December 15, 2024 04:00 IST
First published: 15 December 2024 04:00 Indian Time
Mr S Jaishankar, Minister of External Affairs, and Mr Ashwini Vaishnav, Minister of Electronics and Information Technology, are urbane, educated and soft-spoken. Mr. Jaishankar had a distinguished career in the Foreign Service where he was considered a liberal. Shri Vaishnav is also the Minister for Railways and Information and Broadcasting. He was in the civil service, resigned, entered the private sector, started his own business and returned as a member of parliament.
I know Mr. Jaishankar is interested in economics. Mr. Vaishnav studied economics as an undergraduate from the Wharton Business School. Both are familiar with the current state of the Indian economy and they recently spoke about the issue at a conference organized by television channel NDTV.
Panic of numbers
Numbers have a way of confusing the best minds. First, Mr. Jaishankar is proud of the size of the economy: “Today, we are a $4 trillion economy with a trade of $800 billion… if you look at foreign investment in India…”. The reality is very different. We are not yet a $4 trillion economy. We are huffing and puffing to cross that number to the target post of a US$5 trillion economy – a goal post the Finance Minister and Chief Economic Adviser has moved three times in the past six years. On trade, at the end of 2023-24, our merchandise exports were USD 437 billion and imports were USD 677 billion. The trade deficit was USD 240 billion. Foreign direct investment in India has declined from USD 84.84 billion in 2021-22 to USD 70.95 billion in 2023-24.
Mr Jaishankar praised “our ability to deliver benefits… food and nutrition support”. If he pointed out that 5 kilos of foodgrains per person would be distributed free of cost, I thought that it was an indication of the problems and low wages especially prevalent in the rural areas. He also praised India for being “the most efficient producer and innovator of vaccines during the time of COVID”. The only vaccine invented in India was Covaxin which showed about 80 percent efficacy. Another vaccine, Covishield, had an efficacy of about 90 percent and was licensed by Oxford-AstraZeneca. Of the 200 million vaccines administered, 160 million were CoviShield.
Not a strong pillar
Mr Vaishnav was no less impressive as he shared his views on India “achieving a sustainable growth rate of 6 to 8 per cent”. He identified ‘four pillars’: capital investment, production, inclusive growth and simplification. However, if we look at the data, India’s real GDP growth rate has averaged 4.99 percent over the last six years, including the Covid-affected year. Capital expenditure by the central government and public enterprises actually declined from 4.7 per cent of GDP in 2019-20 to 3.8 per cent in 2023-24 (Mr Modi’s second term). Manufacturing as a percentage of GDP has also declined from 15.07 percent in 2014 to 13.46 percent in 2019 to 12.84 percent in 2023. Inclusive growth is a debatable issue that cannot be proven or disproved in a brief essay, and I will pass. And, to put it simply, there are more rules and regulations today than there were 10 years ago, especially under regulatory laws. Ask any Chartered Accountant or Company Secretary or Legal Practitioner, they will tell you a great deal of rules and regulations – and intricacies – in laws relating to Income Tax, GST, Company Law, RBI Rules, SEBI Rules, etc. Applied for a passport or registered a sale deed or opened a bank account? I am amazed at the number of signatures required.
Check the reality
Mr. Jaishankar and Mr. Vaishnav can be legitimately proud of the progress we have made in the country since liberalization in 1991. It was the dawn of economic freedom. Shocks in particular occurred in 1997 (Asian financial crisis), 2008 (international financial crisis), 2016 (demonetisation) and 2020 (COVID). However, subsequent governments stood on the shoulders of the previous government(s) and added more building blocks. No government ever started with a slate full of dirt, wiped it clean, and started writing – as the Modi government would have us believe. Take Covishield vaccine: The Serum Institute of India was established in 1996 and has built vast capacity and gained vast experience in biological products. When the COVID opportunity arose, it was ready to absorb AstraZeneca’s technology and become one of the world’s largest vaccine producers. Take the vaunted JAM — an acronym for Jan Dhan Accounts, Aadhaar and Mobile. The seeds of no-frills bank accounts (zero balance accounts) were sown by two RBI governors, Dr S Rangarajan and Dr Bimal Jalan (1992-1997, 1997-2003) and millions of accounts were opened. The first Aadhaar number was issued on September 29, 2010 under the guidance of the Unique Identification Authority of India (UIDAI). The mobile revolution began when the first call was made on July 31, 1995.
If you want to know the current state of the economy, you should definitely listen to the praise of the ministers (it boosts your morale) but also read the essay on the state of the economy in RBI’s bulletin published every month.
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