As the sun dawned on the new millennium, India, under the stewardship of the Vajpayee-led NDA, embarked on transformative reforms. With the advent of 2004, the UPA ascended to leadership in a nation poised on the cusp of an economic leap. The exhaustive and meticulous reforms of the NDA, notably in sectors like infrastructure, telecom, insurance, and power coupled with extensive road-building programme, (‘Golden Quadrilateral’) had chiseled out an India ready for a marked leap in growth. While the evident results – the widening roads, the proliferation in connectivity, and swift GDP acceleration – bore witness to visionary steps of Vajpayee-led NDA, the UPA’s initial stance displayed a stark divergence. Instead of harnessing this propitious moment to instigate deeper systemic reforms, UPA exhibited signs of presuming that economy would self-steer.
Meticulous reforms and strategic economic thinking were replaced by a so called ‘rights-based framework’ which was only a euphemism for entitlement based post-dated socialism. As the shadows of the 2008 subprime crisis enveloped the globe, the cascading impact of the crisis began to manifest in India with its economic landscape gradually deteriorating. The UPA was forced to respond but unfortunately the cure turned out to be worse than the disease albeit with a time lag. The stimulus package in 2009 which came at the cost of violating all fiscal norms would later lead to double digital inflation between 2012-14.
Further exacerbating strong allegations of several corruption scandals only accentuated the policy paralysis. This period, characterized by economic stagnation and dwindling investor confidence, reached a symbolic nadir when Morgan Stanley dubbed India as one of the “Fragile Five” in 2013. When PM Narendra Modi‘s NDA ascended to power in 2014, they inherited an economic landscape marred by policy paralysis, high NPAs, high inflation, and dwindling growth. The NDA’s initial years focused intently on cleaning up the mess left behind and setting the foundations for a transparent, robust, and inclusive economic framework.
The emphasis was on good governance, efficient delivery of services to the people as well as reforms such as GST, Insolvency and Bankruptcy Code (IBC). Govt Capex became the cornerstone of government spending which increased from ₹2.5 lakh crore in FY 14 to ₹10 lakh crore in FY 24. In hindsight, the sharp focus on financial inclusion and creation of a digital public infrastructure during this period would prove to be of immense worth during the Covid crisis. The pandemic highlighted the fragilities of global economies, even more so than the aftermath of the 2008 financial crisis. Modi government, when confronted with the pandemic’s upheaval, exhibited both alacrity and strategic foresight. It wisely channeled resources where most needed – into vaccines, support for the poor through PMGKAY, and a credit scheme for MSMEs.
After the short-lived but painful economic hiatus due to lockdowns, tangible indicators soon bore witness to this shift. By FY 2021-22, FDI inflow and foreign exchange reserves touched all-time highs. By 2023, while the global economic milieu was still contending with uncertainty and setbacks, India’s narrative was one of resurgence and dynamism. India’s transition from a “Fragile Five” member to a “Bright Spot” emphasizes leadership’s role in crisis navigation. Just as India’s rise from 10th to the 5th largest economy was not a ‘arithmetic inevitability’, the promise of 3rd place in future will require threadbare planning and execution. The author was OSD to Finance Minister Nirmala Sitharaman