There are daily, nay minute by minute updates on the state of the Indian economy and there are as many views as there are economists and financial experts, many of whom have crawled out of the woodwork in recent times, on the state of the Indian economy today. Many have attributed the economic downturn to the Modi-Jaitley combine calling it an ‘experiment in adventurism.’ In this turmoil there are two school of thought that are emerging. Those in support of the Government see the current turndown as a temporary setback that is exacerbated by the untimely introduction of the Goods and Services Tax (GST), before a fool-proof system was in place and that a little judicious delay would have made the GST implementation smoother. Others see demonetisation as a poor attempt at curbing black money and GST which followed it as the shock that will take India a long time to recover from. Small and medium businesses suffered the most from demonetisation and the agricultural sector too was disrupted. Economists have their own ideas of how to revive the economy. They believe there is need to stabilize the fiscal and monetary policy to prevent the economy from going into a shock. They of course blame the Government for its adventurism based on a shallow understanding of how the economy works.
But while the narrative of gloom and doom persists, World Bank President Jim Yong Kim avers that the recent slowdown in India’s economic growth is an “aberration” mainly due to the temporary disruptions in preparation for the GST. Kim believes that this will get corrected in the coming months and also asserted that GST will have a hugely positive impact on the Indian economy. Kim also stated that Prime Minister Modi has really worked on improving the business environment in India. However, the World Bank President has also taken a view that others before him have not. For the first time, the World Bank has added human capital to its wealth analysis, in addition to produced capital and things like machinery and buildings, natural capital, energy, forests, agricultural lands, and net foreign assets. He says that human capital alone is the key to reducing poverty and growth inequality. Kim feels that India and other developing countries need to enhance investment in education and health as both are integral to building human capital and in turn the economy.
