I would say Economy of India is doing good, but not excellent. PM Narendra modi is better than other Indian Prime Ministers and better than the alternatives, but not as good as expected from PM Narendra Modi. It is sort of MS Dhoni scoring 45 runs in 45 balls. Better than average, but not as good as the expectation.
First, the bad news. The “tax terrorism” that Modi so hated continues. Modi promised corporate India that there won’t be these unexpected retro taxes, but here they are brought by Jaitley. The confusion around tax policies and lack of speed in reforms have been affecting the stock markets. Despite this recent correction, stock markets are still up 20% since Modi though.
Budgets have been good [and but were not spectacular. No big ticket reforms.
Now, the good news. Overall economy looks healthy. The government has brought down the fiscal deficit, inflation and interest rates. Investments have been going up. Here are 6 key indicators. All are looking good.
Many experts are more optimistic though.
Economy seems to be sailing comfortably with low inflation, controlled fiscal parameters and growth in tax revenues.
Majority of the credit would go to low crude oil prices. Therefore any party ruling would have benefited. But the Modi government hasn’t meet the high expectations which it set itself. We can’t completely deny that the current government hasn’t taken significant steps. Here are few positive outcomes –
- As per DIPP ( Department of Industrial Policy and Promotion ), FDI to India doubled to US$ 4.48 billion in January 2015, the highest inflow in last 29 months, from US$ 2.18 billion in January 2014. This is mainly the impact of Make in India campaigns and executive actions taken to improve the ease of doing business.
- JAM trinity – Jan Dhan, Aadhar and Mobile. The government has successfully enrolled most of families into banking which is the first step towards achieving direct cash transfer of benefits.
- Moving faster on the neoliberal path. Initiatives such as National Infrastructure and Investment Fund, Mudra Bank, Innovation Fund is a step towards moving from revenue expenditure to capital expenditure.
But the impact of such actions are yet to be noticed on ground as they take time. Their results can be unimaginable when they start delivering. You still have ifs and buts because most of these projects will be implemented by the states and their efficiency will vary.
- Defence budget has been increased by 7.7% whereas higher education budget has been cut along with budgets for promotion of science and technology. Everyone agrees that technology drives growth of economy in a sustainable manner. Low spends on education impacts human capital and its capability to deliver in the long run.
- No progress on banking reforms. Government is no different from the previous UPA on this matter. New licenses for payment banks and regular banks is moving slowly. Single Financial code not on the cards.
- Tax base not increased. India still stands on low Tax to GDP ratio. Public investments needs to be high to push growth when much of PPP projects are on hold.
- No new mega health schemes apart from increasing FDI in insurance. We have seen private health care is expensive and antipoor. Failed miserably in US. Still the government wants to purse this. No clue!!
Even though there is still 4 years for Modi government to show development, they can’t rest because they have promised “acche din” which is so subjective and takes time to show results in all fields.
Some big picture facts on Modi’s 1st Year (Using nos for Apr 14-Mar 15):
1. Real GDP growth – 7.3% (vs 6.9% year earlier)
2. Inflation – 3.8% at end of July’15 (vs 7.73% in Aug’14)
3. Net accrual in Foreign Reserves – $61 bn (vs $16 bn last year).
4. Net FDI flows – $33 bn (vs $22 bn last year). EDIT: India is now #1 recipient of FDI in 2015H1 ahead of US and China.
5. Current account deficit – $ -28 bn (down from -$32 bn last year). Much lower as % GDP
6. Fiscal deficit (% of GDP) – 3.99% (vs 4.5% last year)
7. Rupee – one of the best performers among all Emerging Markets.
8. Financial inclusion – 175 million households enrolled into banking system – this is more than what UPA achieved in last three years as per CMIE. Similar scale difference on toilets in schools.
9. Resource auctions – Rs 3 Lac Crores income – that’s 18% of annual central budget – for government from Coal and Telecom auctions which were done transparently (as opposed to Congress which gave them to cronies and now the ministers are being probed/jailed). Govt is tracking on goals of 24/7 electricity.
10. Foreign policy – Modi’s performance is by far way ahead of any other prime minister.
EDIT: Some great charts on this –thanks to .
(Source: RBI, CSO)
The feeling is much better and a general foundation has been laid. I have a feeling the 3-5 years will bear more fruit while Year 2 will start momentum.
– Goodwill with people (Evacuations, rescue operations etc.)
– Flexing muscles as a country (Foreign leaders visiting India)
– very low news of corruption by ministers
– Showing solidarity (neighbors don’t mess with Army as their hands are not tied anymore)
– Economy is in much better shape (around 3500 crore recovered from black money, still more to go)
Here are a few links:
I don’t agree with Arun Shourie’s economics. But his analysis of Modi sarkar’s performance is spot on…