A government's performance depends to a certain extent on the cards it has been dealt with when it takes charge. The cards are dealt to a certain extent by his outgoing predecessor, as well as the overall condition of the global economy. The first UPA government led by Manmohan Singh was lucky in that sense. The domestic economy was gaining momentum because of the steps taken by his predecessor, Atal Bihari Vajpayee. To add to that, the global economy was on a tear (which ended in 2008 with the Lehman Brothers collapse, which in turn triggered off the global financial meltdown).
So for the first four years of UPA's term, the Indian economy showed some astounding growth, though the government itself had relatively little role in pushing that growth. The second UPA government had to deal with the prolonged slump in the global economy caused by the financial meltdown, which it tried to tackle through a stimulus. The stimulus did help for a bit - debt fuelled private investment took off, and the GDP growth zoomed again for a bit, but it left serious problems.
High inflation and rising current account and fiscal deficits. A few other problems plagued the Manmohan Singh government in this second term. Despite the stimuli in two budgets, growth started slowing down. A relentless rise in crude prices wrecked the budget and fiscal discipline. Recalcitrant allies and accusations of corruption, along with a more active Opposition, ensured that no new initiative went through. Policy paralysis had set in.
Prime Minister Narendra Modi's party won a brute majority in 2014, and he took charge of the government against this backdrop. Things were getting better though. Crude prices fell dramatically giving him an enormous cushion to maintain fiscal discipline while also spending more on infrastructure. The majority in the Lok Sabha also allowed him to try out tough reforms such as GST and IBC. Meanwhile, the global economy was improving and the Indian economy was also growing rapidly.
So what will the next PM, who will take over in the middle of the year, be inheriting from this NDA government? Whether it is Narendra Modi himself who comes back for a second term as PM, or someone else, this is how things look on the economic front at the moment. Oil prices are still moderate and inflation is low. The fiscal deficit is largely under control and the GDP is growing at over 7 per cent. Those are the good news. The bad news is that agricultural distress (and angst) is at an all time high despite many sops announced by the Union and different state governments. Job growth has been minimal, which is creating a big stress. Private greenfield investment is still extremely sluggish. And the global economy is staring at a slowdown.
What should the next Prime Minister and the next Finance Minister do after taking charge? We asked four eminent economists to lay out the economic priorities for the next government.