4 things Modi govt can claim as key achievements
A leading industrialist once described critics’ reaction to the Narendra Modi government’s economic policies to the Amazon ad with the punchy catchline `Aur Dikhao’. The ad starts by showing the variety and breadth of items available on the Amazon app and the website. But the typical Indian shopper, prickly as always, is not impressed and demands more.
The visual then switches to the rapid flipping of sections and pages on the app with a growing list of items while the background music blares the `Aur Dikhao’ song to a catchy jingle. What the industrialist was trying to say is that critics are not taking into account the good work that the Modi government has done on reforms and that their complaints seem insincere. The critics are unsatisfied, not-easy-to-please, and choosy, selfish.
Well, if you look at it one way, there is nothing wrong in being demanding or choosy. As voters and citizens, you are supposed to keep the government on its toes. But there is also a larger point that the industrialist is making and it is this. The unrelenting criticism that the Modi government has faced regarding most of its economic policies smacks of partisanship and poor understanding. There is an eagerness to score points. Given the scope and extent of some of the Modi govt reforms, some crticism was always inevitable.
For instance, it is now clear that GST was pushed through in summer of 2017 without much thought to the complexities of the filing process. Too many rates were crammed into too many slabs and this proved unviable. The government was also late in realising the extent of bad loan crisis in the banking sector and the urgent need to deal with it.
The bank recap, announced in October 2017, was late by atleast a year, in my view. But the bitter partisanhip is also clouding judgement and preventing people from understanding the true importance of emerging economic trends.
As 2018 gets underway and an intense political season starts with the Karnataka elections, these emerging trends could help Modi sarkar showcase the positive highlights of economic programme.. Here are four major things that the Modi sarkar can talk about as among its key achievements! Inflation control: Unless something dramatic happens in the rest of the year, the Modi government can claim before voters in 2019 that it has successfully tamed the inflation monster. The Consumer Price Index is now about 5% versus around 7% in May 2014 when it assumed power. Food inflation is also lower at less than 5% now compared with close to 10% in summer of 2014. If India’s GDP growth had been badly affected by demonetisation and GST and struggled to recover, the Modi sarkar’s credibility would have been damaged. But a fledgeling recovery in the second quarter is set to turn into a strong one in the coming quarters reinforcing the impression that a resilient economy has absorbed the twin mega shock.
Job losses, poor job creation and high unemployment were supposed to be deal breakers for the Modi government. For many years, we have had no reliable data on how many jobs are being created and what is the true unemployment situation.
But that did not stop people from creating propaganda about the lack of jobs in the country. The Labour Bureau’s quarterly employment survey is woefully inadequate in measuring job creation in the country given that it is limited to non-farm economy and that too to just eight sectors.
Professors Soumya Kanti Ghosh, group chief economic advisor State Bank of India and Pulak Ghosh of IIM Bangalore shows that nearly 7 million jobs have been created in organised sector in in 2016/17 and 2017/18 (till November). The authors sifted through employees provident fund (EPFO), employees state insurance (ESIC) and NPS (National Pension Scheme) data to arrive at the figure. Though incomplete — we still dont know how many jobs are being created in informal sector — the Ghosh & Ghosh research blows a big hole in claim that jobs are not being created fast enough. An analysis by brokerage firm CLSA in September 17 painted a similar picture. CLSA analysts sifted through annual reports of 76 companies to show that jobs in India’s biggest companies by market cap grew 3.4% in FY17 versus 4.2% in FY16.
More than jobs, a big problem for Modi sarkar would have been the bad loan problem plaguing banks. The BJP government did not create this problem but its inability to solve the mess would have created given the opposition ammo and dented its image.
But now, thanks to the bankrputcy process, many of the pressing, large NPA problems are on the verge of getting resolved. Banks may still have to take a bit of haircut and raise capital but the time-bound resolution at NCLT means that there is little chance of kicking the can down the road. By this time next year, many of the big NPA problems would have been resolved and the government should press ahead with its bank consolidation programme to change the face of PSU banking in India.
Things can still go wrong, especially on the rural front. A bad monsoon will push inflation higher, lead to farmers riots and force governments to offer freebies. It will also be bad for politics. But if rains are good and the global economy chugs along and there are no other nasty surprises, prime minister Narendra Modi will approach 2019 elections on the back of a surging economy, low inflation and relatively cleaner banks. That should help build a pro-incumbency mood!
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