When the economy dreams of reaching higher and higher levels of Gross Domestic Product, it should be enshrined by the goals of equity and social justice. Father of the nation, Mahatma Gandhi warned that "let no one commit the mistake of thinking that Rama-Rajya means a rule of the Hindus. My Rama is another name for Khudai or God. I want Khudai Raj, which is the same thing as the kingdom of god on earth. The establishment of such a Rajya would not only mean welfare of the whole of the Indian People, but of the whole world. But now,  As Rajan (2020) puts it "communities get trapped in vicious cycles where economic decline fuels social decline …… The consequences are devastating. Alienated individuals, bereft of the hope and the feeling of belonging that comes from being grounded in a healthy community, become prey to demagogues on both the extreme Right and Left, who cater to their worst prejudices."  In addition to such demagogues, most devastating presence is that of caste in many colours and size. Ambedkar (2017) points out that "turn in any direction you like, Caste is the monster that crosses your path. You cannot have political reforms, you cannot have economic reform, unless you kill this monster." Ambedkar prescribes the following for the successful functioning of democracy;

(a)        Absence of glaring inequalities

(b)        Need of a strong apposition

(c)        Equality in law and administration

(d)       Observance of constitutional morality

(e)        No tyranny of majority over minority

(f)        Moral order in the society and

(g)        Strong presence of public conscience.

At present it is shocking that across India, none of these conditions is prevailing.  Jalan (2018) highlights that " in considering future policy options, it is necessary to distinguish between `ends' and ` means'. Thus, political freedom, alleviation of poverty, universal literacy, equal economic opportunities and so on, are objectives or `ends'. While these objectives are non-negotiable, the specific policies or ` means' that are adopted to achieve them are matters of choice". Jalan also asserts that "there are very few developing countries that are as well placed as India to take advantage of the phenomenal changes that have occurred in production technologies, international trade ,capital movement and the deployment of skilled man power. As a result, India today has the knowledge and skills to produce and process a wide variety of products and services at competitive costs".

Amidst macro-economic instability and jobless growth, augmented by rapid technological changes and re-entry of crony capitalism, Indian economy tries to carve out a path of progress of its own. At this juncture Abhijit Banerjee et al (2019) underlines that macro-economic stability is a pre-requisite to sustainable growth and job creation. They point out that "every time macro stability has been traded off to boost growth, the economy has been pushed towards a crisis, the consequences of which have undermined the very growth that was the initial policy focus". They continue to add that "ensuring macro-economic stability has at least three elements to it: maintaining low and stable inflation; ensuring the consolidated fiscal deficit leaves enough space for private investment; and ensuring that the CAD is sustainable and can be financed largely through stable capital flows, to help insulate the economy from sudden swings in global sentiment".

In this context, one has to analyse the retrospect and prospect of reaching five trillion-dollar economy by 2024-25. When we look back, in the pre-independent period India had to comply with 0.89 percent annual growth rate for five decades while population growth was at 0.83%. Independent India until 1970 had to be satisfied with 3% to 3.6% annual growth rate which Raj Krishna called the Hindu rate of growth. During this period, since population was growing at 2.2 per cent, percapita income could grow only at 1.4 per cent.

Bank nationalization of 1969 and 1980 could usher in a phase of deposit expansion and priority sector lending with differential interest rate policy with political will and policy focus on `garibi hattao' or `poverty eradication' worked wonders to build the new India. The green revolution technology which started from mid-1960s took the Indian economy from a hand-to-mouth existence position to one of food self-sufficiency and much beyond to an exporter of food grains. Green revolution technology would not have been successful unless bank nationalisation preceded it with focus on agriculture, micro, small and medium enterprises.

In the 1980s, understanding that as the mixed economy with `commanding heights' in the public sector had a series of inherent weaknesses, which prevented the growth of trade and industry on par with other Southeast Asian countries, policy of liberalisation was started with. This helped India to attain GDP growth of 5.6 percent in the 1980s. However, political instability, over dependence on external debt, unsustainable fiscal policy, among others, led the economy to the worst macro-economic crisis in 1991-92 period.

In order to overcome the economic crisis India needed external financial assistance which was made conditional by International donors like IMF. India had to go for liberalisation, privatisation and globalisation policies. India, after overcoming the crisis, between 1992-93 and 2000-01, could enjoy GDP growth (at factor cost) annually by 6.2%. Between 2001-02 and 2012-13, it grew by 7.4%. Growth rate between 2013-14 and 2019-20 was 6.7% (which was achieved after shifting the base year from 2004-05 to 2011-12 and some data cooking is pointed out later by a member who left NITI Aayog after demonitisation. Rangarajan (2022) underlines that "the best performance was between 2005-06 and 2010-11 when GDP grew by 8.8%, showing clearly what the potential growth rate of India was. This is the highest growth experience by India over a sustained period of five to six years. This was despite the fact that this period included the global crisis year of 2008-09. During this period the investment rate reached a peak of 39.1% in 2007-08 There was a corresponding increase in the savings rate. The current account deficit in the Balance of payments (BoP) remained at an average of 1.9%".

