Economic progress during the last ten years
There are many concerns about Post-COVID India, but it is worth noting how much progress the Indian economy has made during the last ten years. Using satellite imagery to collect luminosity data in order to estimate economic development, is a method that allows economists not to solely rely upon government statistics.
The left-hand photo shows India in 2012; the right-hand photo is India nine years later in 2021. The spread of electric lighting is clear.
For India, even old maps provide another indication of how significant economic growth has been in India: below is a comparison of the extent of India’s national highway system, as the network doubled its road-miles from 10 years ago up to the present.
India’s Economy: The Satellite Photo Tour
By: Timothy Taylor – Journal of Economic Perspectives
India post-COVID
The current economic backdrop:
- The National Statistics Office released the advance GDP estimates on January 7, 2022: in the financial year 2021–22 , India’s GDP growth rate will be 9.2 percent. In 2020-2021 it was 7.3 percent. However, this growth estimate is lower than the 9.5 percent rate growth published by the Reserve Bank of India (RBI) in December 2021. The growth in nominal GDP is estimated to be 17.6 percent.
- The RBI has kept policy rates at 4 percent. The reverse repo rate was kept unchanged at 3.35 percent to nudge commercial banks toward facilitating loan issuance. The RBI has not yet formally announced any “normalization” procedure.
- Inflationary pressures are also mounting. In India, the wholesale price index (WPI) inflation rose to a record high of 14.32 percent in November 2021. The consumer price index (CPI) inflation is 4.91 percent, though that is still within RBI’s comfort zone of the inflation targeting framework of 4 percent (with a band of +/- 2).
Going forward:
Any attempt at fiscal consolidation at this juncture employing capital expenditure compression rather than tax buoyancy can adversely affect economic growth. Public investment—infrastructure investment in particular—is a major growth driver through “crowding-in” of private corporate investment.
If the growth rate does not stabilize around 9% or more, argues Shashi Tharoor, India risks creating a mass of young, poorly educated, unemployed, and angry people – the classic formula for social and political unrest. If the government’s economic incompetence continues, hopes of a demographic dividend may turn into a nightmare.
An accommodative fiscal stance is crucial for India
By: Lekha Chakraborty – National Institute of Public Finance and Policy, India
The Price of Modi’s Economic Incompetence
By: Shashi Tharoor – former UN under-secretary-general
