Oxford-trained economist Pulapre Balakrishnan in a recent paper has said that macroeconomic policies since 2014 have been "contractionary" and has compressed demand in the Indian economy.
"The macroeconomic policies have been uniformly contractionary since 2014. Far from one of its two arms being used in a countervailing way, the conduct of both the monetary and fiscal policies has served to be demand compressing. This is likely to have stymied investment," Balakrishnan wrote in paper titled "Unmoved by Stability" published in Economic and Political Weekly (EPW).
He said that the Modi government appears to have misjudged the impact of its macroeconomic policies.
"However, there is also an act of omission on the part of the government. The only way in which the promised infrastructure and jobs could have been delivered when private investment was contracting would have been via expansion of public investment. This was not systematically attempted," he added.
Questioning the government's policies Balakrishnan wrote: "There is reason to believe that we have had a period of tight money in India since 2014".
On the Modi government's controvertial demonetisation move, Balakrishnan said private investment did not show a decline following demonetisation but "it cannot be ruled out that it might have stalled an incipient increase of it".
"The corporate sector itself might not have been cash-strapped by the exercise, as it works on credit, but might yet have gone slow on its investment plans as the economy shrank due to incapacitated trade and production in the informal sector," he added.
However, it may also be mentioned that the global economy itself has been going through a rough patch. Closely followed indicators like the bond yield curve suggest a reccesion is imminent.
Besides, European economies are facing a huge risk of falling into a technical recession. Investment in UK has come to a halt over political uncertainty owing to Brexit resulting in economic contraction. Europe's largest economy, Germany, also contracted due to the impact of US-China trade tensions.
Moreover, China has been consistently dropping hints that its trade dispute with the world's largest economy has had a damaging effect.
(Ravi Dutta Mishra can be contacted at ravidutta.m@.in)
( With inputs from IANS )