Effects are not always presented to us in manifest form. Sometimes they have to be inferred from what바카라s not there. A universal sense of well-being바카라what was called the 바카라feelgood바카라 factor in 2004바카라is now not as perceptually salient among the middle class or other strata as it was then. What else is missing or present? And why this exercise? Because a new economic epoch for India was the central claim the Narendra Modi campaign had made in 2014바카라the presumed economic miracle of the 바카라Gujarat model바카라 was to be extended all over. Fifty-four months later, it바카라s a good time to assess the results since the Modi regime바카라s pure policy phase is mostly done, and any big policy rollouts hereafter will likely be election-flavoured. So how does it stack up?
Modinomics: How Has Modi Govt Fared On The Economy? It's Time For An Audit
Has the Modi experience matched the promised Modi magic of 2014? Verifiably not. But has its patchwork quilt offered enough warmth to see it through 2019? We will know in a few months.
A performance audit of NaMonomics offers mixed evidence of both sorts. Of the manifest ones, the disasters were, of course, spectacular. Demonetisation was a train wreck. The rupee was like Newton바카라s apple. And the farm sector바카라s condition could be read visually too, in front-page photographs of mile-long marches converging on the cities. Things that became conspicuous by their absence? Well, Make in India made nothing. Smart cities did not mushroom. Jobs did not bloom. Bank NPAs did. Jan Dhan accounts ran on empty. GST, the other headline event, was a courageous but difficult reform, with some inevitable mess and pain (and verifiable gain). Then there were things invisible to the urban middle class바카라because they happened far, far away from its universe. Long networks of rural roads, for instance, qualitatively changing life in India바카라s vast outback. The gifts of the Awas Yojana. The soft light of Ujjwala, where cooking gas connections touched many lives. And the deep effects of something like GST won바카라t be as visible as the trucks running on smooth new highways.
The last day of November, though, these saw spanking new highways inundated, ironically, with the other narrative. It was a significant day for India바카라s farmers. About 10,000 of them had congregated in the national capital to talk about what the Modi government had left unfulfilled in the past four-and-a-half years. Even in their anguish, they built a bridge바카라apologising to the city-dwellers for causing them inconvenience, and listing the astonishing difference between what the farmer makes and how much a Delhiite pays. The angst resonated also because the aam janata in cities, hit by ever-spiralling fuel prices and straitening home budgets, is taking a critical look at NaMonomics too.
The farmer바카라s rally offered harsh vignettes from rural India. For 70-year-old Ashwini Devi, homeless in Bijnor, western Uttar Pradesh, it바카라s a fight to retrieve her late husband바카라s small piece of land from moneylenders. For Birendra Saini, from Amroha, also in western UP, life is at the crossroads because of the Rs 4 lakh he owes to the bank. Saini lambasts the government for not keeping its promise of loan waivers and better minimum support prices (MSP). 바카라The MSP announced by the Modi government is a total failure. There바카라s a big difference between cost of production and MSP. The prices of inputs have gone up. We buy seeds for Rs 1,700 and sell for Rs 1,100,바카라 he says. Siddharama, from the suicide-scarred farmscape of Andhra Pradesh, too juggles vicious debt traps, bad crops and land rights issues. The protest, organised by a coalition of over 200 farmer groups from across India, saw a huge turnout from Punjab, Haryana, Andhra Pradesh, Telangana, Madhya Pradesh, Rajasthan, Chhattisgarh, Tamil Nadu and West Bengal. The farmers call for a special session of Parliament, and two private members바카라 bills바카라one to address farm indebtedness, another for remunerative MSPs.
On farm unrest becoming commonplace, agro-economist Dr Panjab Singh says, 바카라Things are not so bad, but there are many outstanding demands.바카라 Singh, who is president of the National Academy of Agriculture Sciences, says production is growing and productivity too is improving in certain cases, but farm incomes have unfortunately stagnated over the past four-five years. This when input costs have gone up substantially바카라so the farmer is unable to harvest the benefits he should have got. Consumers too pay high prices, while middlemen and retails reap a rich bonanza.
CRISIL chief economist Dharma Kirti Joshi agrees farmers have reason to be upset as their price realisations have dipped despite higher MSPs announced by the government. 바카라Unfortunately, it바카라s a trade-off바카라we need to improve productivity, that바카라s the route to sustainability, but when output increases, prices fall and you have a bonanza of low inflation,바카라 he says. It바카라s a vicious cycle, marked by little long-term vision, that has been on for years. Earlier regimes are as culpable (remember the suicide statistics from the UPA era). It바카라s the further deficiency of short-term support that바카라s exacerbating the situation, despite the Modi government바카라s crop insurance scheme.
