The GDP Debate: Modinomics Unplugged

    03-Sep-2020   
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India has fared much better than almost every major, comparable, international peer in the first half of calendar year 2020, thanks to stellar reforms in the last six years by Prime Minister Narendra Modi, which have strengthened the absorptive and shock taking capacity of the economy. India became the 5th largest economy in the world after surpassing the United Kingdom in February 2020 and 6th largest after overtaking France in 2019.
 
GDP India_1  H
 
 
What is the simple definition of GDP? What is GDP of a country? Gross Domestic Product, abbreviated as GDP, is the total value of goods and services produced in a country. GDP is measured over specific time frames, such as a quarter or a year. GDP as an economic indicator is used worldwide to show the economic health of a country.
 
Hence, the GDP growth rate of India is an essential indicator of the country’s economic development and overall health. Different countries have different methods to calculate GDP. How is GDP calculated?The central statistical office, or CSO, is responsible for compiling data for calculating GDP. It aggregates the GDP data by coordinating with several federal and state-run agencies. Once the data collection process is completed, the task of calculating the GDP begins.
 
There are two key methods to arrive at the GDP number---(1) Known as GDP at factor cost, this is an income based.(2) The second method is the more accurate and scientific, expenditure-based method or GDP at market prices.Further, the nominal GDP is calculated using the current market price, and real GDP is arrived at, after adjusting for inflation.
 
> Expenditure Approach:GDP =C + I + G + (X-M)
 
> The Expenditure Approach says GDP = consumption + investment + government expenditure + ( exports – imports).
 
> The income approach on the other hand,is a sum total of the factor incomes or payments paid to the factors of production,for economic activity in the given period.
 
> Income Approach: NI = W + R + i + PR
In effect,Income Approach says, Net National Income = Wages + Rent + Interest + Profits.
 
> GDP at Factor Cost = Wages + Rent + Interest + Profits+ Depreciation + Net Foreign Factor Income.
 
> GDP at Market Prices= GDP at Factor Cost+ Indirect Taxes – Subsidies.
 
GDP at factor cost (FC) was the most commonly used figure during the erstwhile Congress led UPA regime.While the GDP at factor cost,a relatively outdated,income based method, reveals which industry is doing well, the expenditure-based GDP method,called GDP at market prices (MP),is more broad based,modern and exhaustive and indicative of the status of different areas of the economy;for example,it showcases how trade is doing or whether investments are on the decline,so on and so forth.
 
For GDP at factor cost (FC),data is taken from eight sectors, namely agriculture; mining and quarrying; manufacturing; forestry and fishing; electricity and gas supply; construction, trade, hotel, transport and communication; financing, real estate and insurance; and business services and community, social and public services. For the calculation of expenditure-based method or GDP (MP), all the spending incurred on final goods and services are added that include consumer spending, government spending, business investment spending, and net exports.The Modi government switched from GDP (FC),to GDP (MP) method in line with international best practices.Hence those who allege that the switch was made to pad up GDP numbers by this government,are blissfully ignorant.
 
The first thing we must understand from the above discussion is that, GDP (FC) =GDP (MP) minus indirect taxes plus subsidies.We can take the following example to understand this.We suppose that in a particular year, GDP (FC) is Rs. 100. In the same year,say indirect taxes are Rs. 20 while subsidies are Rs. 25. So, we can arrive at GDP (MP) using the following equation:GDP (MP)= GDP (FC) +Indirect Taxes - Subsidies;So, GDP (MP) = Rs. 100 + Rs. 20- Rs. 25 = Rs. 95.
 
Basic difference between GDP at factor cost and gross value added (GVA) at basic prices is that,production taxes are included and production subsidies are excluded from the latter.Now, GDP at market prices would be arrived at, by adding product taxes and deducting product subsidies from GVA at basic prices.If the Government tries to raise the subsidies or lower the taxes,the divergence between GDP (FC) and GDP (MP) will be wider.
 
