How Good Were Modi Critics At Tackling Inflation?

One hot button issue in recent times has been inflation that has caused immense hardship to ordinary Indians.

It is perfectly understandable for politicians and political parties to take pot shots at each other when it comes to dealing with economic issues. One hot button issue in recent times has been inflation that has caused immense hardship to ordinary Indians. Till recently, old inflation was particularly high, adversely affecting family budgets of poor households. Its only in the last few weeks that both food and retail inflation have shown signs of slowing down. What tickled the interest of India Tracker is the constant barrage of veiled and open criticism of the Narendra Modi regime on economic issues by two well known economists Kaushik Basu and Raghuram Rajan. Both live in the United States and travel frequently to India; Rajan is currently in India interacting with professionals who support the Congress party. Kaushik Basu was chief economic advisor to the government between 2009 and 2012. Rajan succeeded him and worked for one year before he was made the Governor of the Reserve Bank of India. Both have been extremely critical of the economic policies adopted by the current regime.

In May 2022, Basu gave an interview to the news agency Press Trust of India where he as usual raised alarm bells about rising divisiveness and polarisation harming the Indian economy ( Rajan said the same more explicitly a few days ago claiming “othering” of the Muslim community will backfire. Anyways, lets stick to economics. In May, when the retail inflation rate was a notch above 7%, Basu made a confident forecast: “ My calculation is that India’s CPI inflation will cross 9%. We must make every effort to ensure it doesn’t break into double digits”. Data reveals that the Basu forecast turned out to be wrong as the rate of retail inflation has been weakening since May. In act, retail inflation declined to 7.01% in June compared to a high of 7.78% in April.

The accompanying chart shows the rate of retail inflation every year or the period between 2008 and 2015. India Tracker considered it worthwhile to look at credible data to see how well these well known economists performed when they were chief economic advisor to the government of India between 2009 and 2013. Before Kaushik Basu was appointed chief economic advisor, the retail inflation rate in 2008 was 8.35%. After he took over, the inflation rate jumped to 10.88% in 2009 and 11.99% in 2010. By the time he left in 2012, inflation was 9.47%. And what about Raghuram Rajan? In the one year that he advised the government on economic policies, the inflation rate was 10.02%.

It is not the job of India Tracker to draw any sweeping conclusions, pass judgements or even engage in debates. As stated repeatedly, the mandate of India Tracker is to present credible data and analyse it. Readers are free to draw conclusions about how well Basu and Rajan performed in their tenures.