UPA-era welfarism led to severe imbalances by 2012-13, economy saw some correction under NDA: Ruchir Sharma

Sharma also touched on global economic challenges, such as deglobalisation and the difficulties facing manufacturing.

The balance between welfarism and economic growth of India has been more sensible under BJP-led NDA government compared to the previous Congress-led UPA government, Ruchir sharma said during an exclusive interview to Network18's Zakka Jacob and Bodhisatva Ganguli

Sharma, Chairman of Rockefeller International, said the second term of the UPA government was more about welfare than economic growth.

“The problem under the UPA government, particularly the second UPA government, was that it was all about welfare without focusing on what's happening to economic growth, who's paying for it, and we ended up with these severe imbalances by 2012-2013, which the country had to deal with,” the fund manager said.

Read: Full transcript of Ruchir Sharma's interview

However, he said that the balance has shifted under the present NDA government. “Under the Modi government, at least you've seen some correction in that imbalance, which is that they are still doing welfare spending in terms of that, but it's not to the extent that was happening before. There's been more focus on building out infrastructure.”

Sharma pointed out that no government in India has ever won an election if the inflation was high. “In terms of that, to give credit for it, the NDA government has shifted the focus somewhat.”

Read: India's challenging business environment, 'sense of fear' drive entrepreneurs abroad, says Ruchir Sharma

Explaining why the current balance between welfare and growth is sensible, Sharma said that a welfare state that is too large can’t be built prematurely.

“In China, they decided we are not going to have a welfare state until, you know, at least we reach a particular per capita income level. So, it was ruthless capitalism in China,” he said.

However, he said that a China-like approach is not possible in a country like India.

“There's no way any government in India is going to ever take that risk… I'm dealing with the reality of India,” Sharma said, adding that the country needs such policies to achieve 9-10 percent economic growth.

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Separately, during the same conversation, the author said that entrepreneurs find it challenging to do business in India and prefer establishing their firms in places like Dubai and Singapore.
Sharma cited concerns over India’s “out of control” regulatory machinery and investigative agencies as key factors contributing to this trend.

Moreover, he pointed out the issue of underemployment, noting that while India is experiencing a stock market boom, it primarily benefits a limited segment of the population.