Internationally,countries like USA, UK,Japan,Germany,etc use the GDP(MP) method as it is more reliable,scientific and takes into account full impact of taxes and subsidies. Prime Minister Narendra Modi is only following global best practices.Why has the leftist media and Congress been so rattled by the new GDP methodology? What is wrong in discarding the outdated GDP (FC) method? Why should Congress doubt the honesty and veracity of the GDP (MP) mechanism,only because it showcases the Congress and the UPA regime in poor light?
 
So this begs the question, which Indian Prime Minister helped India's GDP to grow the most, Narendra Modi or Manmohan Singh? The numbers favour Modi, overwhelmingly.The average GDP growth rate under Singh both in UPA-1 and UPA-2 was 6.67%,using both old series and new series, much lower than the figures under Modi's first term. In sharp contrast, under both the old and new series, the current BJP led NDA government has witnessed an average GDP growth rate of 7.35% during Modi's first term.The second term is still work-in progress.
 
Is there anything wrong in the new GDP calculation methodology adopted by the Modi government? The answer is a vehement, "No". The government in 2015,simply changed the methodology to Gross Value Added (GVA) from the earlier GDP and brought forward the base year for computation to 2011-12,from 2004-05. The back series release/revisions in November 2018 provide the growth estimates for previous years using the new methodology.The faulty old series had pegged UPA-1 and UPA-2 growth at 8.1% and 7.46% respectively,but these faulty numbers are irrelevant as they were based on an outdated method,using an outdated base year.
 
Modi naysayers should not forget that twenty billion dollars is what India attracted as investments and pledges from 15 companies in three months from April to July 2020 during the Covid-19 pandemic. This $20bn is a massive vote of confidence for India by some of the world's largest and richest corporations like Google, Facebook, Walmart, Samsung,Apple, Saudi Arabia's PIF, SGS, Axtria,etc. Google pledged $10bn immediately after its global chief,Sundar Pichai met with the charismatic PM Narendra Modi, "virtually".
 
The Congress deliberately stuck to an old base year.Modi simply rectified matters and did what needed to be done by discarding 2004-05 and adopting 2011-12,as the new base year.In fact,most big economies have a "rolling base year" concept and change their base year every single year.It is highly preposterous therefore, for shallow journalists who know nothing about economics or rudderless Congressis or even the leftists who wallow in self pity,to lecture and question the Modi government on it's much needed move to change the base year.
 
India's GDP growth was upgraded from 8% to 8.2% during FY17,under the Modi government, after last revision in November 2018,by the CSO. The GDP growth rate for 2017-18 was also revised upwards to 7.2% from the earlier 6.68%. "Real GDP or GDP at constant (2011-12) prices for 2017-18 and 2016-17 stand at Rs 131.80 lakh crore and Rs 122.98 lakh crore, respectively, showing growth of 7.2 per cent during 2017-18 and 8.2 per cent during 2016-17," the CSO said.Nominal GDP, or GDP at current prices, was also revised to 11.3% from 10% for 2017-18, and to 11.5% from 10.8% for 2016-17.In fact,India never hit the 9% supposedly ‘high-growth’ phase in the years of UPA-1 and 2, as was earlier believed, based on the revision carried out in November 2018!
 
Coming back to the GDP debate,the new back series data released by the National Statistical Commission (NSC) in 2019 showed that growth during the UPA years never ever crossed 9% for any single quarter and never hit 10.23% in 2007-08,as was originally and falsely claimed by Congress led UPA regime, with a sense of false bravado. What explains the wide difference in numbers in GDP under the revised methodology adopted by the Modi government,from the old series? The answer is crystal clear---Earlier,under the Congress,data from the Annual Survey of Industries (ASI) was used for for calculating manufacturing output. ASI provides manufacturing sector data, including disaggregated industry specific details of production,investment, employment and costs. It does not cover unorganised or unregistered units or the informal sector.
 
