11 years of Seva, Sushasan, and Garib Kalyan: From stress to strength

Business Standard

16 hours ago

The global economy is undergoing an unprecedented period of uncertainty, grappling with growing geo-economic fragmentation, even as elevated debt levels and emerging technologies raise concerns about financial stability. Amidst this, India continues to be a bright spot — a stark contrast to the previous major episode of volatility in 2013, famously known as the taper tantrum. Then, economic mismanagement — as a result of which India became dubbed a 'Fragile Five' economy — resulted in low growth, high inflation, high external deficit and impaired public finances. The transformation of the Indian economy over last 11 years — from having a twin-deficit problem to a five balance sheet advantage — is an outcome of the concerted policy efforts under PM Modi's leadership.
When we came to power in 2014, the foremost priority was growth revival. Structural reforms were introduced, including GST, IBC , RERA, and during the pandemic years, the PLI Scheme, and ECLGS to help credit-worthy MSMEs survive the Covid shock. Equally, infrastructure and asset creation — neglected in the previous decade — was revived. Capital investment rose from 1.7% of GDP in FY2013-14 to 3.2% in FY2024-25 — effective capital expenditure, which includes the capital grants-in-aid, stood higher still (4.1% for 2024-25). In 11 years, 88 airports were operationalised, 31,000 km of rail tracks laid, metro networks expanded over fourfold, port capacity doubled, and National Highway length increased by 60%. Enhanced logistics and eased supply constraints are improving the economy's long-term efficiency and augur well for steady growth and low-and-stable inflation in the years ahead.
Through this, we never lost sight of the common man — targeted interventions were launched to bring the historically deprived into the mainstream. With over 55 crore Jan Dhan accounts opened, 15 crore household tapwater connections provided, 4 crore houses built, 41 crore provided health insurance cover, and 10 crore LPG connections provided under PM Ujjwala Yojana, a welfare net against the perpetual cycle of exclusion and deprivation was established. Consequently, India has made significant strides in poverty alleviation — World Bank data shows that extreme poverty in India fell from 27.1% in 2011-12 to 5.3% in 2022-23, even under a revised, higher poverty line.
India's emergence as the fastest-growing major economy is anchored on several favourable factors, and is closely intertwined with strengthening balance sheets of key sectors of the economy — banks, corporates, households, Government and the external sector. Let's take a deeper dive into this 'five balance sheet advantage'.
First, corporate balance sheets are healthy. There has been noticeable improvement in interest-coverage ratio (ICR) of firms, and marked decline in the proportion of vulnerable firms. To put it in a global context, compared to 18% firms in emerging market economies (excluding China), only 12.2% Indian firms have ICR below 1, almost the same as advanced economy (AE) corporates. With strong financial flows to the commercial sector (total flow has increased from ₹33.86 lakh crore in 2023-24 to ₹34.88 lakh crore in 2024-25, with granular data showing strong support by equity issuances and corporate bonds by non-financial entities), and above average capacity utilisation in the manufacturing sector, there is ample room for investment.
Second, bank and NBFC balance sheets are healthy, bolstered by strong profitability, improved asset quality, lower non-performing assets and adequate capital and liquidity buffers (see Figure 1), allowing robust credit flow to industry and agricultural sectors. This outcome results from sustained and proactive reforms, complemented by vigilant and forward-looking regulatory oversight.
Third, Union Government's balance sheets are healthy, supported by buoyant revenue collections and improving debt sustainability. Government debt and the fiscal deficits, which rose briefly during the pandemic to support the most vulnerable, are back on a declining glide path, lowering economy-wide borrowing costs (see Figure 2). This has been achieved without compromising on the quality of expenditure. Our target to reduce government debt-GDP ratio to 50% (+/– 1%) by 2030-31 (from 57.1% in FY25) reflects a commitment to reducing intergenerational debt liability.
The bond market has given a thumbs-up to India's fiscal management and a de facto credit upgrade as the spread to the 10-year US Treasury yield has come in below 200 basis points, and Indian 10-year bonds are priced above that of higher-rated sovereigns.
Fourth, external balance sheets are healthy, supported by robust services exports, private remittances, and gross capital (particularly FDI) inflows. India's forex buffers have improved (providing import cover of over 11 months as of May 2025, up from just 7 months in 2013) and external vulnerability has declined. The low levels of current account deficit (averaging about 1% of GDP during 2014-25 compared to an average of 2.4% of GDP from 2005-15), and the ability to comfortably finance external obligations instil confidence.
Finally, household balance sheets are healthy. Gross financial saving of households have remained steady, with increased borrowings (often termed 'liabilities') majorly directed to the creation of physical assets. Households are also diversifying their savings profile — the increased investment in mutual funds, equities, life insurance, and retirement funds, reflects an increased confidence and belief in India's growth story.
With retail inflation well within RBI's target range (after averaging 4.6% in FY 2024-25, it moderated to a 75-month low of 2.8% in May); robust manufacturing and services activity (India continues to record the highest PMI reading among major economies); and continued resilience in the agriculture sector (supported by bumper rabi harvests, higher summer crop acreage, and healthy reservoir levels), global optimism in India is amply justified.
This progress was despite a series of external shocks – the COVID-19 pandemic, geopolitical tensions, and weaponisation of trade and technology— upending the old premises and promises of global economic integration. These continue even today — while global trade and economic policy uncertainty have eased from historic highs in recent days, they remain elevated, and disinflation has stalled as the inflation in advanced economies continues above target (see Figures 3a and 3b).
India's ability to stand out as a beacon of stability has been driven by a consistent reform agenda which focused on repair and capacity-building, trusting in the creative ingenuity of our people to find answers to the country's challenges. As PM Modi said in his first address from the ramparts of Red Fort: 'this nation has neither been built by political leaders nor by rulers nor by governments. This nation has been built by our farmers, our workers, our mothers and sisters, our youth.'
From the digital payment revolution initiated by UPI (achieving transaction volumes of over 185 billion in FY25) to the entrepreneurial appetite revealed by MUDRA loan uptake (cumulative disbursements of over ₹33 lakh crore to 53 crore+ loan accounts), the last 11 years have shown the heights our economy can reach when we combine trust-based governance with systematic reduction of regulatory burden and an expansion of public goods.
Challenges to the globalisation era today create stronger headwinds than have been experienced in living memory. However, the 'nation-first' leadership under PM Modi have instilled confidence in India's ability to navigate uncertainty. The 'five balance sheet advantage' anchors India's resilience and high-growth momentum, while continued trust-based governance and reforms guide our journey to the goal of Viksit Bharat by 2047.