In reference to this morning’s news report about NSC sub-committee’s estimates of GDP growth series with 2011-12 base. These are yet unofficial. However, the following facts are clear.
Higher growth rate in 2009-2011 and in previous years was funded by untenable fiscal deficit and reckless expansion of commercial bank credit which was surely unsustainable. Consequently, it led to a dramatic economic collapse and growth floundered spectacularly in the last three years of UPA II. This is reflected in Mundle committee’s estimates of the back series as well - 7.05% in 2011-12; 5.42% in 2012-13; and 6.05% in 2013-14. India was branded as belonging to the Fragile Five as the Rupee’s exchange rate went into a free fall during May to August 2013, declining by a whopping 25% in four months.
Likewise, growth of highest ever growth rate during 1987-89 Rajiv Gandhi period was also debt funded and led to a disastrous collapse of growth in 1990-92 and the unmitigated external account crisis that forced India to physically transfer its gold reserves to avoid a debt service default.
Growth rate of four years of Modi Government is still higher than the growth rate of last four years of UPA. This is being managed despite the pernicious legacy of massive NPAs, de-leveraging of commercial bank credit and an uncertain global trade environment and maintaining fiscal discipline and low inflation levels.
Moreover, strong foundations have been laid during these past four years for sustained high and inclusionary growth in the future.