Book Summary: "The Ten Trillion Dollar Dream Dented: The State of the Indian Economy and Reforms in Modi 2.0 (2019-2024)" - Subhash Chandra Garg

Brief about the Book:

Subhash Garg has worked with the Ministry of Finance for two years and briefly understands how an economy functions. Achieving a goal of $10 trillion was a humongous benchmark for 2.0. From designing the policy to implementing the strategy at the ground level, India could have achieved the near target of $10 trillion only if it had been Ceteris Paribus.

The Indian economy received a jolt during COVID-19, but it was too late to revive it and reach its defined yardstick. Each sector starts with agriculture, infrastructure, manufacturing, and services.

This book gives an insight into the accurate picture of how and why the dream of $10 trillion could not be achieved with the actual figures, what best can be done to kick start, and why the $10 trillion was a hypothetical number, keeping the US dollar and INR fluctuating rate into consideration.

Grab your copy by clicking on the below link:

Hard Cover: https://amzn.to/3OooOAh

Kindle: https://amzn.to/3AWpF8g

Book publication date: October 2024.

Brief about the Author:

Subhash Chandra Garg:- As a member of the Indian Administrative Service for more than thirty-six years, Subhash Garg was deeply involved in public administration, the execution of development programmes, managing state-level institutions, making Budgets both at state- and Central-government levels, and policymaking.

He crafted many Budgets as the finance secretary of the government of Rajasthan, the secretary of economic affairs, and the finance secretary of the Government of India. He served as the secretary of economic affairs for over two years, from 2017 to 2019.

After voluntary retirement from the IAS in October 2019, he now works as a policy observer, strategist, commentator, and writer on important economic and financial policy issues, focusing on monetary and fiscal affairs and India's policy. Garg's first book, The $10 Trillion Dream: The State of the Indian Economy and the Policy Reforms Agenda, was published in February 2022. His second book, Subhash Chandra Garg's Explanation and Commentary on Budget 2022–23, includes the results and outcome of Budget 2021–22 and the implementation of Budget 2022–23 and develops a national standard for analysing and commenting on Central government budgets.

He writes opinion editorials and columns for print and online news magazines, regularly speaks to think tanks, educational institutions, and investors, and appears on television channels to discuss the economy, budget, and other public policy matters.

Time Line:

Secretary Ministry of Power - Government of India

• July 2019 to October 2019

Secretary Economic Affairs - Government of India

• July 2017 to July 2019

Executive Director - World Bank

• November 2014 to July 2017

Officer on Special Duty in Dept. of Economic Affairs - Government of India

• September 2014 to October 2014

Pr. Secretary Finance - Government of Rajasthan

• December 2013 to September 2014

Additional & Joint Secretary Cabinet Secretary

• February 2022 to December 2013

Joint Secretary, Ministry of Agriculture - Government of India

• August 2009 to February 2012

Finance & Principal Secretary, Finance - Government of Rajasthan

• April 2006 to December 2008

Principal Consultant - National Institute of Public Finance and Policy, New Delhi

• June 2005 to March 2006

Director and Joint Secretary, Ministry of Finance - Government of India

• May 2000 to May 2005

The Ten Trillion Dollar Dream Dented:- Book Review

Exordium:

Subhash Garg Every Indian aspirates to live a good life, measured by better health, education, housing, and income. Only a developed economy can fulfil this aspiration. India is a growing economy that dreams of becoming a $10 trillion economy.

In The $10 Trillion Dream, the author provides a road map to fulfilling that dream. However, the performance of the Indian economy in the past few years seems to have shattered the dream.

This book presents a comprehensive and critical analysis of the Indian economy's performance under the Modi government from 2019 to 2024. It critically examines the government's policy measures and identifies why India can’t become a $10 trillion economy by 2035.

Foregrounded in rigorous research, The $10 Trillion Dream Dented is an unputdownable work that should encourage policymakers to rethink their approach to managing the Indian economy.

Part I: Production of Value (Supply-Side Economics):-

The author indicates decent agricultural growth based on the three farm laws, which boosted hydroculture in the country, and farmers received some relief from MSP.

The President of India promulgated two ordinances 'intending to boost rural India for farmers engaged in agriculture and allied activities'. The Farmer Produce Trade and Commerce (Empowerment and Protection) Agreement on Price Assurance and Farm Service Ordinance 2020. It was claimed that the first Ordinance 'will create an ecosystem where the farmers and traders enjoy the freedom of choice relating to the sale and purchase of farmer produce, facilitating remunerative prices through competitive alternative trading channels.

Manufacturing growth could have been more active due to the slower pace of manufacturing and excessive relaxation in terms of loans and support provided by the government regarding production-linked incentive schemes. This helped technology manufacturers boost production in chip manufacturing and IT hardware goods. PIL for pharma was launched in 2021 with an estimated budget of 15k cr. The key focus area was to maximize the aid to chronic disease. Under the OEM incentive scheme, automobile PIL got some solace from OEM (Original equipment manufacturer), similar to battery production, drones, and semiconductors.