ASI data is not 100% reliable, as it includes only units registered under Factories Act,which basically implies that it includes only those units that employ 10 or more persons. Hence,rather than blanketly relying on ASI data,the Modi government switched to the MCA21 data base that includes data from units registered under Companies Act, for computing industrial production, numbers.ASI used to exclude over 70,000 units from it's ambit and used to publish data with a 2 year lag.On the contrary, MCA21 data base is very comprehensive, real time and covers over 5.2 lakh units.Hence,those who make baseless allegations at the Modi government must answer these questions--Did the Modi government not do the right thing by shifting to MCA21,when it is much wider in scope?Why did the Congress stick to ASI data despite knowing of it's inaccuracies? Is it wrong to adopt modern data systems and discard old ones that are well past their expiry date?Why is the Modi government being hounded for simply doing which any sane dispensation that believes in good governance,would do in any case?
 
Concerns were also raised by the likes of a digruntled Pronab Sen,ex-Chief Statistician of India,who claimed that the last revision in November 2018 based on "back series",was essentially released by Niti Aayog and hence doubtful.He alleged that Niti Aayog is a "political institution".So what if it was released by Niti Aayog? It is a credible body in its own right.In fact,Niti Aayog is a state of the art resource and knowledge centre and India's premier policy think tank.It works with the basic intent to foster cooperative federalism through structured support initiatives and mechanisms with the States on a continuous basis, recognizing that strong States make a strong nation.In any case,while the revised figures were released by Niti Aayog,a large part of the compilation and calculation was done by the National Accounts division,which is a part of the Ministry of Statistics and Programme Implementation (MoSPI) and works under the Central Statistical Organisation (CSO).
 
Why should therefore,anyone doubt the CSO,a reputed body with a great track record? Why should frequent GDP revisions be viewed suspiciously? Every major global economy including the United States and many Eurozone nations, have frequent revisions of their preliminary and advance etimates and final GDP numbers too,on many occasions.Why should one believe Pronab Sen but not believe current MoSPI secretary and head of CSO,Pravin Srivastava,who has said on record,that the new back series is reliable.Don't forget,the new back series adopted by the Modi government is more representative,as it works with a far larger,inclusive sample,that is more scientific and more real time in nature,rather than summarily excluding over 70,000 units,which used to happen under the earlier methodology.
 
Now that it is established beyond doubt that the new back series based on GDP (MP),is far more scientific and if anything,the Modi government has to be lauded for it,let us move to other facts and figures that show how the economy is re-booting and getting on track, despite the worst global pandemic in 102 years.Take the GST collection in August 2020,for instance,which stood at Rs 86,449 crore.The revenues for August are 88% of the GST collected in the same month last year. E-way bill collections for the month of July were 7.3% below the levels seen a year ago.This is an improvement over the 12.7% year-on-year (YoY) contraction reported in June 2020.
 
Qualcomm Ventures invested $97 million in Reliance Jio platforms. Kia Motors,the South Korean carmaker was in top gear before the pandemic, overtaking Toyota and Honda in monthly sales and long waitlists.So it is investing another $54 million at it's factory in Andhra Pradesh.Hitachi, the Japanese major will be investing $15.9 million for the order of 400 electric locomotives it won from the Indian Railways recently. Six more global companies are either entering India or expanding existing operations.
 
Intra-state e-way bill collections in July were 3.9% below last year, compared to a 7.9% year-on-year drop in June.Pace of contraction has slowed down,which is a good sign.Inter- state collections, that had seen a hit amid the lockdown, contracted by only 12.3% year-on-year in July, after having fallen 19.9% in June.On a month-on month basis, intra state e-way bill collections rose by 9.1% in July 2020, while inter- state collections saw a pick-up of a solid 15.3%. Overall,at 48.3 million bills in July,things are slowly but surely moving back to pre-Covid levels of say,55.3 million e-way bills that were generated in January this year.
 
E-way bill collections have improved as there is re-stocking happening, especially for essential commodities, with discretionary demand also showing healthy signs of pick-up,as "Unlock", gets underway,partially. Interestingly, the manufacturing industry has seen a quicker rebound relative to services.
 
