From Prime Minister Narendra Modi to Finance Minister Nirmala Sitharaman, India’s goal of being a $5 trillion economy has been the main talking point over the past eight years of the NDA government. As soon as he took office, the Prime Minister emphasized his government’s objective of “sabka sath, sabka vikas”, ie growth for all. Economic growth has been mixed over the past eight years – it has been hit even harder by the unprecedented pandemic and then by a war in Europe.
Economists and pundits have indicated that even before the pandemic, demonetization, GST implementation and bad debt problem started impacting India’s economic growth. Now that the war between Russia and Ukraine is creating repercussions on Indian shores as well as around the world, major challenges remain to sustain growth and create a trillion dollar economy.
In the meantime, here’s a look at how the current government has performed, in terms of GDP growth, consumer inflation and unemployment rates from 2014 to present.
India’s real gross domestic product (GDP) growth, a review of the overall performance of the Indian economy over the past eight years, has been mixed. India’s economy on average headed on an upward trajectory from 2014 to 2016. However, GDP growth slowed in the following two years. The data indicated that the growth rate has slowed due to slow growth in agriculture and manufacturing in India. The GDP rate fell further to 3.7% in 2019 due to the crisis in the NBFC sector, the introduction of GST and demonetization.
In 2020, with the COVID-19 pandemic hitting all economies, India saw its GDP growth in negative territory for the first time in four decades. With the country back in shape after the past two years of turbulence, the Indian economy appears to be rebounding. According to the International Monetary Fund (IMF), estimated GDP growth in 2021 was 8.9% and is expected to reach 8.2% in 2022. Like other economies, the omicron wave and now the war between Russia and the hampered economic growth, however, India should be better off than other emerging economies, according to IMF and World Bank estimates.
For consumer inflation, the Reserve Bank of India has a lower tolerance limit of 2% and an upper tolerance limit of 6% for inflation. CPI inflation averaged 5.8% in 2014, the year the Narendra Modi government took power. It remained within RBI’s upper tolerance limit from 2014 to 2019, benefiting from low crude oil prices. However, it crossed the 6% mark in 2020 after the unprecedented global pandemic. Average consumer inflation was 6.2% in 2020. It was mainly driven by rice prices in food as well as high fuel and commodity prices following the lockdowns imposed after the outbreak of the pandemic.
In 2021, it fell to 5.5%. But this year, it is expected to cross the upper RBI threshold again and peak at 6.1%, mainly due to planned rate hikes by the US Federal Reserve and the ongoing war in the Black Sea region, which pushed up the prices of energy, food and raw materials. materials all over the world. Going forward, inflation should be a big concern for the government as well as the RBI as the war in Ukraine shows no signs of abating yet.
The unemployment rate has remained at an average of 5.4% since the Modi government came to power until 2017. Unemployment fell slightly to 5.3% in 2018 and 2019. However, with the pandemic ravaging the livelihoods, unemployment soared to 8% in 2020, the first year of the pandemic. According to Pew research, the middle class shrank by 35 million while the number of people pushed into poverty was 75 million due to the recession caused by the COVID-19 pandemic.
It remained high in 2021 at 6%, according to World Bank data. According to recent data from the Center for Indian Economic Monitoring (CMIE), India’s labor force participation rate has fallen to 40% from 47% in 2016, showing signs of economic distress. CMIE said millions of Indians of working age (15+) have left the workforce, even stopped looking for jobs, perhaps too disappointed in their inability to find jobs and convinced that there were no jobs available. However, it improved in April. Generating broad-based jobs, meaning jobs for youth, women and all sectors, will be a challenge for the current government.