In 2015-16 India became the world’s ‘fastest growing large economy’ with national income recording a growth rate of 7.5 per cent. One consequence of an improvement in GDP growth rate has been the improvement in most other macro-economic parameters. The fiscal deficit of the central government, current account deficit and debt-GDP ratios have all shown an improvement. However, the decision of the Narendra Modi government to remonetize high value currency notes withdrew over 80 per cent of purchasing power from the economy in mid-November, with new currency notes being replaced slowly. This cash squeeze has reduced both consumption and investment demand, with the economy expected to slow down by 0.5 to 1.0 percentage points. The focus of the government’s recent policy has been to revive both consumer and investment sentiment. What policy options are available to the government to restore momentum to the economy?
Year 2017 began with uncertainty on the economic front as well as on the political and foreign policy fronts. The election of President Donald Trump, the Brexit vote in UK, China’s growing assertiveness in India’s neighbourhood have contributed to this sense of uncertainty on the foreign policy front, while the likely weak performance of the ruling Bharatiya Janata Party in five state elections, being held through the month of February, has generated new uncertainties on the political, hence policy, front. What are the options for the Modi government in navigating its’ way through this phase of geopolitical and political uncertainty?
About the Speaker:
Sanjaya Baru is Distinguished Fellow, United Service Institution of India. He was Media Advisor and Spokesperson of Prime Minister Manmohan Singh (2004-08). He has been Editor, Economic Times, Financial Express & Business Standard (1992-2004 & 2009-11). He was Visiting Professor, Lee Kuan Yew School of Public Policy (2008-09) and Director, Geo-economics & Strategy Programme, International Institute of Strategic Studies (IISS). He was a member of India’s National Security Advisory Board (1999-2001) and of the ASEAN-India Eminent Persons’ Group (2011). His books include Strategic Consequences of India’s Economic Performance; The Accidental Prime Minister: The Making and Unmaking of Manmohan Singh; India and the World: Essays on Geo-economics and Strategy; & 1991: How P.V. Narasimha Rao Made History.