Reality check: Pragmatic policy could outperform check-list reforms
We knocked on the doors of Hell’s darker chamber/ Pushed to the limit, we dragged ourselves in—Decades, Joy Division A decade is a good time-frame to take stock of just how much we pushed the limits, how far inside the darker chambers we dragged ourselves to, and finally, how much changed as an outcome. As the Narendra Modi government completes a decade, it’s not a bad idea to take stock of economic policymaking from a bit of Joy Division lens. A dispassionate analysis of the last decade throws up this point: the government has managed to check almost every major box on the “reforms wish-list’ of India since 1991.
GST? Check. Lower corporate taxes? Check. Inflation-targeting monetary policy? Check.
Conservative fiscal policy? Check. Tilt of public expenditure towards capex? Check. Skin-in-the-game manufacturing focus? Check (production-linked incentives).
There aren’t too many big ideas left on the table, barring those whose global credibility is under a cloud today: free trade principles, for example, are tougher to justify in a world of US barriers and subsidies to home- and friend-shore strategic manufacturing verticals. While debates over implementation minutiae persist, such as GST slabs, the wish list has thinned. There is litigation, but the bulk of it is narcissism of small differences.
Much of what is demanded isn’t politically feasible and doesn’t materially move the dial. How about outcomes? Let’s start with GDP growth. The numbers are puzzling here.
Since 1991, that trend-break year of reforms, India’s average GDP growth print has been about 6.3%. Taking 5-year blocks, growth accelerated from 5.14% annually in the first block (1991-95) to above 6% thereafter. But barring one roaring semi-decade (2006-2010),
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