Inflation Falls, GDP Surges

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Government of India
Special Service and Features
29-May-2015 17:50 IST

Inflation Falls, GDP Surges

Economy Looks up After a Three-Year Gap

Feature
One Year Of Modi Government

*Nantoo Banerjee
One year may be a short period in the life of a nation. For a democratic government in a country like India, it means
almost a quarter of its life. Government normally avoids hard economic decisions in election year. The performance report
card of the BJP-led National Democratic Alliance governments first full-year in the centre has been a talking point not only
in India but also outside the country for two key reasons.
Firstly, Indias poor economic growth and high domestic inflation between April 2011 and May 2014 had visibly
shrunk opportunities in the worlds second most populous nation. Secondly, increased domestic consumption and high GDP
growth in India could change the economic outlook of both the country and the world. Indias economic stability and growth
means a lot to the world, especially after Chinas economy showing signs of stress and slow-down.
In all fairness, the Narendra Modi government, which was elected to rule the country a year ago, has more than met
the expectation. Indias economic weightage is now the highest ever assigned to any emerging market. International rating
agencies have predicted that India would surpass Chinas economic growth rate at the end of 2015-16.
Global Funds, Asia-Pacific Funds and Emerging Market Funds are overweight on India by 120 to 500 basis points
(bps) compared with their benchmark indices. For instance, these Emerging Market (EM) funds have parked 10.9 per cent of
their money in India as against a country weight of 6.7 per cent in the widely tracked EM Index. Indeed, this is the highest
weight these global funds have accorded to any emerging market in the past 20 years. Of the total Indian assets under
management by foreign portfolio investors, half the amount is under the custody of Global Funds, Asia Pacific and EM
funds. "In the long-term, foreign funds' weightage to India will gradually rise.
India is a compelling story not just because of reforms, growth and quality of companies, it also stands out in the EM
universe. India is increasingly being viewed as an investment destination in its own right, not just part of an EM index," said
Jonathan Schiessl, head of equities at Ashburton Investments, which oversees $12 billion of assets. He says he is not
worried about short-term money flows, though they can be significant. In the last calendar year, Global Funds have raised
their allocation to India by 70 bps to 2.2 per cent; EM funds raised it 260 bps to 10.9 per cent while Asia-Pacific funds by
270 bps to 12.6 per cent.
The foreign fund managers and rating agencies are certainly smart. They have no specific love for any government
or political system, leave alone a head of government. India is looking up. Inflation rate is down and manageable. Last
years economic growth exceeded seven per cent. The consumer price index (CPI) inflation decreased to 5.17 per cent in
March, this year, from 8.59 percent in April, 2014. It is the lowest rate in three months due to a slowdown in food cost. The
inflation rate in India averaged 8.69 per cent from 2012 to 2015, reaching an all-time high of 11.16 per cent in November
2013 and a record low of 4.38 per cent in November 2014. Whole sale price inflation is negative at (minus)2.33 per cent in
March this year. It was 5.44 per cent in April 2014. The real GDP growth is expected to accelerate to 7.4 per cent, making
India the fastest growing large economy in the world; foreign inflows since April 2014 have been about $55 billion, so that
our foreign exchange reserves have come a long way from where the country had started and increased to a record $340
billion; the rupee has become stronger by 6.4 per cent against a broad basket of currencies. Current account deficit would be
less than 1.3 per cent in 2014-15 .Both fiscal and revenue deficit has been showing a declining trend.

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Several pro-poor initiatives, including the highly successful launch of Pradhan Mantri Jan Dhan Yojna (PMJDY) and
Mudra Bank, marked this governments first year of operation. The platform was widened through empowerment, creation
of job opportunities by way of bridging infrastructure deficits, skill upgradation and make in India initiative for developing
India as a global manufacturing hub. It unleashed an era of financial inclusion, by implementing PMJDY. In just 100 days,
over 12.5 crore family have been brought into the financial mainstream.
While the government is committed to improving urban centres by developing smart cities, urban habitations and
Swachh Bharat Abhiyan. The latter has been transformed into a movement to regenerate India. It is not only a programme
of hygiene and cleanliness but, at a deeper level, a programme for preventive healthcare and building awareness.
Interestingly, the corporate sector is providing further boost to Swachh Bharat and Clean Ganga Campaigns by including
these activities under their Corporate Social Responsibilities (CSR).
Embarking upon to more game-changing reforms through the use of Jan Dhan, Aadhar and Mobile (JAM), a unique
combination of three to implement direct transfer of benefits. This innovative methodology will allow transfer of benefits in
a leakage-proof, well-targeted and cashless manner. There would be cut in subsidy leakages but not in subsidy themselves.

While the government is building a national consensus to amend the Constitution to implement the Goods and
Services Tax (GST), it will put in place a state-of-the-art indirect tax system by April, 2016. This will create a unified and
common domestic market by replacing a confusing array of taxes and preventing their cascading effects, it has launched an
ambitious plan to bring electricity to all villages by 2020. The government continues to support important national priorities
like food security, MGNREGA, and kerosene/fertilizer subsidy. The union budget for this year allocated Rs 34,691 crore for
MGNREGA and Rs 1,24.419 crore for food subsidy.
The government is working to provide access to medical services and schools for all. The aim is to provide six crore
urban and rural houses by 2020 with each house to have uninterrupted power supply, clean water and a toilet. The
achievements and programmes are certainly raise the quality of life of Indians and have long-term positive impact on
economy. No matter what some Congress leaders say, India is back on high growth path. International agencies are betting
big on India.
Ms. Nantoo Banerjee is journalist .
(PIB Features)
Email: - featuresunit@gmail.com
himalaya@nic.in

SS-324/SF-324/ 29.05.2015
YSK/ Uma

26-08-2015 03:03