectivity), stable uniform Goods and Services Tax (GST), emphasis on ease of living, taxation reforms and growth through capital investment focus.
After assuming the office of Prime Minister in May 2014, the first major step taken by him was towards financial inclusion – which required a three-pronged approach – PM Jan-Dhan Yojana for banks to link their bank accounts. (PMJDY) to move to the unbanked. for Aadhaar and to provide them infrastructure for mobile connectivity. He announced the scheme on 15 August 2014 to provide universal access to banking services for the poor. The scheme was launched on August 28 of the same year. And now PMJDY is the world’s largest financial inclusion program with deposits of over ₹1.75 lakh crore in over 472 million accounts.
Its full potential was realized during the COVID period, when India faced a tough 68-day lockdown from March 24, 2022. The Modi government immediately sent financial assistance to lakhs of underprivileged including widows, with the push of a button the money reached their accounts. , They received government assistance in times of extreme distress without making any cuts to the middlemen. Modi’s vision saved lakhs of people. This was over and above the free additional food grains of 5 kg per person per month to 800 million poor under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). The program is still ongoing from April 2020 onwards at a cost of over ₹3.90 lakh crore. It is the world’s largest food security program that not only saved the Indian poor from starvation, but also catalyzed the rural economy by creating demand.
The road to such reforms has not always been easy for the Modi government. It has been criticized for introducing the Goods and Services Tax (GST) regime on July 1, 2017. Critics, mainly the opposition, said it was implemented in haste. But, thank God it was implemented, otherwise the country would have debated on it for another decade or two. Knowing full well that the GST regime would take time to stabilize, the Modi government shot. Irrespective of criticism, it continued to reform the new tax system. As a result, India has a strong revenue stream, crossing ₹1.50 lakh crore for the second time since the inception of GST and ₹1.40 crore being the new normal. There was a time when crossing ₹1 lakh crore was a matter of celebration. While the GST unified the country for business purposes, the government significantly reduced the corporate tax to attract foreign investment. As a result, when all major economies, including China, are on the verge of recession, India received a record foreign investment of $84 billion last year.
Hence, Modi’s carefully crafted strategy not only saved the poor but also encouraged economic activity. In addition, tax administration was made more impersonal and people-friendly, compliance cost was reduced and people were encouraged to contribute more in nation building. Ease of Doing Business has been extended to Ease of Living by removing over 1,500 old laws. Self-verification has been encouraged to save people from finding gazetted officers to support their activities. Modi shaped the bureaucracy by restoring trust in the people, he trusted the citizens.
The most notable strategy that saved the Indian economy was the calibrated stimulus by the Modi government which quickly revived the economy without raising inflation. Initially, critics slammed the government for doing nothing to revive the demand. They wanted Union Finance Minister Nirmala Sitharaman to give billions of dollars to people (like many advanced economies) to generate demand. But, the FM was careful. He did not give free gifts indiscriminately, instead, he offered easy finance to bring back production and spent public money on capital investment. As a result, India has relatively low inflation, while many European countries have four decades of record inflation.
While free facilities created problems for advanced economies, Sitharaman’s conservative and balanced approach is now being appreciated across the world. Public expenditure, especially capital investment, has been aggressively pursued by them for its multiplier effect on the economy. While the return on Re 1 spent for revenue expenditure is only 45 paise, the amount spent on infrastructure yields a return of ₹2.45 in the first year and ₹3.14 and ₹3.25 in the subsequent years.
Prime Minister Modi gave a summary of this on Wednesday. Inaugurating Karnataka’s Global Investors Meet on Wednesday, the PM expressed confidence in the steady growth of the Indian economy. In the 21st century, India only has to move forward from its present position. Referring to a sense of global optimism towards India, he said, “These are uncertain times, yet most nations are confident about the fundamentals of the Indian economy.” He is very right.