Sen’sational take

Nobel laureate and noted economist Amartya Kumar Sen made a sensational comment on Indian economy when he said on Sunday that India took a quantum leap backwards since 2014. "Things have gone pretty badly wrong. It (India) has taken a quantum jump in the wrong direction since 2014. 

We are getting backwards in the fastest growing economy," said the 84-year-old economist who won Nobel Prize in 1998. He was speaking at the launch of 'Bharat Aur Uske Virodhabhas,' the Hindi translation of his book 'An Uncertain Glory: India and its Contradictions,’ in New Delhi. He co-authored this book with Jean Dreze, a Belgium-born development economist and activist who focuses on India.

Pointing out that the Indian economy is on decline, Sen claims India is now the second worst in the subcontinent after Pakistan. Of the six countries in the region, India was the second best after Sri Lanka 20 years ago. “Now, Pakistan has managed to shield us from being worst,” he went on to maintain, while blaming the central government for deflecting from key issues such as inequalities and the caste system. He also observed that dalits got a raw deal in the current regime.

Kolkata-born Sen is known for his critical comments on the Modi government policies. He opposed demonetisation tooth and nail, terming the move a despotic action that struck at the roots of economy. He received flak from Modi admirers for his comments, which, however, turned out to be prophetic as people losing trust in banking system post note ban started withdrawing money from banks and investing it in real estate and other investment avenues like stock markets, instead.

But does his latest comment reflect reality? It looks like so. Though India is the world's fastest-growing economy, the growth rates, if we compare apple to apple, are far lower than what the country witnessed before 2014. The government move to change the base year from 2004-05 to 2011-12 did the trick and India was able to bag the fastest-growing economy tag.

The growth rates aside, other macroeconomic indicators are also not so encouraging. Indian economy looked a bit rosy as long as crude oil prices remained low. With crude prices inching up and hovering around $80, economic indicators have started faltering as India depends heavily on imported crude, and any rise in oil prices puts pressure on current account deficit (CAD). Therefore, it's no surprise that inflation is raising its ugly head yet again; rupee is on sticky wicket and foreign director investment has hit slow lane. 

Adding fuel to fire, foreign institutional investors are pulling out their investments from India after seeing green shoots in the US economy. As per Bloomberg data, foreign investors pulled out Rs 47,000 crore from India so far in 2018 – the worst outflow in a decade. The number includes equities worth Rs 6,000 crore and debt totaling Rs 41,000 crore. Such outflows were last seen in 2009 when global economy went into recession. Despite all these, the Modi government still paints a rosy picture about economy. Will its posture boomerang a la 'India Shining' campaign in 2004?