Again,Indian Railways' Freight loading for the month of August 2020 surpassed last year's loading for the same month,in August 2019.In August 2020, freight loading was 94.33 million tonnes which is 3.31 million tonnes higher compared to last year's loading for the same month,at 91.02 million tonnes.
 
CBDT has, so far, issued refunds of over Rs 88,652 crore to more than 24.64 lakh taxpayers from 1st April 2020 onwards. Income tax refunds of Rs. 28,180 crore have been issued in 23,05,726 cases & corporate tax refunds of Rs 60,472 crore have been issued in 1,58,280 cases,yet again showcasing the robust dynamics of the ongoing economic recovery.
 
According to the monthly IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) survey, manufacturing PMI stood at 52 in August, up from 46 in July. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction. PMI had fallen to a historic low of 27.4 in April, but has been steadily climbing since.Output and new orders expanded at the fastest paces since February 2020. Production growth was largely driven by greater client demand for goods following the resumption of business operations, according to firms.True, the decline in foreign exports weighed slightly on overall new orders,as firms cited subdued demand conditions from abroad. Overall new business received by Indian manufacturers,however,expanded at the fastest pace since February 2020.
 
Again,the Modi government is going all out to ensure that liquidity concerns of the MSME sector are addressed on priority, under its Emergency Credit Line Guarantee Scheme (ECLGS).As of August 18, 2020, public sector and private banks have sanctioned loans worth over Rs 1.51 lakh crore under the 100% Emergency Credit Line Guarantee Scheme, of which close to Rs 1.02 lakh crore has already been disbursed.There has been a big jump in the sanctions in the last 15 days. The sanctions have increased rapidly by about Rs 12,000 crore while disbursement increased by close to Rs 10,000 crore,in the last fortnight alone. The ECLGS scheme is the biggest fiscal component of the Rs 20.97 lakh crore Self-Reliant, "Aatmanirbhar Bharat" package announced by the Modi government, in May 2020.Loan amounts sanctioned by the Public Sector Banks increased to Rs 76,044.44 crore, out of which Rs 56,483.41 crore has already been disbursed as of August 18.Similarly, private banks sanctioned loans to the tune of Rs 74,715.02 crore, out of which Rs 45,762.36 crore has already been disbursed.The scheme would help more than 30 lakh units of MSMEs and other businesses to re-start their businesses post the lockdown.
 
Samsung, the South Korean giant has launched a new 4G-enabled smartwatch that will be manufactured in India. It already manufactures its full range of 18 smartphones in the country.Hyundai Mobis,the South Korean auto components' company is expanding its technical centre in India, and strengthening R&D activities in India, especially for autonomous vehicles.
 
As part of the Aatmanirbhar package, the Centre had announced its plans for Rs three lakh crore as additional credit to the MSMEs and small businesses. Such enterprises were to be eligible to receive up to 20% of their existing borrowing as additional loans at interest rates which were capped at 9.25%. The loan would be available to units with up to Rs 25 crore outstanding and a turnover of up to Rs 100 crore whose accounts are standard.The units will not have to provide any guarantee or collateral of their own. The amount will be 100% guaranteed by the government of India providing a total liquidity of Rs 3 lakh crore to more than 45 lakh MSMEs.Clearly,the ECLGS has been a resounding success,till date.
 
If there is one segment which has been holding up stupendously,it is India's agrarian economy,which grew by a robust 5.9% in the March 2020 quarter,even when overall GDP growth was only 3.1%. As on 17 July 2020, India’s total Kharif crops sowing recorded an increase of 21.20% at 691.86 lakh hectares, against 570.86 lakh hectares sowed during the corresponding period of last year.As on 16 July 2020, actual rainfall received in the country was 338.3 mm against normal of 308.4 mm.As per report of Central Water Commission (CWC), the live water storage by mid July,available in 123 reservoirs in the country,was 150% of live storage of corresponding period of last year and 133% of storage of average of last 10 years.This is excellent news!
 