Beyond the lack of attention to agriculture too, there바카라s more critique than cheer about the government바카라s performance on the economic front from experts and economists across the board. They see a canvas largely of blanks, with some bright spots where the government has excelled and shown work on the ground. With less than six months left of its tenure, one could naturally expect some vote-garnering strategies바카라creation of employment conclaves, perhaps loan waivers. But experts do feel that, despite the measures it took to boost the economy, the Modi regime바카라s performance has not been stellar as compared to the UPA. They agree things could have been pulled down much further바카라the government managed to hold it and prevent a real slowdown바카라but we are much below the optimal rate of growth, by a few percentage points.
Things are on an improving track in some sectors. According to ICRA, a broad-based improvement is visible in October 2018, comparing year-on-year (YoY) growth performance, in as many as 14 of the 16 early economic indicators. This largely reflects the adjustment of production schedules related to the later start of the festive season, as well as factors such as base effects and the receding impact of floods in parts of the country. Accordingly, industrial growth is likely to display a healthy pickup in October 2018, from the level recorded in September 2018.
But the general feeling among experts is that broad objectives kept changing over the years바카라no objective was really achieved as such. The oft-repeated joke is that DeMo was for climate change. This is, of course, one initiative that polarised opinions sharply바카라eulogised or thoroughly dismantled, often by the same economist (follow the Arvind Subramaniam trail here). Partly because the phenomenon, which came almost like a tsunami, a classic Black Swan event, had a complex effect too. Says economist Y.K. Alagh, chancellor of the Central University of Gujarat, 바카라It was done in a clumsy way, but what it did was increase the tax revenue base once and for all. But it did not at all decrease the process of creating black money as it has started again in great earnest.바카라 The latest data shows a growth of 15-20 per cent in I-T returns. India바카라s tax-to-GDP ratio has also increased from 5.5 per cent to 5.8 per cent.
Prof N.R. Bhanumurthy of the National Institute of Public Finance and Policy too is critical. He says DeMo바카라s objectives were never fixed. 바카라The government kept changing the goalposts. The positive outcome is related to the tax base, which has increased significantly both in terms of direct and indirect tax, visible in the buoyancy of economy. But this is not entirely due to demonetisation. It should be looked at together with GST,바카라 he adds. Many economists feel the message never went through. Says Ishwar Hegde, economist and founder-MD of Sun Fan Energy, 바카라It was supposed to bring back currency. However, the narrative went wrong for the government. I agree it was badly planned and badly executed. We could have done much better.바카라
Prof Arun Kumar, economist and an authority on black money, however says DeMo damaged the economy enormously바카라affecting the unorganised sector disproportionately and reducing the rate of growth by one per cent. The unorganised sector is 40 per cent of the GDP. If that reduced by 10 per cent, even the measurable impact can only have been heavy. Kumar says it바카라s difficult to determine what is black money. When all the money comes back into the system, demarcating the black money component out of that is tough. 바카라More than 100 per cent of the money came back into the system! Including counterfeit, which has got converted into white money, as has old black money. Demonetisation cannot stop black money generation as under-invoicing will continue with the new notes. This is because cash is only one per cent of black money, 99 per cent is held in real estate, gold and overseas, which has not been affected.바카라
Beyond the unorganised sector, DeMo also left the micro, small and medium enterprises (MSME) sector bruised and battered. The micro sector, which accounts for 97.5 per cent of MSME employment, got severely hit. The poor state of the MSMEs is ascribed by many partly also to the GST and the credit squeeze. We are at a juncture where the banks바카라 ability to lend is low, which pegs back the economy바카라s ability to grow fast. An anti-globalisation sentiment is also playing out around the world, so the scope of growing via exports too is limited. In this environment, CRISIL has projected an economic growth of 7-7.5 per cent, if we are able to sustain it.
Senior CPI(M) leader Tapan Sen, for one, registers a trenchant critique of both policies and outcomes. 바카라I don바카라t find any achievement. Rather, I find they have oriented their policy regime towards destruction of the country바카라s indigenous manufacturing base. They are moving fast in that direction. This government has collectively contributed to the collapse of employment growth,바카라 he says. The former MP stresses that employment growth has practically turned negative during the past four-and-a-half years. 바카라To suppress this fact, they have stopped publishing employment and unemployment surveys by the labour ministry from 2016-17 onwards,바카라 states Sen. The report published up to 2015-16 shows cumulative labour growth between 2014 and 2016, in the eight most labour-intensive sectors, was hardly 5.5 lakh. Taken together with job loss due to closures and shutdowns in industry, widely seen during these past few years, total employment generation has turned negative during the Modi regime. This is further confirmed by studies done by the CMIE and the Azim Premji University, Sen adds.
