Jayant Sinha: Bill Gates often says the following when he talks about technology and change processes in general. And I think it is very, very correct for what we're doing as far as our economic reform efforts are concerned. He says that, in general, when it comes to very powerful forces of change that get unleashed, you tend to overestimate the short run and underestimate the long run.
What does that mean as far as the Indian economy is concerned?
When our government came to power in May 2014, we had a great rally in the stock market and as far as people's expectations were concerned, they had really, really risen very far and very fast. In terms of thinking about things being magically fixed within three to six months was a bit of an overestimation, because India is a very large country. We are not playing a T20 match. We are playing a test match, a 5-day test match, a 5-year term of office.
So rather than recognising what the nature of the change processes had to be and how long it would take, expectations outran what was possible in the short run and there was an overestimation then.
Since then, what we have done as far as the reform initiatives are concerned are being underestimated and people don't fully understand how powerful the change vectors that we have put in place are going to be for the Indian economy. And that's why they are underestimating the long-run. (See: Jayant Sinha on 6 game changers for the Indian economy). Overestimating the short run, three to six months - but underestimating the long-run which is two to four years.
When we came into power in May 2014, the macroeconomic situation in India was very dire. We faced a near balance of payments crisis in September 2013, the rupee had gone to 68/dollar, we were running large fiscal and current account deficits, growth had been below 5% for two consecutive years - which had not happened in 25 years, and our investment rate was plummeting. All around there was the sense of foreboding and a tremendous amount of doom and gloom about where the economy was going.
In a year we've been able to turn that around.
Look at India's macroeconomic picture on any indicator - growth, fiscal deficit, current account deficit, inflation, the relative strength of the rupee. India is doing extremely well. It's not just us saying it; global agencies - the IMF, the World Bank, rating agencies too.
Those of you interested in macroeconomics will agree with me in that typically a macroeconomic stabilisation programme can take two or three years, but we did it in less than a year. That is an extraordinary accomplishment given the legacy issues inherited.
Now, some of those legacy issues are still there with us. You have seen the numbers as far as bank NPAs are concerned, the over-leveraged balance sheets that some of our large business groups have, and a large number of stalled projects that we are dealing with right now. These are legacy issues due to a decade of not much action as far as reform was concerned. Now, very quickly we have to address these legacy issues and really propel the economy forward.
