Era of prosperity ended with demonetisation: PM advisory panel ex-member

No easy fixes, says economist;

Update: 2025-01-28 19:40 GMT
Era of prosperity ended with demonetisation: PM advisory panel ex-member
Prof. Rathin Roy, economist, with policy analyst Mohan Guruswamy, at a lecture in Secunderabad on Tuesday. (DC Image)
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Hyderabad: Prof. Rathin Roy, economist and former member of the PM’s Economic Advisory Council, said the growth model which had relied on 10 per cent of the population — which at 150 million was bigger than all of the German economy — had ended. The new generation would not have the level of prosperity that was seen between 1991 and 2016, when demonetisation kicked in.

Delivering a lecture, ‘Repairing The Indian Economy: Tackling Challenges And Driving Growth’, at the Guruswamy Centre here, Prof. Roy said: “The solutions to this cannot be technocratic.” He said 74 per cent of bureaucrats come mostly from technical background.

“We are caught in the middle-income trap now and there is no escape… If someone does not have wealth bequeathed, even the top 10 per cent cannot have the same living standard,” Prof. Roy said.

He said that the pharma and IT sectors had fuelled growth in Hyderabad and Bengaluru but this cannot happen continuously and had stopped in 2024.

“We are now in the same bracket as Brazil, Argentina, Turkey and the Philippines where per capita income has grown but we have crime, destitution, stunting, poor health and education.”

“I believe in market prosperity but I believe one should be able to pay for health, education etc., from their own income to claim success instead of being subsidised by schemes like Aarogyasri,” Prof. Roy said.

Explaining the measures that could be taken to remedy the situation, Dr Roy asked why a shirt costing `300 could not be made in Bihar or Jharkhand, instead of at the textile centre of Tirupur where the industries complain that their wage rates do not allow production at such rates.

Doing so would end the import of cheap textiles from Vietnam and Bangladesh, Prof. Roy said. “The mindset of stereotyping a north Indian as lazy and not enterprising has to stop,” he added.

“Instead of complaining that the South is subsidising the North, we should be asking why UP got deindustrialised” and why the South was inviting cheap labour from the North.

Prof. Roy said that the special economic zone (SEZ) policy, where human rights and labour laws were suspended, was once touted as a panacea that would fix the economy by focusing on exports but the model had abjectly failed.

“Even in the IT sector, that we are at the low end of it was exhibited when we had a new AI change.

“The inequalities that we see in our society are a result of lack of fraternity which has to be increased for a happy ending,” he reasoned.

Mohan Guruswamy, noted economist and political analyst, said the process of Budget-making was a sham. “It mattered in the licence permit raj when those like Dhirubhai Ambani and Nusli Wadia lobbied for a change in duty structure to benefit their respective companies.”

“What matters is the annual report and look at ratios like savings to GDP, capital investment to GDP ratio, inflation to capital investment. The allocations made in the budget go haywire after the first quarter and things like education and health suffer as there is no constituency to lobby for them.”

It will be increasingly difficult to get into the top 10 per cent for new generations, he said. “The Telangana CM is asking teachers to stay in hostels, as if that would fix a broken education system.”

Guruswamy said the `10 lakh health insurance scheme cannot be a solution for the people’s health problems and called it a scam/


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