Service growth was dampened, bifurcating into Finance, Hospitality, Transportation, communication, and public administration. The novel virus badly affected hotels and transportation, whereas the financial sector and real estate saw good growth in the second term of the government.

Part II: Consumption and Investment (Demand-Side Economics):-

The growth in private and government final consumption expenditures saw an enormous flow of capital with the given incentives, whereas household consumption fell sharply after the ill-fated decision to impose highly stringent lockdowns in the wake of COVID-19; there was a sharp recovery in 2020-21 ironically the year witnessed the worst covid-19 wave. the mammoth agriculture support program, which the government runs for poverty alleviation, other than free food programmes, such as MGNREGA, PM Kisan, etc, works from the income side of the households.

Capital formation collapsed and then recovered. Fixed capital formation, the investment in natural capital assets such as buildings, plants, and machinery, usually makes up about 90 per cent of the GCF, with the change in stocks and valuable accounting for the rest. PLIs contributed little to Industries; the most extensive expenditure-side programme to boost capital investment in private-sector manufacturing was introduced precisely and with considerable fanfare during 2.0.

Infrastructure investments suffered in the first three years, the NSA (National Accounts statistic) provides details of capital formation by industry of use, this helps in finding the estimates of capital investment made by the typical infrastructure industries- road, railways or air transport. the first three years of Modi 2.0 turned out to be quite horrific from the viewpoint of infrastructure industries' capital formation. The capital investment in the four industries group of utilities, transport and infrastructure capital formation fo ?23k trillion in 2018-19.

Part III: Labour and Quality of Life (Income-Side Economics):-

The households/individuals in any country/society fall into three groups broadly: a) those who can earn for living a good life, b) those who have innate abilities to work and earn, but for various reasons, inappropriate/opportunities, poor policy framework and so on-are not able to do so, and c) those who have physical, mental or other disabilities that prevent them from earning an adequate income. The job growth claim is quite suspect. The LFPR for all-India male persons during the five years rose from 75.8% in 2022-23, and females rose to 23.3%.

The government claims to lift 135 million MPI (multidimensional poverty Index) poverty. NITI Aayog has added two indicators to its national MPI: maternal health in the health group, taking away half of the weight assigned to child and adolescent mortality, and bank account in the standard of living group with a weight equal to the other six indicators.

Global concern and ambition captured in Glasgow climate action plan, India emphasises that her historical cumulative and per capita emissions have been very low despite being home to more than 17% of the global population. India contributed only about 4% of the global cumulative greenhouse gas emissions between 1850 and 2019.

The government introduced and withdraws the Personal Data Protection Bill 2019, PDP governed by the IT Act 2000 and the IT (reasonable security practices and procedures and sensitive personal data or information) Rules 2011, defined sensitive personal data or information (SPD or I) to mean personal information relating to password, financial information such as bank account, CC, DC or other payment instrument details, physical physiological and mental health.

Part IV: Engagement with the Rest of the World:-

In the national accounts, export-import performance enters into the expenditure side equation. The GDP equals consumption (private and government together) plus investment plus net exports, with net exports being positive. If exports of goods and services exceed imports, the GDP of consumption plus investment gets a boost. On the contrary, if imports exceed exports, the net GDP gets dragged down to the extent of imports exceeding exports.

FDI has three constituents: a) inflow of new foreign investment, b) reinvestment of retained earnings and c) disinvestment/repatriation of the FDI invested. The new FDI inflow is made up of new FDI flowing into the country in a particular year. This brings in additional foreign currency inflows. FDI has a small share in India's capital formation provisional GDP numbers for 2023-24 at current prices, estivated the GFCF, the statisticians' term for capital formation, at ?91.07 trillion ($1k billion at ?83 to a dollar); 31% of ?295.63 trillion GDP.

External financial integration showed good growth in foreign exchange reserves; India's Foreign exchange reserves were $413 billion at the end of Narendra Modi term in 2018-19. The reserves increased to $578 billion after four years in 2022-23, recording an annual growth of 9%. As of 29 March 2024 (the last working day of the financial year), India's foreign exchange reserves stood at $646 billion, which, taken at the year-end 2023-24 level, meant that India's foreign exchange reserve grew by a handsome rate of 9% per annum on the Narendra Modi period.

Part V: Money, Finance and Wealth:-

Currency circulation exceeded pre-demonetization levels. CIC (Currency in Circulation) at the end of 2013-14 was ?13 trillion. With nominal GDP being ?112 trillion in that year, the Cash/currency to GDP ratio amounted to 12%. Coin usage is fast declining, given the gradually decreasing demand for coins, and the RBI placed indents for 31 billion coins in 2017-18 and 29 billion pieces in 2018-19. ?2k currency note withdrawn by asserting that about 90% of the ?2k currency notes issued before March 2017 were at the end of their productive life (the expected lifespan of Indian paper currency note, according to RBI, is four to five years under its clean note policy), the RBI on 19 May 2023, decided to withdraw the ?2k denomination banknotes from circulation.

