According to RBI Monetary Policy Committee (MPC) Member Ashima Goyal, the Indian economy has begun to perform well despite the unfavorable global environment because the Modi-led government carried out numerous reforms over the past nine years, improving important macroeconomic indicators.
Goyal was questioned about how she would contrast the nine years of the Modi-led NDA government’s tenure with the ten years of the UPA government’s tenure (2004–14).
“The (Modi-led) NDA inherited double deficits (high fiscal deficit and high current account deficit), high inflation and weak banks, but has improved all these, and implemented other reforms so that the economy has begun to do well now even in an unsupportive global environment,” she asserted.
Prime Minister Narendra Modi assumed office for the first time in May 2014. Modi led the Bharatiya Janata Party (BJP) to a majority of its own in the 2019 Lok Sabha elections.
On some US-based economists’ claim that India is overstating economic growth, Goyal said it is absurd to over-interpret quarterly results that are subject to seasonal and base effects as well as measurement issues.
“Q1 growth is high because of the base effect due to a steep fall in growth to -23.2 in Q1 FY21 during the pandemic.
“Growth rebounded to 21.6 in Q1FY22, 13.1 in Q1FY23, and 7.8 in Q1 FY24,” she explained.
Last month, India recorded GDP growth of 7.8% during the April-June period of 2023-24, the highest in the past four quarters.
While observing that the corresponding annual rates of growth in the last three fiscal years were -6.6%, 9.1%, and 7.2%, she said the base effect is slowly fading, but this does not mean growth is decelerating.
“All kinds of data indicators suggest growth is robust,” she said, adding that annual growth above 6% is excellent during a global slowdown.
Noting that some US-based Indian-origin economists had argued that the fall in Indian growth in the 2020s was because of fundamental flaws that persist, Goyal said India’s robust post-pandemic recovery has proved them wrong. According to her, if there were fundamental problems, then India would not have done so well despite continuing global shocks.