The sowing area coverage by mid July under Kharif crops is as follows: Rice has been sown on 168.47 lakh ha,against 142.06 lakh ha area last year,i.e. increase in area coverage by 18.59%.Pulses was sown on 81.66 lakh ha,against 61.70 lakh ha area,last year i.e. increase in area coverage by 32.35%.Coverage of Coarse Cereals was on 115.60 lakh ha area,against 103.00 lakh ha area last year,i.e. increase in area coverage by 12.23%. Oilseeds' sown was,154.95 lakh ha area,against 110.09 lakh ha area last year, i.e. area coverage increased by 40.75%.Sugarcane was sown on 51.29 lakh ha area,against 50.82 lakh ha area last year,i.e. increase in area coverage by 0.92%.Under Cotton, area coverage sown on 113.01 lakh ha area against 96.35 lakh ha area last year,implies increase in area coverage by 17.28%.In case of Jute & Mesta, area sown was, on 6.88 lakh ha area,against 6.84 lakh ha area last year, i.e. increase in area coverage by 0.70%.So, in effect,there is no impact of COVID-19, on progress of area coverage under kharif crops as on date,which speaks volumes about the resilience of the rural economy.
Coming back to the GDP debate,suffice to say that the base year revision by the Modi government,captures structural changes in the Indian economy.A revision in the base year is essential for better policy making. It is meant to track structural changes in an economy and improve or update macroeconomic indicators that reflect the economic performances of a country.
 
India graduated to the latest international standards, the 2008 System of National Accounts (2008 SNA) evolved by the UN - which was an update from 1993 SNA - while adopting the 2011-12 series. The 2011-12 series adopted by the Modi government,incorporated changes in data sources, expanded coverage and improved procedures in accordance with the new standard.The new base year plugged loop holes in the ASI data base by relying on MCA21 database that captures corporate sector output and revision in the index of industrial production (IIP),in a far more comprehensive manner.
 
India,after Modi took charge, now subscribes to the IMF's Special Data Dissemination Standards (SDDS) too, which calls for adopting 'double deflators' in GDP estimations by developing new price indices.India currently uses single deflator price indices like CPI and WPI.Countries like the USA, Australia, Canada, France, Germany, Italy, Japan, Mexico and Brazil have switched to double deflators using separate deflator for output and input. Knowing Modi's unflinching commitment towards adopting global best practices,it is only a matter of time before we adopt double deflators too,just like we adopted international best practices of changing the base year and adopting the GDP at market prices based methodology.
 
More importantly,let Modi naysayers should not forget that twenty billion dollars is what India attracted as investments and pledges from 15 companies in three months from April to July 2020 during the Covid-19 pandemic. This $20bn is a massive vote of confidence for India by some of the world's largest and richest corporations like Google, Facebook, Walmart, Samsung,Apple, Saudi Arabia's PIF, SGS, Axtria,etc. Google pledged $10bn immediately after its global chief,Sundar Pichai met with the charismatic PM Narendra Modi, "virtually".
 
Qualcomm Ventures invested $97 million in Reliance Jio platforms. Kia Motors,the South Korean carmaker was in top gear before the pandemic, overtaking Toyota and Honda in monthly sales and long waitlists.So it is investing another $54 million at it's factory in Andhra Pradesh.Hitachi, the Japanese major will be investing $15.9 million for the order of 400 electric locomotives it won from the Indian Railways recently. Six more global companies are either entering India or expanding existing operations.Samsung,the South Korean giant has launched a new 4G-enabled smartwatch that will be manufactured in India. It already manufactures its full range of 18 smartphones in the country.Hyundai Mobis,the South Korean auto components' company is expanding its technical centre in India, and strengthening R&D activities in India, especially for autonomous vehicles.
 
The country's foreign exchange reserves swelled by $3.623 billion to a record high of $538.191 billion in the week ended August 7 2020,as per RBI data.Also,in the last one year,India's external debt has risen by just 2.8%, driven by a minor 6.7% increase in commercial borrowings.The best part is,short term trade credit is just 18.2% of overall external debt.Again,over 66% of the aforesaid accretion in forex reserves in the past one year,is accounted for by stable and high quality FDI and not fickle FII flows.
 