Saving households are the primary contributors to gross savings in India, which generated GNDI (Gross National Disposable Income) of ?192 trillion in 2018-19, the last year of Narendra Modi 1.0. Households contributed ?38 trillion to the gross saving of ?60 trillion, which is 64%. The corporations mustered up gross savings of ?24 trillion (40%), of which the bulk of gross savings were contributed by the non-financial/real sector corporations-?21 trillion (34%) of total gross savings.

Bank Credit: Despite the late boom, credit grew slower. Bank aggregate credit witnessed two phases of expansion in Modi's 2.0, one slower (until 2021-22) and the other faster (2022-24). Micro, small, and medium industry credit collapsed earlier and picked up a good pace in Narendra Modi 2.0. Outstanding industrial credit in these two segments at the end of 2018-19, when the Modi government completed its first term, was also the same at ?5 trillion (micro and small ?4 trillion and medium ?1 trillion).

Part VI: Budgets and Debt:-

Expenditures on welfare measures for the weaker and poorer sections of society, such as education, scholarships, health, subsidized food, etc., are classified as social services expenditures. Expenditures on agriculture, Industry, infrastructure, and other economic growth-promoting interventions and heads are considered financial services expenditures. Grants and contributions expenditures, as the name implies, are made up of grants and transfers made to state governments, foreign governments, and other persons.

Revenues (primarily tax revenues and relatively minor non-tax revenues), non-debt capital receipts like disinvestment proceeds, and net browsing raised by the government fund the budgeted expenditures. The COVID-19 pandemic lockdowns buffeted corporation taxes in 2020-21, and their collections declined once again, in absolute terms, dropping to ?5 trillion (the second consecutive double-digit decline by about 18%).

The government has made considerable investments in non-commercial enterprises such as NHAI. These investments can only be partially recovered by monetizing the assets created. The roads built by NHAI can be monetized by granting concessions through various models like Toll-Operate-Transfer (TOT), infrastructure investment trust (InVIT), etc. The Modi government announced a significant monetisation policy but needed to follow it more aggressively.

Fiscal deficits are covered by the borrowings the government makes. there are numerous sources for borrowing the funds required. The government can issue bonds or securities in financial markets to raise funds or institute schemes of small savings to collect loans from people directly or subject its employees to contribute to pensions or provident funds, which become available to it as borrowings. There are ways to raise short-term and medium-term borrowings.

Epilogue:

India missed the $5 trillion goal by a wide margin. The prime Minister officially highlighted the goal for the first time in the meeting of the Governing Council of Niti Aayog held on June 15, 2019. He sought to make the state's partners in realizing this mission; while the goal to make India a $5 trillion economy by 2024 is challenging, it is achievable, too.

State governments must recognize their core competence and correctly use their potential. If each state decides to increase its share of the country's GDP, it will accelerate the process of achieving a USD 5 trillion economy.

The possibility of attaining the goal of $10 trillion GDP in 2034-35 becomes more complex if we consider the depreciation of the US dollar. India's GDP goal was set in terms of US$ in 2019.

Making India a developed nation is every Indian's rightful ambition. Development requires high GDP growth and much more.

Learning:

India can become a 10 trillion dollar economy, but it will take severe hustle and grind. Here are a few things that could help make it happen:

Boosting exports: India needs to increase its exports to become a 10 trillion dollar economy. This means exporting more goods and services and finding new markets to sell to.

Encouraging foreign investment: India needs to make investing easier for foreign companies. This means reducing red tape, cutting taxes, and simplifying business setup.

Building infrastructure: A 10 trillion dollar economy can only exist with the infrastructure to support it. India must invest in building roads, railways, ports, and airports to help businesses move goods and people around the country.

Developing the digital economy: As the world becomes increasingly digital, India must ensure it's included. This means investing in technology and ensuring everyone has access to the internet.

Improving education: The more educated a population is, the more productive it is. India must invest in education to help its people acquire the skills they need to compete in the global economy.

Encouraging innovation: India needs to create an environment that fosters innovation. This means investing in research and development and making it easier for entrepreneurs to start new businesses.

Simplifying regulations: India needs to make it easier for businesses to comply with regulations. This means streamlining laws and regulations and ensuring they're enforced consistently.

Making taxation simple: Nobody likes paying taxes, but they're a necessary evil. India needs to simplify and make its tax system more transparent so that people and businesses can understand and comply more easily.

Improving the business environment: India needs to create a business-friendly environment. This means reducing corruption, cutting red tape and making it easier for businesses to access credit.

Improving healthcare and sanitation: A healthy workforce is a productive workforce. India needs to invest in healthcare and sanitation to ensure that its people are healthy and able to work.

These are just a few things that could help India achieve a 10 trillion dollar economy.

Of course, it won't be easy, and it will take some serious elbow grease. But hey, if we can put a man on the moon, we can make India a 10 trillion dollar economy.

Subhash Garg Penguin Publishing Group Penguin Random House Penguin Random House UK Penguin Press Penguin Penguin Business House