Lack of Reforms Led to Slowdown in Indian Economy

In the period of 2004 to 2016, there was no major economic reform in the Indian economy. Prior to 2004, the NDA government during its six year tenure from 1998 to 2004 had introduced many economic as well as financial reforms and successfully integrated the old system with the new ones. As it is the fact that any reform usually takes time to reflect in form of results. The same was true during that period as well. The benefits of those reforms started reflecting after only 2004.

As a result of reforms in the economy at structural level, the GDP growth rates started accelerating and crossed the mark of 8% in 2006. However this high rate of growth in GDP could not sustain longer in lack of further reforms required by the changed economic and institutional realities which were result of globalization as well as economic and financial integration with the world. Also post 2004 period, government kept on increasing expenditure without arranging for increase in revenues.

By the end of second term of UPA government, there were enough sings of fractures in the economy. This alarmed the government to take curative actions but forthcoming election did not allowed the government to exercise much required discipline.

In 2014, when Modi government came into power, it inherited an economy which was slowly inching towards slowdown. This situation perhaps pushed the panic button and government went on to implement many structure reforms in haste with the hope to break the momentum but without proper preparation for the same. These reforms, instead of breaking the momentum, accelerated the momentum.

These reforms were implemented as shock treatment to the economy and regulators also did not fail to follow the suit. Demonetization, GST, Insolvency and Bankruptcy Code, RERA and orders of Green Tribunal ended up creating confusion and negativity in the economy than giving any clear policy direction. Even till now on account of GST, that persists.