Poised for growth

The Modi government has had a tremendous impact on the Indian economy and its emerging international leadership image

India's economy, as it enters its 71st year of Independence is at a resilient period with an annualised average growth rate of 7 per cent GDP. Today, as the sixth largest in the world in terms of GDP and third largest by purchasing power parity (PPP), India is well on its path to become the third largest economy (by GDP) within the next decade. 
As one analyses the country's performance from 1947, if plotted at the beginning of a horizontal axis, this hasn't been a linear growth. While no developing country can be expected to achieve a linear growth model, India's performance received a massive vertical surge at a single definitive point, which can be traced all the way back to the period of economic liberalisation in the early 90s.
The economic development in India followed a socialist-inspired mode for most of its independent history, including the state-ownership of many sectors. While there was no single central command for the nation's critical sectors, the country's policy leaned towards protectionism aimed towards self-sufficiency, with a strong emphasis on import substitution, industrialisation, economic interventionism, a large government run public sector (which often underlined political shrewdness), scrutinised business regulation and central planning. 
The only liberal aspects were government initiated cross-country relationships for trade and foreign policy. While the capacity of such an arrangement, which prevented leverage between private industries and businesses to international exchange, can be a topic of argument, the reason why the first Indian Prime Minister Jawaharlal Nehru set such a protective environment can be well understood. 
India as a fresh nation did not have the necessary resources or capabilities to compete against international competition at that point of time. What it had was a fiery resolve to move its assets towards regenerating industry and commerce after achieving political liberty and right for self-governance.  
After 45 years of being a closed socialist economy, India's economy moved towards being more market and service-oriented, expanding the role of private and foreign investments. The economic liberalisation of the country was the single radical step, which changed the face of the nation. This got the Indian business mind working and the private sector began to grow in a speedy manner. This also brought about the reduction of import tariffs, deregulation of markets, reduction of taxes, and greater inflow of foreign investments. 
While the rapid free market economy opened up the economic prospects of the country, it has been attributed for the large-scale disparity in the country. However it has to be noted that it is indeed because of this measure that India has outperformed its South Asian rivals, establishing itself high above the order. Now, the country has to aim at competing with the global power list in its next phase of economic order. 
Initiating reform and rejuvenating the economy 
India hadn't really had much of a radical spruce up in its economy since the liberalisation steps undertaken in the 1990s. For over two decades since, the economy was normative, although performing at a record level of over 7 per cent average annualised growth rate. The overall direction of liberalisation has since remained the same, irrespective of the ruling party, although no party has yet addressed a variety of politically difficult issues such as liberalising labour laws and reducing agricultural subsidies.
The onset of the Narendra Modi led BJP government, carried forward over the polls by sweeping promises of initiating reforms and sprucing economy, bore equal measure of heralders and naysayers over the capability of initiating large-scale change. 
In an honest and nonpartisan assessment, the Modi government has in fact had a tremendous impact on the Indian economy and its emerging international leadership image. With sweeping reforms aimed at removing red tapery and reclogging the notoriously slow government processes, along with the groundbreaking measure in the demonetisation process, it is indicative that the administration is keen to undertake bold measures. While this does not compare with the scale or reach of the liberalisation era, it is certainly an attempt at thawing the frozen reform movements.
Stepping aside from the debate over demonetisation, I would rather nudge the government to initiate the next phase of action. Stark reforms have still remained frozen, and it is time for India to emerge as a reformed and capable country. The seriousness will be only judged by the ground reality - bringing in transparency and eradicating the babu culture. Wishing the country the very best on its 71st Independence Day.
The London-based author is Founder & Senior Partner, Zaiwalla & Co. LLP.

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