A few days back, the Reserve Bank of India (RBI) had slashed its forecast for India’s economic growth for the financial year 2019-20 to five per cent — the lowest since the economic dip seen in the financial year 2013-14 when the Indian economy wobbled due to the US Federal Reserve’s plans to shut its liquidity tap. The Indian central bank arrived at the five per cent growth projection after revising its forecast for six times in the last 11 months.
In February, experts at the RBI felt that India’s economy would grow at 7.4 per cent; in April 7.2 per cent; in June seven per cent; in August 6.9 per cent; in October 6.1 per cent and in December five per cent. Despite having access to vast amount of data, the central bank of the country does not seem to know in which direction the economy is heading. Does it indicate the lack of skill at the RBI? Or did the RBI hide truth in February in hope that the government would set things right? Or did RBI miss the magnitude of slowdown due to opaqueness in data transmission from the government departments? In any case, it shows that RBI estimates too can change like the weather forecast. One should not be surprised, if the RBI further slashes its forecast in February and the actual growth ends up at 4.5 per cent, which is half of what is expected to take India’s poor out of poverty.
The government, however, continues to live in denial. Prime Minister Narendra Modi himself remains silent, while letting loose other worthies to either defend his economic policy or to reject the growth numbers themselves. One classic example of this was BJP MP Nishikant Dubey, who questioned the very relevance of GDP growth. While speaking in the Lok Sabha, Mr Dubey said sustainable economic welfare of the common man was more important than the pace of economic growth! One wonders if the BJP and the Prime Minister, who was once the darling of industrialists, are in agreement with his position on the economy, which sounds more like the mantra of the Indian government’s long-discarded policy of socialism. Since the BJP claims that people have voted for Mr Modi, the buck should rightfully stop at him. But Mr Modi too stands at a crossroads — does he want history to remember as the one who was chosen by the people to repair the economy, or as the one who wrecked the economy and set the clock back to socialist days? According to Arvind Subramanian, former chief economic adviser to the Government of India, economic growth is already overestimated by 2.5 per cent. If one goes by his theory, India’s actual GDP growth would be 2.5 per cent — the good old Hindu rate of growth — and not the five per cent that the RBI has forecast. Therefore, unless the Modi government sheds its reluctance to admit its mistakes and takes steps for course correction, forget about the $5 trillion economy, India would continue to languish as a lower-to-middle income country for decades to come.
