Indian Economy – Foundation and Development

Growth of Indian GDP does not make the story any longer. In fact, we have become so habituated to see our economy grow in leaps and bounds over the years that we have started taking this growth for granted. However, more than the growth rate it is the quality of growth that is more significant. The growth must be holistic, inclusive and sustainable for the constituents of the economy to reap its full benefits.

The last five years have been truly momentous for the Indian economic growth. The focus that has been laid on the following five elements has laid a strong foundation on which an edifice of a strong economy can be created in the next five years.

I. Social Inclusion – A huge divide between the Haves and the Have Nots can never augur well for any economic stability. Efforts have been made to narrow down this gap by reaching out to the marginal sections of the society. Initiatives on socio-economic inclusion undertaken at various levels like providing support for fundamental essentials including housing, education, basic utilities and sanitation have strengthened the building blocks of our economy. With roughly 35 million households getting electrified in recent years, this will have a ripple effect on the economy by pushing up the demand for FMCG goods that are powered by electricity. By providing such goods and facilities to people at a fair, sensible and affordable cost, a large section of our society can turn into change agents for the future.

II. Quality of life – Economic investments made on improving the living conditions of population through subsidies on Gas, Food and Employment Guarantee schemes have raised the quality of life and have opened the doors for a wider spread of economic gains. Also, higher banking penetration has enabled the plugging of leakages in the subsidy distribution process. The banking penetration has tripled from about 30% to over 90% over the years. With subsidies reaching the beneficiaries accounts directly, the Rs.700 Cr odd subsidies spent by the Central/State governments did not leak through the distribution pipeline any longer. Also, in order to ensure the development of a sustainable economy, gradual withdrawal of subsidies through schemes providing for alternate means of employment is underway.

III. Infrastructure Development – We have witnessed a spurt in our infrastructure development over the past few years. Our Road network, Ports, Airports, Air connectivity, Rail network, Irrigation facilities, Logistics & Distribution efficiencies etc. are far better today than ever before. This has enhanced economic productivity through improved operational efficiencies, reduced costs and creation of a robust business network.

IV. Probity -  Measures such as Demonetization, GST rollout, RERA introduction, crackdown on shell companies & benami assets, clean up of Banking systems, launch of Insolvency & Bankruptcy Code, strengthening Corporate Governance & ethics are just a few examples of an effort to create a strong, efficient and compliant business ecosystem that has had a significant impact in defining the contours of our economy. Causing destruction of inefficient systems and establishments was necessary to pave way for the emergence of a robust and durable economy. Clean up of Bank books through proper reporting and clean-up of NPAs, where a sizeable amount of muck had built up, was as much a prerequisite as demonetization to secure efficient launch of some of the subsequent initiatives like GST and IBC. This ecosystem has forced inefficient establishment and businesses to either fold up or get acquired by more efficient enterprises thereby raising the overall economic efficiencies.

V. Economic Climate – Efficient monitoring of economic indices like fiscal deficit, inflation, interest rates, forex reserves, trade balances etc with a view to undertake timely and proactive interventions for course correction has gone a long way in improving our economic climate and fundamentals. Support provided to a strong startup ecosystem for augmentation of business opportunities using innovation has begun to show palpable difference in the economy.

The gestation period of bringing about economic reforms can be tediously long and the initial phases may cause greater pain and hardships leading to an overall cynicism. However, if these efforts are followed up unrelentingly and efficiently, it leads to the creation of a sound and durable economy.

Having created a strong foundation in the last five years, the focus should now be on creating an edifice of a strong economy on this foundation. Several unfinished tasks like bringing in reforms on Land, Labour, Judiciary and Agriculture require urgent focus. A strong political leadership and a robust business intellect will certainly catapult India as a global economic superpower in the coming years.