Economic growth during Prime Minister Manmohan Singh-led United Progressive Alliance (UPA) regime was 'not bad', but 'the system was out of control', Sanjeev Sanyal, Principal Economic Adviser to the Prime Minister Narendra Modi government, said in an interview to The Print.
Sanyal was referring to the soaring inflation, widening fiscal and current account deficit and massive lending from the banks that were ailing India's economy under the UPA regime.
"The real problem was inflation spiking up into double-digits, fiscal deficits rising to 6.6 percent in 2009-10, current account deficit at 3-3.5 percent of gross domestic product, and massive lending by banks. The system was completely out of control," he said.
On demonetisation, the economist said the financial exercise was not a disaster as claimed by critics. "The massive risk and fear of breakdown of the economy did not happen. There was some dampening of growth for a quarter of two. On an aggregate level, the negative impact was small," Sanyal said.
Demonetisation improved the tax compliance and business culture of the country, he stated. "You have to take demonetisation as part of the wider attempt of this governance problem. We have seen dramatic increase in tax compliance, business culture of the country has dramatically improved," he added.
Speaking about the implementation of the Goods & Service Tax (GST), he said the need for a unified national taxation system was felt even 20-25 years ago, but it was never put into effect.
"Finally in 2017, we decide to go ahead. When we were going ahead, people pointed out several things that could go wrong. Ultimately the decision was taken to just do it because the only way to find out what can go wrong was to just do it," Sanyal said, adding many things went wrong in the first three months, but these have since been smoothed.
Sanyal said every reform is disruptive to a certain extent, but this government has undertaken some major reforms and created infrastructure.