Indeed, job creation has lagged despite skill development being one of the government바카라s mantras바카라there바카라s no clear action on the ground. Says Abheek Barua, chief economist and executive vice-president at HDFC Bank, 바카라There was an effort to understand the nature of the job problem, but it continues to be a dry area. Policy-makers are divided over whether we want to revive manufacturing or continue to depend on services.바카라
Hegde talks of a large unfinished agenda바카라areas where the government has either not done enough or failed. Primary among this is Make in India. A proper boost to manufacturing would have helped push other sectors바카라exports, for instance, where India바카라s basket remains restricted to traditional items and handicrafts. Even services cannot lead to high-value addition without proper support from manufacturing. 바카라Manufacturing has to be developed. Without that, a country cannot develop. This was initially conceived, but it did not fructify,바카라 he says.
The other thing launched with a lot of fanfare but yet to take off is smart cities. Beyond the initial hype, progress beyond the planning stage has been tardy or absent, with very little or almost nothing to show on the ground. 바카라It has remained a concept and has been lost,바카라 says Hegde.
That brings us to the vital social sector. For those who comprehend only technology metaphors, this is where the 바카라software바카라 part of India is developed: enriching human potential is crucial to its future. And it바카라s well-known that the Modi government actually reduced outlay to health and education throughout its tenure, and only started looking at this area in its last budget which, as the last full one before elections, was expected to be populist. Naturally, there has been little development on this front. On top of that, the sector is hobbled by duplication of authority as it바카라s a concurrent subject바카라so both the states and Centre are responsible for the attrition.
To give the government credit where it바카라s due, a lot of well-intended schemes were conceptualised and launched but, unfortunately, many of them just lagged in the arduous stage of handling the nitty-gritty of implementation. The money based on Aadhaar, the Jan Aushadhi scheme and the much-publicised Jan Dhan Yojana have all been genuinely good schemes, but slow starters with little progress logged.
Virjesh Upadhyay, general secretary, Bharatiya Majdoor Sangh (BMS), an affiliate of the BJP, cites areas where the Modi government has taken verifiable steps forward. The employees바카라 annual bonus, for instance, was raised 2.5 times in 2015, he says, and minimum wages were raised after 11 years, that too by 3.5 times. He also lists social security schemes like Pradhan Mantri Bima Yojna바카라insurance coverage for accident and death바카라or the health insurance scheme Ayushman Bharat as major initiatives.
Similarly, Pradhan Mantri Awas Yojana, though it existed earlier, got a major thrust during this government바카라s tenure. 바카라There바카라s a manifold, measurable difference between the previous government and this government바카라s achievement, if you look at the data of work done,바카라 Upadhyay says. The Ujjwala scheme too has seen lakhs of women coming into the clean cooking gas economy, bringing them out of the toxic drudgery of firewood and kerosene.
Schemes like Modicare and crop insurance are designed to bring in private investment to fill gaps on the social front바카라which many see as a route worth pursuing in straitened times when the State finds it difficult (or is unwilling) to step in. But, for that to work, these schemes have to be nurtured properly. Says Hegde, 바카라The government has to create an environment for social sector spending by the private sector as the government cannot do it. But that environment is not being created. Social spending is not on the government바카라s radar either.바카라
Some experts believe the lack of focus on the social sector was because of attention being on other areas. Says Barua, 바카라In every government, something gets priority and others do not. A lot of social sector issues are governance issues, but much more could have been done. The need to pay more attention to this side emerged in the middle of the NDA바카라s term. Also, the social sector is difficult to figure out because of Centre-state issues and it바카라s not clear who is responsible for the sluggishness.바카라
Infrastructure is possibly the only area where the government has achieved a lot on the ground, especially in roads and highways, even ports. Says Barua, 바카라The only cure for the balancesheet is for the government to invest actively. The government did it by investing in roads and infrastructure. There has been a coherent macro-economic strategy post the slowdown of 2012 and one can see the elements of a plan.바카라
Helmed by the proactive Nitin Gadkari, highways have seen a lot of visible expansion. Data released by the Union ministry of road transport and highways indicates the Modi government built 73 per cent more highways in its first four years as compared to the last four years of UPA-II. According to reports, 28,531 km national highways were constructed since FY 2014-15, contrasting with 16,505 km by the previous government up to FY 2013-14, a clear gain of an astounding 12,026 km.
