India 2017: Still no achhe din (good days) for the economy

In 2017 the Indian economy appeared to be on a declining trend up to Quarter 1 (Q1) 2017-18 (April-June 2017). The data for Q2 of 2017-18 (July-September 2018) – the last available at the closing of the present article – were better, but insufficient to conclude that the negative trend had been reversed. In turn, this declining trend was the result of long-term causes, going back at least to Financial Year 2012-13, which are briefly analysed in the present article. However, its main thrust aims at analysing the two main economic reforms implemented by the Modi government - demonetisation and the Goods and Services Tax. The following analysis shows that, they, far from improving the situation, worsened it, in particular causing the contraction of the informal sector of the economy, without bringing about any development of the formal sector. As shown by a plethora of journalistic enquiries, this adversely impacted the Indian economy although, because of the way in which data on the economy are collected, at the closing of the present article the actual dimension of this negative impact was not yet visible in the official statistics. What was clear was that, in spite of Modi’s promises during the 2014 electoral campaign, job creation was lower than during the UPA governments. At the closing of the period under review, the government started to react to the worsening economic situation not only at the rhetorical level, but by taking some sensible economic decisions such as reviving the Economic Advisory Council and trying to tackle the NPA-induced crisis of the banks.

Michelguglielmo Torri | University of Turin | mg.torri@gmail.com