GDP growth: Ups and Downs since 2011-12: First reason was the abolition of planning commission which worked from March 1950 when it was started by an Act of parliament. This body was formulated for the most effective and balanced utilisation of resources with priorities of growth with equity. Its vast experience and knowledge of the nook and corner of the country and resource base is far beyond expression, irrespective of its bureaucratic weaknesses. Though NITI Aayog was constituted in the place of Planning Commission, its rudimentary experience of the macro-economy, budgeting and fiscal balancing could not but fail. Panagaria, the first vice-Chairman of NITI Aayog, voluntarily left the position, after understanding the failure of the institution. After a while, Prime Ministers' Economic advisor Aravind Subramanian also left the position.

Demonetization conundrum:

On November 8, 2016, in one shot, government withdrew 86.4% of the currency in circulation. It may be likened to a situation of a running vehicle that hit stopped as the lubricant is exhausted abruptly. Indian economy hit stopped as its lubricant, cash and currency, is withdrawn at the stroke of a second. The economy was paralysed. This was, perhaps, the biggest blunder that Independent India ever experienced. Then NITI Aayog CEO Rajeev Kumar had to accept in a short while that the `country is experiencing 75 years' serious liquidity crunch and 45 years' high unemployment. As Ramakumar (2023) observes "the RBI printed the new Rs.2000 notes in a new size …….. Consequently, every one of the 2.2 lakh ATMs in India had to be "re-calibrated" It is that series of Rs. 2000 which created such a lot of havoc in the country which was withdrawn from circulation on May 19, 2023.

Attack on secularism and democracy:

Opposition in the parliament pin-points anti-democratic attitude of the ruling national party. They raise the important observation that there is a government led strategy to disrupt parliament and prevent the opposition from raising issues of grave concern to the country and its people such as unemployment, inflation and social divisions, Congress Chairperson (2023) points out. She further highlights serious issues like the misuse of the Central Bureau of Investigation and the enforcement Directorate. There is a systematic effort to undermine the judiciary by even calling some retired as "anti-national" by the Union Law Minister. Similarly, onslaught and intimation of media goes unscrupulously.

Akeel Bilgram et al (2023) remembers "the remarkable achievements of India's distant and more recent past, above all, its singular achievement of learning to live with religious and cultural differences, are now at risk, under the government of Narendra Modi.

Many a schemes in the name of Prime Minister is launched to bring prosperity and growth to girl- child and women.  Lion's share of amounts set apart for such schemes is spent on their advertisements with a view to build up the image of the party amidst voters across the country.  BJP is having majority in the parliament as well as in the Rajya Sabha.  It could easily enact `Women's reservation Bill' 1996. But not even name sake an attempt is made so far with that intention.

Recent GDP growth behaviour

Key to growth lies in the linkage between revenue - savings- capital formation and sustainable debt. Low tax/GDP ratio is a bottleneck to Indian economy's growth. Shome (2017) identified that the Central Government's tax/GDP ratio is around 10 percent, with slightly higher collection from commodity taxes (5+%) than income taxes (5%). He further points out that the economy has to contend with lower revenue buoyancy until the tax administration is able to significantly expand the base of income tax payers. Shome identified high tax/GDP ratio of 46.75 (Sweden) and low tax/GDP ratio of 18.01% in India (P.111).

Figure-1 Tax/GDP Ratio of India (2017-18 to 2023-24) (Gross Central Taxes as

 percentage of GDP)

 

        Source: Union Budget

 

Gross central taxes include Corporation tax + Income Tax + Customs + Excise + Central GST (CGST) +Service Tax. From 2021-22, a little improvement is noticed in the tax/GDP ratio thanks to corporation and income tax improvement (Fig 1). CBGA reports that corporates in India saw profit growth rate between 75% to 62% after the Covid -19 Pandemic. This is attributed to shrinking of the informal economy as the formal sector takes over the market share of the informal sector through e-commerce and similar other means. Union Government's pro-corporate policies like drastic corporate tax cut, huge capital expenditure to improve ease of doing business and reducing logistic costs etc helped the growth of corporate profits.

Non-tax revenue:

According to the World Bank's World Development Indicators (World Bank, 2003), in or around 2002, roughly 39% of revenues of the 166 countries covered there, not just resource rich economics, were from non-tax revenues. However, in India from 2019-20, it is 4% or less than that of the gross revenue of the government (Fig 2). 

Figure-2 Non-Tax Revenue/ Gross Revenue Ratio of Central Government Growth of Non

   Tax Revenue

 

Reference