On a macro level, though, the economic highway ahead may not be very smooth: a tough fiscal ride is predicted. Says ICRA principal economist Aditi Nayar, 바카라Fears of a fiscal slippage may intensify following the sharp 23.5 per cent YoY rise in the fiscal deficit in April-October FY2019, which has crossed the budget estimate for the full year, despite the relief offered by the recent correction in crude oil prices.바카라 The extent of a potential fiscal slippage in FY2019, Nayar says, would be shaped by factors like targets being met for GST, excise duty, dividends/profits and disinvestment, and the adequacy of outlays for revised MSPs, the NHPS or Modicare, fuel and other subsidies.
Tax revenue growth continues to display mixed trends, with a healthy expansion in direct taxes juxtaposed with a contraction in indirect tax collections. The uptick in headline GST collections in October 2018 is likely to have been led by quarter-end adjustments. It remains to be seen whether GST collections continue to exceed Rs 1 trillion in the remainder of FY2019, particularly in the festive months, despite the recent GST rate cuts. Nayar expects a shortfall in indirect tax revenues in FY2019 relative to the budgeted level, driven by CGST and excise collections.
CRISIL바카라s Joshi ranks the Insolvency and Bankruptcy Code, which he calls a fundamental reform with a long-term effect, and GST as two major initiatives the Modi government has been able to push. 바카라One can argue these were initiated earlier, but this government has managed to take it forward, so the implementation is associated with the present regime,바카라 he says. GST, being structurally complex, did not offer a good narrative initially, but the government is learning on the job. Like with the Bankruptcy Code, the virtuous effects will play out over the next three to five years, he says. GST was also affected because the government kept on changing rates. Many other countries too have taken 10-15 years to stabilise GST, believe economists like Barua.
Much has been made by the government of India having risen to 100th place in World Bank rankings this year from the 130th rank in 2017. But many economists and academicians question the nature of the data on which the ranking is done. R. Nagaraj, professor at the Indira Gandhi Institute of Development Research in Mumbai, says the World Bank report is a very subjective index, and done in two cities바카라Mumbai and Delhi. 바카라It basically manipulates certain procedures. How they translate it to ground reality is open to question. More importantly, it바카라s a highly political index,바카라 says the economist, wondering what has changed on the ground. 바카라The question is how do you collect the data? Were employers consulted? Were workers spoken to? Or the actual people who apply for starting business? No!바카라
Jayan Jose Thomas of IIT Delhi also questions the yardstick, arguing that if it바카라s related to ease in getting clearances for starting a new enterprise, then it바카라s all for the good. But if it means overlooking the rights of the labour force, or environmental degradation, then it바카라s undesirable.
Ravinder, joint secretary, department of industrial policy and promotion (DIPP), disputes this and justifies the ranking as the outcome of four years of hard work. 바카라The entire work of Ease of Doing Business started in 2014, keeping in mind the World Bank criteria. But the government decided to go beyond those criteria and took it to the states also,바카라 he says. While the World Bank has a case study approach and looks at 10 areas for starting a business, the DIPP decided to include more areas.
바카라We found that labour is studied, but not covered by the World Bank. Similarly, environmental clearances and inspections are not covered by them. All these things were in the reforms plans we made for the states,바카라 the official adds, saying the rising international confidence in India is showing in a concomitant rise in FDI inflows. The FDI inflow had peaked in 2011-12 at $46.6 billion, then waning till 2015-16, when it started a continuing graph of growth. Last year, the inflow was around $62 billion.
The economy is a mysterious compound, though. A lot of it is based on perception, experience and memory. People judge on the basis of tangible factors like remembered pain, or felt comfort. Has the Modi experience matched the promised Modi magic of 2014? Verifiably not. But has its patchwork quilt offered enough warmth to see it through 2019? We will know in a few months. The farmer will also vote, but not necessarily only as farmer. There are also things beyond the economy, stupid.
***
What Has Worked For Modi
- Roads and highways Taken off after hiccups
- Digitisation Move towards digital payments picking up
- Tax net Widened by 15-20 per cent post GST and DeMo
- GST Helped to ease business and improve tax administration
- Health Insurance Higher health insurance through Ayushman Bharat
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What Has Proved Dismal
- Demonetisation Failed to achieve any goals, hit GDP
- MSMEs Hit by DeMo and GST
- Employment Job creation remains a question mark
- Make In India Yet to make an impact
- