'Growth is not God-given, it is earned': Sanjeev Sanyal after Chidambaram says India becoming 3rd largest economy a certainty

Days after former Finance Minister P Chidambaram argued that India will become the world's third-largest economy no matter who becomes the Prime Minister, noted economist Sanjeev Sanyal said the economic growth is not God-given, it is earned. He said India's economy was now growing because the Centre put in a lot of effort and carried out structural reforms in the last ten years under Prime Minister Narendra Modi.

"Let me be absolutely clear that growth is nothing God-given about. It is earned. The reason we are growing right now is because we put in the effort. So policies matter if you have bad policies, we have bad outcomes," he said in his latest podcast - SparX - when asked whether the current growth will continue on its own or require some heavy lifting. The podcast was aired on Monday.   

Sanyal, who has written extensively on India's economic history and also authored a book 'The Indian Rennaissance: India's Rise after a Thousand Years of Decline', said that in the socialist period, the government had bad policies due to which the country had lower growth.

"Of course, the people at that time blamed it on Hinduism and called it the Hindu rate of growth. It had nothing to do with Hinduism. It had everything to do with bad Nehruvianism and socialism." 

The economist, currently a Member of the Economic Advisory Council to the Prime Minister (EAC-PM), said that the Indian economy started doing well after the government carried out "original reforms in 1991-92". However, by 1993, he said, the government stopped doing reforms, "so the momentum of growth then died out."

"By the early years of the Vajpayee era, there were a bunch of reforms that created some momentum and growth. that did flow through into the UPA-I. But they also didn't do any reforms. Then that momentum died out. Growth was then forced to keep going by pumping up the banks, which led to bad outcomes...growth began to flounder again," he said. 

Prime Minister Modi's first term was then spent cleaning up the banks and introducing new reforms, Sanyal said. For example, the GST, inflation targeting, and, insolvency & bankruptcy court. "The benefits of that would have begun flowing through by 2021 or so. Unfortunately, we then last two years due to Covid."

"So it's only from 22 that we began to see the real momentum in the economy. And now we are in 2024. So now we have had two years where we have been the world's fastest-growing economy. But the reason I told you this long story is that just because we have done a bunch of reforms in the past does not mean we will get growth in the future. Future growth has to be earned today," Sanyal said.   

Sanyal's podcast was aired a day after Chidambaram said India was set to become the third-largest economy irrespective of who becomes the Prime Minister. He said Prime Minister Modi was turning an "arithmetical inevitability into a guarantee". "It is inevitable that India will become the third largest economy in the world (in terms of GDP)," Chidambaram said in an interview with PTI.

Finance Minister Nirmala Sitharaman, however, rejected Chidamabarama's claim saying it was not an "arithmetic inevitability" but the efforts that the government had put in that would propel India into the spot of third-largest economy. She also said that India needs a stable government and growth. The period of 10 years before 2014 was a completely "lost decade", she said.

India's economic growth accelerated to 8.4 per cent in the third quarter of 2023-24, beating all expectations and making it the only large economy to grow at this rate. Last month, the IMF raised India's growth projection to 6.8 per cent, higher than China's growth projection of 4.6 per cent.