"It was under these difficult economic circumstances that the present government took office. Its immediate challenge was to restore macroeconomic stability and accelerate GDP growth," says Arvind Panagariya.
The government received an unexpected pat on the back for bringing back the economy on track by NITI Aayog former vice-chairman Arvind Panagariya on Wednesday. Writing in a paper published on the Columbia University website the famous economist offered a thumbs up to the government for successfully reviving the economy. Apart from brave economic reforms that this government pitched, Arvind Panagariya also considers Modi’s assurance to his officers about taking the decisions without the fear of being charged with any wrongdoing as a major factor that helped in revival. Arvind Panagariya resigned as vice chairman of Niti Aayog just two-and-a-half years after he joined the body set up by the NDA government to replace the Planning Commission. It then invited mixed opinions in the media and political circles. However, this thumbs up comes at a time when the opposition is attacking the government for slowing down economic growth by introducing the not needed demonetisation exercise and imperfect goods and services tax (GST). “It was under these difficult economic circumstances that the present government took office. Its immediate challenge was to restore macroeconomic stability and accelerate GDP growth. Going by the available estimates of various indicators, the government substantially met this challenge. While the scope for additional growth acceleration remains, an initial turnaround has surely been achieved,” writes Arvind Panagariya in a paper published on the Columbia University website. Arvind Panagariya claims it to be “the first comprehensive evaluation of the economy during the first three-and-a-half-years of the Modi government”.
In terms of government’s success in bringing down the high inflation rate it inherited from the UPA government Arvind Panagariya writes, “Early in its tenure, the government adopted a target of 4% inflation as measured by the Consumer Price Index (CPI) with 2-percentage point variation on either side of this target permitted. With this target at the center of monetary policy, the Reserve Bank of India (RBI) has successfully brought inflation down. It had stood at 10.1% in 2012-13 and 9.3% in 2013-14. During the three years of the present government, the rate has been successively brought down to 5.9%, 4.9% and 4.5%.”
Arvind Panagariya also mentioned that the Modi has been successful in breaking the bureaucratic log-jam of the previous government by directly intervening to make coordination between different ministries. “The government also took early steps to end the paralysis in a decision-making process that it had inherited. Environmental clearances were speeded up and the Prime Minister assured officers that they could take decisions without the fear of being charged with wrongdoing. He also intervened directly to improve coordination among different ministries,” he said.The paper also showed optimism that more reforms will pitch in the remaining part of the Modi government. Once the NDA secures majority in the upper house as well, the government should have labor laws on its agenda along with the revisit to the land acquisition law, the paper said.