It has been one year since the Hindustani voters gave a once-in-a-generation mandate and absolute power to Narendra Modi in the name of economic change. No other Prime minister since Indra Gandhi has enjoyed this much popularity.
The people of India, India Inc and international investors pegged high hopes and expectations from the government after the landslide victory. However, while it is quite debatable to declare any new government an absolute success or failure on the basis of one year performance, the results towards the end of the first year is not up to the par. But no one will dispute that unlike the previous government of Congress, this government has tried to bring India on the right path.
On the economic front so far, the Goddess of success has been treating Modi well. The double-digit inflation, which had haunted the Congress government for years, is down to 5 percent. The current account deficit is now less than 1 percent of GDP and fiscal deficit is also slowly on the decline. The Indian government has slashed the subsidies, especially on oil and diesel. However, these achievements came in the backdrop of falling oil and commodity prices in international markets.
On the reform front, Modi has allowed FDI in insurance, railway, and defence. The government has opened the mining industry, especially coal mining for private competition rather giving it to the government favourites. In order to curb corruption and bring back the black money a very powerful black money law has been created.
The government has further introduced the much-awaited GST bill (which was originally created by Congress) and the land reform bill to the parliament. However, so far it has been unable to pass these bills from the upper house where it lacks the majority.
Nevertheless, when it comes to take hard choices so far Modis government is no different than the Congress. In September last year, Modi launched his Make in India campaign with the aim to drive the-neglected manufacturing sector to a growth of 14 percent in a year. So far, according to experts, the result is nowhere near the target and the manufacturing sector only expanded by 6.8 percent from 5.3 percent from last year.
In last one year, the Modi government has failed to privatize any state-run company and the banks due to politics of job loss fears. Although tax reforms have been introduced on paper, but thanks to the inertia in revenue bureaucracy the Indian corporate sector has been unable to benefit from those reforms as yet.
The Indian stock market has shown its worst performance this year and nearly $2 billion was been pulled out of the Indian stock market in May by foreign investors compared with a net investment of $15 billion in the first four months of the year. The first-quarter earnings of India Inc are severely in dismal, and the exports are down for six months straight ending April 2015.
The Modi government just like any other Indian government in the past undoubtedly obsessed with the growth rate. Historically, whenever India has higher GDP growth, she has seen higher inflation and no job growth. So far, in last one-year Indian economy has not witnessed that, perhaps low oil prices and commodities have created that oasis.
The country recently has changed the way it calculates the GDP and so far the government is unable to give valid reasoning for this change. By using gross value added as its preferred metric for growth in the fourth quarter, Indian GDP has beaten all the expectations and shows growth of 7.5 percent, which is very similar to Chinas GDP. This higher number of GDP was certainly due to the new way of calculating the GDP numbers, according to many international economists.
No one in the economic community was expecting Narendra Modi to fix the ten-year mess in one year. The hype was created by the media and Modis own marketing personality. It is time for Modi to cut short with his international travels and focus on the real issues which India is facing.
India needs desperately the much-awaited reforms and some very hard choices by the government. However, one can only anticipate that the second year of Modi raj would be different from the first one. During the middle of next year, state elections are coming and Modi has to win those elections in order to get the absolute majority in both houses. It is perhaps recognizing that by then it might be too late for investor confidence India is beating the drums about China Pakistan Economic Corridor, the spy Pigeon and what not.
Source: Business Recorder