India will become a global manufacturing hub for both components and the complete assembly of smartphones and other devices going forward.
 
The focus is both "Vocal for local" as also making India a FDI friendly and exports'oriented giant.India is targetting $400 billion in electronics' manufacturing and exports by 2025. Apple’s contract manufacturing partner Foxconn, that recently pledged over a billion dollars in fresh investments,has started to assemble the current generation of iPhone units — the iPhone 11 lineup,in its plant near Chennai, illustrating Apple’s further commitment to India, the world’s second largest smartphone market, as it explores ways to cut its reliance on China.Apple’s contract manufacturing partner, Taiwan-based Wistron, first began assembling older iPhone models in 2017. Wistron, which has locally assembled older iPhone SE, iPhone 6s and iPhone 7 models in the past in its Bangalore plant, currently assembles iPhone XR units in India. Taiwanese company Pegatron,is the 4th Apple supplier to decide to set up a base in India,after Foxconn,Wistron and Compal Electronics.
 
Assembling handsets in India enables smartphone vendors including Apple,to avoid roughly 20% import duty that the Indian government levies on imported electronics products. The Modi government's smart electronics' policy, based on production linked incentives (PLIs) and other incentives of Rs. 48000 crore that were announced in April 2020,are swiftly shaping the landscape of electronics' manufacturing.Xiaomi, Vivo, Samsung, Oppo, OnePlus and a range of other smartphone companies have inked deals with contract manufacturers across India in recent years to produce much of their locally sold smartphone units in the country itself.Xiaomi, which has been the top smartphone vendor in India since late 2018, said earlier this month that nearly every smartphone it sells in India is produced in the country.Those who ridicule Prime Minister Narendra Modi,therefore,have completely missed the plot, because Modinomics is deftly giving concrete shape to the idea of "Aatmanirbhar Bharat",in more ways than one.
 
Coming back to the GDP debate, India's April to June 2020 quarter Gross Domestic Product (GDP) growth declined by 23.9%,according to the data released by National Statistics Office (NSO).This is the worst contraction in GDP in 40 years,screamed the headlines,giving fodder to the morally decrepit and electorally defunct opposition parties,in India. What the leftist media managers of the Congress failed to mention is the fact that, this contraction happened due to the worst global pandemic in the last 102 years.Every big economy has been adversely impacted by the Coronavirus related global lockdown.India is not alone.
 
In fact,other global economies fared worse.For the June 2020 quarter, while the USA reported a staggering 32.9% annualised crash in GDP growth,the comparable fall was 42.9% for Singapore and again,a massive decline of 38.7%,in the case of Canada.Eurozone GDP growth fell by 12.1%,while Germany's growth retraced by 10.1%. UK,too,saw a growth contraction of a steep 20.4%,while Japan's GDP growth was a precipitous fall of 27.8%,in the June quarter.
 
To cut a long story short,every major economy, be it within the G-7 or G-20 group of nations,has experienced s "growth shock".So why are large sections of Indian media and political midgets like Rahul Gandhi, single-ing out the Modi government?India saw a 3.4% growth in agriculture and allied activities even during this otherwise lacklustre June quarter,which deserves plaudits, because rural economy accounts for over 50% of the workforce.This also implies that the job destruction in India due to Covid,is far lower than in other world economies,as India enjoys the vibrancy of a strong agrarian structure,made possible by Modi's farm oriented policies.
 
Pseudo intelligentsia and the leftist mafia in India have been quick to say that the USA is doing better than India,in dealing with the pandemic, which is a bunch of malicious lies. A good 1.18 million people filed for unemployment benefits in the 1st week of August 2020,making it the 19th week in a row that unemployment claims have topped 1 million in the US. Before the coronavirus pandemic gripped the US, the record for weekly claims never crossed 695,000,way back in October 1982. So things in USA have been pretty dismal in the last 5 months.The spending generated by the monthly dole-out of $600 to poor Americans who cannot afford food,rent or childcare,was supporting over 5 million jobs. In other words, kill the $600 and you would kill 5 million jobs .If the $600 emergency hand-outs that expired in the end of July 2020,are not renewed, the US consumption will see a sizeable 4.2% fall-- a drop that exceeds the entire 2.9% fall during the Great Depression.
 
