Ensconced class interests a hindrance to India’s growth trajectory

ON THE back of recent strong quarters, the Indian economy is now expected to grow 7.3 per cent in the current fiscal year, with soaring hopes that the country has broken some kind of output barrier. The projection is that India will retrace the growth trajectory of the East Asian tiger economies and will, in time, join their ranks.

But before the forecasters get ahead of themselves, there are a few problems to consider. Foremost are the gross domestic product (GDP) figures themselves. The current GDP series is based on data from the 2011-12 period. It is being argued the absence of a back series when the new series was launched in 2015 makes it difficult to do comparative analyses of the nation’s economic performance in previous decades. Current consumption, savings, and poverty rate measurements may be unreliable. This is significant as GDP remains the most useful way to check if employment, income, factory and farm output and sales have gone up or down. Otherwise, policymakers, analysts and investors trying to gauge the health of the economy could be misled.

That said, it is also fair to note that the Indian economy has undergone transformation from a decade ago. One development was the decision to demonetise large-value currency notes in 2016. The objective was to flush out the corrupt who, it was assumed, simply hoarded their ill-gotten cash. Either the corrupt were smarter than assumed, or perhaps there weren’t that many corrupt people. Either way, the exercise was a flop. But it did have the side effect of speeding up the pace of financial digitalisation. Now India, even given its size and stage of development, has digital infrastructure that rivals that of many advanced economies. For instance, last October the government-backed Unified Payments Interface processed 11.4 billion transactions, up 56 per cent from a year ago. Even street hawkers now display QR codes for payments.