India is undergoing another transformation. The India I first visited, in the 1970s, was impressively democratic — with the exception of the period known as the Emergency imposed by then prime minister Indira Gandhi between 1975 and 1977. But its economy grew too slowly. After the balance of payments crisis of 1991, India introduced radical reforms. Over the next two decades its economy became faster-growing, while the political system remained robustly democratic. After the global financial crisis, however, growth slowed. India’s politics is also now moving towards an aggressively illiberal form of majoritarianism. These twin changes are not for the better.
Arvind Subramanian, a former chief economic adviser, has co-authored a paper on the post-crisis slowdown. It notes that every important indicator — investment, credit, profits, tax revenue, industrial output, exports and imports — has weakened sharply since the financial crisis. Yet overall economic growth has supposedly risen. This contradiction persuaded him to challenge the reliability of official estimates of economic growth. His conclusion was that the overestimate of growth between 2011 and 2016 averaged about 2.5 percentage points annually, which would lower average growth to somewhere around 4.5 per cent. If true, this has been really poor.
Alas, there is worse. The economy has been slowing even more dramatically in the recent past, even on the official statistics. These show that growth of gross domestic product slowed to just 4.5 per cent, year on year, in the third quarter of last year. Growth may now turn around. But the slowdown has been dramatic, comparable even to what happened in the crisis of the early 1990s.