Despair to jubilation, asserts white paper on 10-year journey

NEW DELHI: From an economy that was on the road to nowhere and faced a crisis in 2014, the Modi govt rescued it from a state of despair and paralysis, containing prices to provide relief to households and repairing public finances through prudent fiscal policies, said the white paper on the economy unveiled in

Parliament

by the Centre on Thursday.
“Worse, the UPA govt, in its quest to maintain high economic growth by any means after the global financial crisis of 2008, severely undermined the macroeconomic foundations. One such foundation that was severely weakened by the UPA govt was price stability,” it said.
Average annual inflation between FY14 and FY23 declined to 5% from an average inflation of 8.2% between FY04 and FY14 after

NDA

govt mounted efforts to remove what it says was the sting of the high cost of living for households. “To tackle the enduring challenge of high inflation inherited from UPA govt in 2014, our govt strategically addressed the root cause of the problem by implementing responsible fiscal and monetary policies,” according to the document released by finance minister

Nirmala Sitharaman

.
It said fiscal discipline undergirded govt’s spending decisions. In 2016, govt gave the mandate to

RBI

to target inflation in the band of 2% to 6%.

“But for the geopolitical developments that significantly escalated global commodity prices, the average inflation in the last 10 years would have been even lower. Yet govt had inflation in control through diversifying supply sources and strengthening buffers of key food items,” according to the white paper.
Highlighting its fiscal management, the paper said that contrary to UPA govt’s approach of expanding the budgets during the high growth periods (pro-cyclical), the present govt has followed a prudent fiscal policy of containing the budget size during peak cycle of GDP growth to generate adequate fiscal space for handling any unforeseen events.

“Therefore, when Covid-19 impacted India, govt was not seen as fumbling for a response. It put in place, without delay, a well-crafted fiscal stimulus that reached out to every sector and every person without showing signs of distress,” said the document.
It said the budget size increased from 12.2% of the GDP in FY19 to 17.7% of GDP in FY21. Despite substantial fiscal stimulus in FY21, the fiscal situation did not get out of hand because the stimulus was prudent and calibrated and not open-ended.
“More importantly, as soon as the immediate need for the stimulus receded, our govt went to work to reclaim the fiscal space. As the economic growth rebounded impressively from FY22 onwards, govt has steadily brought down the gross fiscal, revenue, and primary deficits. The approach has been marked by fiscal prudence and transparency. This is in stark contrast to how the fiscal and revenue deficit was still rising in FY12, three years after the global financial crisis in 2008-09,” said the document.

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