Writing in Mint, Research Director and Senior Fellow Niranjan Rajadhyaksha highlights immediate challenges that the next finance minister will need to tackle, including a slowing economy and fiscal fatigue.
"The next government will take charge in New Delhi against the backdrop of many years of economic stability. The question it will have to ask itself is whether this is the calm before the storm.
Indian voters put Narendra Modi in power five years ago. The Indian economy was then still struggling with high inflation, fiscal stress and a large current account deficit. The United Progressive Alliance government had begun to focus on stabilizing the economy after P. Chidambaram returned to the finance ministry. Arun Jaitley sensibly continued down that path. The strategy paid off.
Take inflation, for instance. It was near double digits in the 12 months before the 2014 national election. It has averaged around 3.25% in the 12 months before the 2019 national elections, below the middle point of the inflation target given by the government to the Reserve Bank of India (RBI). There is no doubt that the Modi government got lucky with global oil prices, but it is useful to remember that core inflation has also halved over the past five years. The steep decline in core inflation—which does not include food and fuel prices —shows that macroeconomic policy played an important role in taming price pressures."
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