Former Chief Economic Adviser Arvind Subramanian has offered a nuanced perspective on India's economic trajectory under the Modi government. While acknowledging significant strides in several key areas, Subramanian also raised serious concerns about underlying weaknesses that challenge the narrative of India as a rapidly rising global economic power.
Modi Government's Key Achievements
Subramanian, who served as Chief Economic Adviser during the first four years of the Modi administration, highlighted three major achievements:
- Welfare Delivery: He praised the overhaul of the welfare system, noting improvements in providing essential services like free grain, bank accounts, toilets, and running water to a wider population. The economist specifically mentioned the increasing use of cash transfers, suggesting India is evolving into a system akin to a burgeoning Europe with social insurance.
- Physical Infrastructure: The government was credited with substantial progress in developing and improving physical infrastructure across the country.
- Digital Technology: Leveraging digital technology to enhance governance and India's global standing was also cited as a significant accomplishment.
Serious Under-Accomplishments Beneath Headline Growth
Despite these successes, Subramanian cautioned against an overly optimistic view of India's overall economic health, stating that the widely held narrative of India's rise is 'a bit overdone'. He argued that strong headline growth figures, such as the 7.5% reported by the IMF, mask several critical issues.
Rupee Weakness and Investor Confidence
Subramanian pointed to the sustained pressure on the Indian rupee over the past three years, noting that it has weakened more than almost any other emerging market currency, even prior to the Iran war. He highlighted the central bank's expenditure of hundreds of billions of dollars to defend the currency, suggesting a tangible sense of why investors might be 'fleeing India'.
Limited 'China Plus One' Opportunity
Addressing the 'China Plus One' strategy, Subramanian acknowledged a major success in attracting Apple's manufacturing operations through Taiwanese contract manufacturer Foxconn. However, he emphasized that India has largely failed to capture a significant share of global labor-intensive manufacturing. Despite possessing approximately 25% of the global labor force among developing countries, India's share of low-skill manufacturing exports remains a modest 2.5 to 3%. This indicates that while there have been accomplishments, they do not tell the entire story of India's economic landscape.