With the second anniversary of the government round the corner, assessments of its performance will begin soon. Such assessments need to take into account the baseline at which this government began. Any progress must be judged against this baseline.

In May 2004, when the first National Democratic Alliance (NDA) government lost the election, it handed to the United Progressive Alliance (UPA) an economy that had grown 8.1% during the preceding full year. The UPA ruled till May 2014, returning to NDA an economy that had grown just 5% during its last full year (the new GDP series subsequently revised this growth rate to 6.9%).

Under UPA-I, which ruled from 2004 to 2009, GDP growth averaged 8.4%. While this was an impressive performance, there is no satisfactory answer to the question what UPA-I did to make it happen. You can carefully scan Budget speeches and other relevant documents of UPA-I but, beyond continuation of trade liberalisation and trimming of the small-scale industries reservation list, you would find references to few reforms to which this performance can be attributed.

Indeed, there exists a near-consensus among informed commentators that the economic reform process that Prime Minister Narasimha Rao (1991-96) had launched and Prime Minister Atal Bihari Vajpayee (1998-2004) had accelerated experienced a sudden stop under UPA. Taking advantage of revenues that the higher growth had made available, UPA-I (rightly) expanded social expenditures but (wrongly) did little to sustain the high growth so essential to continuing to grow revenues at a fast pace.

To its credit, with rare exceptions, UPA-I did not introduce policies that would positively damage growth prospects of the economy. Even the infrastructure (especially road) projects that had been contracted out under NDA largely continued and were completed on schedule. Therefore, the potential created by the Rao-Vajpayee reforms could actually translate into 8% plus growth.

That, however, changed under UPA-II, which ruled from 2009 to 2014. Denial of clearances to major projects on environmental or other grounds became endemic. A flurry of corruption charges against officers with reputation for unimpeachable integrity froze the top bureaucracy and hence the decision-making process. So deep was the freeze that a definite change of course under the present government has still not fully restored the confidence of the top officials.

Counterproductive legislations such as those on retrospective taxation and land acquisition greatly undermined investor confidence. Lack of proper oversight resulted in public sector banks lending vast sums of money to fund poorly conceived projects. Alongside, poorly performing loans were routinely permitted to “restructure”. Budgetary expenditures were allowed to expand without regard to revenues, leading to large fiscal deficits.

The result was that an economy, which had seemed unstoppable and had grown at the average rate of 8.1% during the first three years of UPA-II rule, descended into what appeared to be a crisis. An Economist story (August 24, 2013) gave a chilling account of what had transpired: decline in the growth rate to 4-5%, inflation at 10%, current account deficit at 4-5% and a rupee that had depreciated 13% during the preceding three months. “It is widely agreed the country is in its worst economic bind since 1991,” concluded the magazine.

Assertions by commentators that economic conditions today are no different from when the UPA-II departed bear little resemblance to the reality. Under the present government, the consumer price inflation has been below 5%, wholesale price inflation negative and current account deficit in the 1-2% range.

While the global economy is struggling, growth rate in India has steadily climbed up from 6.9% in 2013-14 to 7.2% in 2014-15 and 7.6% (Advance Estimate) in 2015-16. The fourth quarter Advance Estimate for 2015-16 turns out to be 7.8%, a hair’s breadth away from the magical 8% mark. Foreign investors who had been fleeing India in 2013 have returned with foreign direct investment rising 24% in 2014-15 over that in 2013-14 and 40% during April-December 2015 over the corresponding period in 2014.

If certain sectors of the economy exhibit weakness, it is because they had been in crisis at inheritance and sector-specific adjustments typically take longer than those relating to the overall economy. It may be recalled that the early reforms under the Rao government had stabilised the exchange rate, inflation and current account within two years and returned the aggregate growth rate to its pre-crisis levels. But a sharper break in the growth rate came only in 2003-04, after the economy had time to adjust more fully to the Rao-Vajpayee reforms. Indeed, a common refrain of many reform critics in the early 2000s was that the reforms had not led to a significant shift in the growth rate.

Keeping this experience in mind, make no mistake about what is to come. Much change in policy has taken place since May 2014 and the miracle-level annual growth of 8.3% that India saw from 2003-04 to 2011-12 is poised to return.