Sunday, May 29, 2022

Four Years Of Modi Government: Direction Right, Journey Bumpy

By EMN Updated: May 29, 2018 12:17 am

In 2014, the economy was on decline, non performing assets (NPAs) of banks had risen already. Plus there was a complete policy paralysis, the government was on standstill. With that kind of legacy, it is quite miraculous that we have come to where we are at this moment in terms of macroeconomics

It is now four years since the Modi government had come to power; and, the next general election is already on the horizon. Congress-led Opposition has criticised the prime minister and gave remarks that nothing has been done in four years and allot zero marks.    The judgment would depend on the scale of ambition of the assessor rather than sheer fact While the Numbers can often be strung together to tell a story. But when each number has a story of its own, it is best to let them do their own talking: a reading of how the economy may play out in the fifth year of the Narendra Modi government.

The report card must take note of three other factors: formalisation of the economy, financial inclusion and digitisation. Big changes that defined 4 Years of Modi government that are demonetisation, unified tax (GST) , improvement in ease of doing business,

The overall record of the Centre in terms of income growth is good. There were a couple of quarters following demonetisation when the GDP growth fell below 7%, but the average will be above that level. It is a matter in which the Centre can take pride that, now, India takes 7% as the norm for GDP growth. Growth is on track despite disruptive reforms. Inflation has been moderate throughout the four years. That is why prices have not become a political flashpoint. Modi government has shown impressive fiscal conservative, ignoring the temptation. Consequently, fiscal deficit is easing. Foreign direct investment has gone up since BJP came to power. The government had eased foreign investment norms in some crucial sectors, including retails, aviation and construction. Industrial production recovered after a dip though private has been missing link but most recent data shows capex picking up (Table 1)

Table 1: Macroeconomic indicators

2013-14 2014-15 2015-16 2016-17 2017-18
Growth Rate  GDP  growth at market prices (% YoY) 6.39 7.41 8.15 7.11 6.62
Inflation (% YoY) 5.2 1.3 -3.7 1.7 3.2
Fiscal deficit (% of GDP 4.4 4.1 3.9 3.5 3.5
Foreign investment ($ billion) 22 31 36 36 29  (upto Feb)
Index of Industrial Production (% YoY) 4.0 3.3 4.6 4.4 (March data)

Source: Economic Times

A jump in tax revenues of over Rs 2 lakh crore on a base of Rs 12.69 lakh crore could be a tall order at the end of the day. Hence, fiscal slippage could be the result. More so, when the economy is already going through a most difficult process of transition to the GST regime.

Over the years, the speed of road construction had become the benchmark for India’s infrastructure creation. Now, the Narendra Modi government has set in play a new integrated infrastructure programme, which involves building of roads, railways, waterways and airports

Over the years, the speed of road construction had become the benchmark for India’s infrastructure creation. Now, the Narendra Modi government has set in play a new integrated infrastructure programme, which involves building of roads, railways, waterways and airports. In between 2010-14, 19,443 km highway was constructed and 20,439 km was awarded. But during the period of this NDA government (2014-18) 28,702 km highway roads have been constructed and 51,112 km awarded. Rural electrification was made in 2014-15 only in 1000 village but in 2015-16 and 2016-17, 7000 and 6000 villages were electrified respectively.

The flagship housing schemes are also doing well as 3781397 houses have been constructed in rural areas and 443966 in urban areas, using generous government subsidies. And, though the details are still being worked out, an ambitious Modicare health insurance scheme for 10 crore households and MSPs-for-all-crops are also on the anvil. Not all these schemes are a good idea—unconditional cash-payments to farmers would be a better substitute for MSPs, and freeing markets is the best—but while achche din may be some time away, a start has been made in putting some of the necessary reforms in place.

The other significant highlight of the government is in the field of financial inclusion. According to data updated on Pradhan Mantri Jan Dhan Yojana’s website on 9 May, there are about 316 million beneficiaries with deposits of around Rs81,203.59 crore. If Jan Dhan got the economy banked, insurance through the Pradhan Mantri Jeevan Jyoti Bima Yojana (life insurance) and Pradhan Mantri Suraksha Bima Yojana (accident insurance) have given financial comfort at rock bottom prices.

Diplomacy has been one of the key thrust areas of the government as their diplomatic outreach has travelled a long way in the last four years.

Challenge: Job is a vital economic need, but it has a political and social side, too. When a political party comes to power by making employment growth an election agenda, people will expect, debate and criticize if it falls short. In the last four years, the jobs debate has grown in proportion. From pure value-perspective, this debate is good for the country,”

India’s youth has raised its aspiration from subsistence wages to living wages. And the way to meet these aspirations is…through raising the productivity of our firms and workers. This needs formalization, financialization, urbanization, industrialization and human capital,”

The economy has done well in these four years. India is the fastest growing major economy in the world. This growth has not come at the cost of high inflation or fiscal deficit. At no point of time has the Consumer Price Index, the benchmark measure of inflation for Reserve Bank of India’s inflation targeting agreement with the government, exceeded its targeted range. However, on the whole, what we got in the last four years is a stable government moving towards a certain direction of a liberal economic order, not too much buffeted by conflicting interests and policies at the centre of the government.

Prof. Mithilesh Kumar Sinha

By EMN Updated: May 29, 2018 12:17:28 am