Puja Mehra’s book The Lost Decade is a reconstruction of the ten years after the global financial shock of 2008, in which the Indian economy could not achieve its potential or its pre-crisis growth momentum. Prior to the global financial crisis, India’s economy was growing impressively. But after the shock, that momentum could not be achieved again due to the influence of politics on policies. Puja Mehra explains this failure of the Indian economy to regain the pre-crisis momentum in her book with sharp analysis and in-depth reporting, drawing on her journalistic experience, of the policy decisions taken by two different governments in the last ten year.
Here we chart a few of the reasons discussed in the book for the continued state of decline in the growth of the economy:
1. The shock of the financial crisis in September 2008 slowed the economy for one year. It rebounded a year later, but that recovery was not sustained.
2. In the following year after the financial crisis had hit the country, the then finance minister’s policy decisions and approach only weakened the recovery. Mr. Pranab Mukherjee, who the finance minister wrongly assessed the need of the hour and rolled out a third fiscal stimulus package even though two stimulus packages were already in place.
3. Furthermore, he sharply increased allocations for social-sector spending by the finance ministry without factoring in the revenue position. As a result, the fiscal deficit expanded even as the economy’s capacity for absorbing the fund releases in a productive manner failed to keep pace.
4. The failure to focus on reforms in the recovery period in 2009, further weakened the industrial sector that was already reeling under impact of the global economic downturn that followed the global financial shock.
5. After a tedious and slow recovery of the country’s economy during the years 2012-15, economic growth was hampered yet again by the failure to address the problem of bad bank loans in a timely and effective manner.
6. The incumbent government chose to prioritise the infrastructure sector, rather than concentrating on the bad bank loans, resolving which was more important for building the growth momentum.
7. Even by 2018, the rates of increase of investments, consumption and exports, the three engines of growth in the economy, were not robust enough, and the sustained high GDP growth seen in the runup to the September 2008 shock was still out of reach for the Indian economy.
The Lost Decade tells the story of the slide and examines the political context in which the Indian economy failed to recover lost momentum.