There is always either too much of optimism or pessimism on Indian economy.
Srivatsa Krishna does not agree on the pessimism bit. He says there is an invisible hand shaping things and quotes several things PM and his office are doing. This then cannot be invisible hand really. The phrase used by Adam Smith suggests that invisible hand of several individuals does a better job than visible hand of the government. Then it has also come to mean that the individuals pursuing their own interests benefits the society more than if the same individuals taking actions intending to directly benefit the society.
So not really an appropriate connotation. It is actually a case of how govt’s visible hand remains invisible.
Coming back to the article:
While it seems intellectually fashionable to indulge in handwringing and say “nothing is happening” in India on the economic front, is that truly an accurate assertion or just the lament of the blind? Or more accurately, the lament of those who can see but don’t want to see? First a few facts.
According to one estimate, India has overtaken China, for the first time, with the largest inflow of foreign direct investment (FDI) — $63 billion — making it one of the most attractive global destinations for capital. Private equity investments are close to an all-time high of about $15 bn as well. The $1.5 bn Ahmedabad-Mumbai high-speed rail link is happening as a result of a loan at 0.1 per cent interest over a 50-year time period from Japan — terms unbelievable by any yardstick of finance.
The implementation of the 14th Finance Commission recommendations has reduced the Centre’s share of tax revenues from 68 to 58 per cent of all taxes. As a result, despite some reduction in the Centrally sponsored schemes, the total resources, especially the untied funds, flowing to states have increased substantially, providing states with much greater flexibility in deciding their spending priorities. Isn’t this true cooperative federalism?
The country has seen some excellent macroeconomic management despite populist tendencies and electoral pressures. The fiscal deficit has reduced successively in each of the last three years — from 4.6 to 4.1 and 3.9 per cent — and has a target of 3.5 per cent in 2016-17, which if achieved would be the lowest fiscal deficit since 2007. Does this fiscal prudence not deserve credit?
The much abused Enron power project was revived by getting all stakeholders together in a room by the Prime Minister’s Office (PMO) in just four meetings, thereby creating about 500 MW of power generation capacity and preventing thousands of crores of bank loans from becoming non-performing assets (NPAs).
However, this government, too, has its share of promises yet to be fulfilled. For example, the GST is still far away thanks to legislative deadlock (and not executive inaction); PM’s vision of Digital India was inspiring but remains yet to be delivered. Further, in general, the performance of several ministries remains mediocre and several key initiatives such as Ganga Rejuvenation, Smart Cities development, banks recapitalisation etc are non-starters.
But should that become an excuse for ideologically-neutral, right-thinking people to not appreciate the significant successes of this government? What else has been achieved in the last 24 months?
There is little doubt that the govt is trying and some progress is being made. But then the crazy expectations it has raised will always ensure that whatever work it does, it is seen as not much progress/change.
Without raising these expectations, the govt would not have won the elections. Now it remains under the burden of the very expectations it has raised. The smoke around expectations does not allow people to see the visible hand.
Ironically, the current govt would not also want people to see the hand as it is an election symbol of the main opposition party as well. It actually wants the hand to disappear..:-)