In sharp contrast,India's Hero Motocorp,the world's largest 2-wheeler company,that derives over 65% sales from rural areas,reported a good 7.6% YoY growth in overall sales, selling 5.8 lakh units in August 2020.Ditto for M&M that derives over 50% sales from rural India--it saw a robust 28% YoY rise in tractor sales in July 2020,driven by a massive 36% growth in domestic sales.
 
While the parameters for calculating GDP employed by the Modi government have been a topic of hot debate,by vested interests who are adept at manufacturing irrelevant controversies, the outlook for the Indian economy has remained overwhelmingly positive all through the last 6 years. Merging SBI and it's associates, two years back, was a giant step that was unthinkable under an utterly inept Congress regime.Current account surplus in June 2020 is the first ever,in 12 years. Trade surplus of $790 million in June this year, is the first surplus in 18 years. Clearly, under Prime Minister Narendra Modi,India has not only delivered superior GDP growth, compared to the Congress period under Manmohan Singh, but more importantly, Modinomics has delivered better quality growth,with forex reserves to external debt ratio,at 85%. Don't forget,under an incompetent Congress led UPA in the December 2013 quarter, India faced a dangerously high current account deficit (CAD) of 6.7%,threatening our external solvency and stability.
 
India,for the first time,in the longest time,is scheduled to have a current account surplus (CAS) of $19bn roughly,akin to about 0.7% of GDP,in 2020-21.Last financial year too, CAD was reined in at just 0.9% of GDP.
Those who are crowing about India's 23.9% GDP decline in the June quarter,would do well to know that most large economies witnessed negative growth,even before the Covid pandemic struck.During the March quarter 2020, while India's GDP grew at a muted 3.1%,what has to be acknowledged is that,we were the only big economy to report positive growth in this March 2020 quarter. Other economies like the USA for example, contracted by 4.8%, Germany by 2.2%,Eurozone by 3.8% and China actually saw a steep GDP fall of 6.8% for the March 2020 quarter. Global rating giant S&P says,India will have the fastest rebound and is projected to have GDP growth of 8.5% for 2021-22, far higher than global peers.
 
To cut to the chase, overall, in the first half of calendar year 2020, India has fared much better than almost every major, comparable, international peer, thanks to stellar reforms in the last six years,by Prime Minister Narendra Modi,which have strengthened the absorptive and shock taking capacity of the economy.India became the 5th largest economy in the world,after surpassing the United Kingdom in February 2020 and 6th largest after overtaking France,in 2019. India's policy REPO rate at 4% is the lowest in 58 years. Coal sector was denationalised and coal mining was privatised for the first time in 2019-2020, after 47 years. Banking consolidation by merging 10 public sector banks into 4, starting April 2020,has happened for the first time in 51 years.
 
The country's foreign exchange reserves swelled by $3.623 billion to a record high of $538.191 billion in the week ended August 7 2020,as per RBI data.Also,in the last one year,India's external debt has risen by just 2.8%, driven by a minor 6.7% increase in commercial borrowings.The best part is,short term trade credit is just 18.2% of overall external debt.Again,over 66% of the aforesaid accretion in forex reserves in the past one year,is accounted for by stable and high quality FDI and not fickle FII flows.Under Prime Minister Narendra Modi's consummate leadership,India's external solvency and stability, has never looked better. Modinomics,which lifted over 75 million people from poverty in just the last 3 years,is holistic,inclusive,modern and multi-dimensional.Most importantly, Modinomics is a bold and progressively transformative idea,whose time has come.
 
(Author is an Economist, Chief Spokesperson for BJP Mumbai and Bestselling Author of “Truth&Dare--The Modi Dynamic”)