Story of India's economy in the past decade: After a high, a sharp slide

The 2010s has been an up-and-down decade for the Indian economy. The country began 2010 on a high — it seemed to have weathered the global financial crisis much better than many of its emerging market peers, and was heading for record levels of growth in gross domestic product (GDP). Since then it has been battered by a slowdown caused by the weakness of its external account, a slow recovery that gained some momentum after the crash in the price of oil following the election of Prime Minister Narendra Modi in 2014, and the twin shocks of demonetisation and goods and services tax. It exits the decade with many problems left unresolved -- including that of non-performing assets, which had already begun to build up 10 years ago — and with growth plumbing historic lows, alongside unemployment and investment. 

Here are the five people who best represent the story of the Indian economy in the 2010s:

 
Narendra Modi: The one man who dominated the 2010s in India is, of course, the prime minister, who stamped his personality not just on Indian politics but on the economy as well. Although in his initial election campaign in 2013-14 he spoke of “minimum government, maximum governance”, his first term featured a retreat from the market in many ways — especially following Rahul Gandhi’s jibe that Modi was running a “suit-boot ki sarkar”. Privatisation efforts never really took off, and trade liberalisation went into reverse as India erected tariff walls. 

Modi’s political capital, his unchallenged authority, and his willingness to take major decisions meant that there were some major steps forward for the economy in his first term — the bankruptcy mechanism, for example, and goods and services tax. But the same instincts also led to inexplicable and damaging decisions such as demonetisation.

Eventually, the optimism that accompanied his early years began to fray, and India enters the 2020s with a slowing economy.              
Pranab Mukherjee: As India entered the decade, it was Mukherjee who was in charge of steering Indian economic policy and its recovery from the financial crisis. In retrospect, his term as finance minister — his third such stint — was heavily criticised. For one thing, it has come to be believed that the fiscal stimulus was not withdrawn swiftly enough, leading the economy to overheat and to a poor fiscal performance. Secondly, there were multiple actions taken by the finance ministry in those years that alienated investors, especially foreign investors — the retrospective tax change in the Union Budget after Vodafone won a case in the Supreme Court being the most memorable among them. 

There are multiple reported instances of occasions when Mukherjee did not take the advice even of his prime minister or the party president, the retrospective amendment being one among them. As a consequence, no personality is more associated in public memory with the wasted years of slowdown and “policy paralysis” than Mukherjee. When he was elevated to Rashtrapati Bhavan, many breathed a sigh of relief.

Raghuram Rajan: The celebrated Chicago economics professor who famously warned about the imminence of the crisis was appointed chief economic adviser to the government in 2012, shortly after Mukherjee departed for Rashtrapati Bhavan. Next year, he shifted to Mint Road in Mumbai as governor of the Reserve Bank of India. His inaugural press conference caused a sensation because of his plain speaking — and also because, at that time of general despair at the gridlock in New Delhi, he seemed to promise a new age of competence and expertise at the monetary authority. Under his stewardship, India took a major step forward by implementing an inflation target for the central bank.

The years prior to that step were marked by consistent high inflation; the second half of the decade has seen inflation stay consistently low by historical standards. The Indian economy is yet to adapt to this structural change, which has had implications for corporate earnings expectations and rural incomes alike. But Rajan’s tenure was also marked by the realisation that the Indian financial sector had a major bad debt problem — an overhang of the crisis years that continues to slow down bank credit growth and private investment. 

Mukesh Ambani: In the years following the change of government in 2014, as the bad debt problem gathered pace, private sector investment languished. Yet some big conglomerates continued to invest — particularly Ambani’s Reliance Industries, boosted by the sustained and high profits from its petrochemicals business. In the 2000s, Mukesh Ambani’s ambitions were constrained by the long-running dispute with his brother Anil, but in the 2010s, the elder brother’s Reliance took a decisive lead in the race.

With the introduction and expansion of Jio, which controversially expanded its footprint even before its formal launch, Reliance signalled that it was shifting its emphasis from the old-economy world of petrochemicals to the new economy of telecommunications and digital technology. Reliance began as a socialist-era enterprise, then thrived in the post-liberalisation age of cheap resources. Its bet on Jio signalled the shift in the 2010s for India to yet another economic paradigm. 

Vijay Shekhar Sharma: A new India, with a new economy, had new entrepreneurs — and perhaps nobody represented this change in the era of the 2010s more than Sharma, the force behind the wallet company Paytm. When the current government sprang demonetisation on an unprepared nation in November 2016, it sometimes seemed the only man prepared for it was Sharma, whose Paytm was set up to benefit from the explosion in the growth of digital payments. 

Sharma, an engineer from the small town of Aligarh in Uttar Pradesh, was markedly different from previous-generation entrepreneurs, as was widely noted when a clip of his high-spirited talk at a Paytm year-ender party after demonetisation went viral. Paytm is still making losses — almost Rs 4,000 crore in the last financial year — but, with another billion dollars in funding sewn up, it seems Sharma retains the confidence of his investors. 

At least three of these figures will likely also feature as central to the next decade’s India story. Will Ambani succeed in embedding Jio as the default telecommunications option for India — and what will the growth of digital connectivity do for the Indian economy and entrepreneurship? Will younger entrepreneurs like Sharma continue to inspire the trust of global investors, and will their big bets on a digital India pay off? And, most of all, how will Prime Minister Modi seek to steer India out of a downturn that is largely driven by domestic factors? The next decade holds the answers. 


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