As I have said in many talks, and as the author @pujamehra wrote, the period 2004-13, was a, “lost decade” in terms of economic policy reform, not in terms of GDP growth rate. The latter was due to the lagged effects of 1991-2003 reforms.
The effects of sept 2019-March 2022 #policy #reforms will therefore, likely not be visible in the growth rate, before FY 24 or FY 25. However, the quicker the changes in law are reflected in the rules & procedure applicable to firms, the quicker they will be reflected in growth!
3/gdpi Remember “#India #Shining” campaign in 2003-4: Bcs of lags btwn enactment of policy rfrm into law, their translation into rules & procedures, and decisions by investors, it took years to translate policy reforms into aggregate growth. Wrld econ is in much worse shape today
4/gdpi MacroEc is complicated: Changes in trend growth(after adj for J curve affects) can be related to structural reforms & anti-reform policies. But exogenous shocks can throw economy off its trend line for a few yrs. We’ve had an unprecedented series of shocks since 2020!
5/gdpi Waves of Covid variants, global logistics disruptions, Ukraine war related inflation, sharp oil price rises/declines, all constitute exogenous shocks(-ve/+ve) to Indian economy! The unprecedented series of shocks makes it difficult to define crnt trend gr & changes in it
6/gdpi Average growth during any period (incl 2004-13) is a combination of trend growth(due to reforms), direct effect of exogenous shocks (+ve/-ve) & quality of macro management. Note: fiscal expansion can always pump up economy in SMT at cost of MLT inflation & BOP problems
7/gdpi Good macro economic analysis (on sustained basis ie >5yrs), is incredibly difficult; It requires theoretical & empirical knowledge, up-to-date data on economic variables, access to anecdotal facts (from ground), hard work, and intuition & judgement honed by experience!
8/gdpi Global financial crisis occurred in 2008. It was well managed during 2008-9/2009 so GDP recovered quickly. Excess fiscal stimulus in 2010-11, boosted Gr temp & with retroactive tax, led to mini Bop crisis(2013). Macro-correction helped 2014-16 Gr, black-M crusade upset it
9/gdpi Lesson: Macro economy does not work on auto pilot, particularly in periods of uncertainty & big shocks. It has to be closely watched, analysed & fine tuned. Often it requires big reforms to deal with old wounds & freshly exposed weakness
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