The Indian economy is witnessing creative disruption for the first time, said Sanjeev Sanyal. He was referring to a slew of tough economic reforms that the government of India has brought in — like the Goods and Services Tax (GST) and the insolvency and bankruptcy code.

On GST, the biggest tax reform in recent times in India, he said, “Even though it was tough to introduce it, it had to be done to create an internal market. Now the system is working well.”

Sanyal gave an overview of the history of the country’s economic policies and said the focus of the current government is to “shift India from a patronage-based economy to one that is rule-based.” The creation of an independent monetary policy committee to control inflation and introduction of codes to tackle bad loans in the banking sector were key measures to achieve the goal.

“We have managed to bring down the inflation rate from 8-10 percent to 2-4 percent permanently, while retaining a reasonable rate of growth of 7.3 percent, which makes India the fastest growing economy in the world,” he said.

Talking about the success of the government’s strategy in tackling bad loans, he said, “One of the obvious ideas was to create a bad bank warehouse. Just 50 cases were accounting for two-thirds of the non-performing assets. We put the first 12 cases in the system and within 270 days we have already started auctioning them.”

Even if the measures were tough, they would help reap gains in the long term, he said.