India’s Economy Needs Modi to Reinvent Himself — Again
The welfare state is running out of money. Time to champion free trade and competition.
A new image is in order.
Photographer: Narinder Nanu/AFP/Getty
It’s now official: The Indian economy is suffering through a major slowdown, and one that shows no immediate sign of easing. The only surprise is that the estimate for growth in gross domestic product last quarter isn’t even lower than the announced 4.5%.
When the Narendra Modi-led government presented its first budget after being re-elected, it expected growth in 2019-20 to be around 7%. A few months later, the Reserve Bank of India slashed that to 6.1%. It is hard, now, to see how even that rate — relatively slow by India’s past standards — will be achieved.
Hidden in the disaggregated numbers is the story of what has gone wrong. Investment has collapsed. It contracted 3% in real terms last quarter, after growing almost 12% in the same quarter last year. What has grown faster is government spending. It may have been responsible for as much as 40% of whatever growth India did have.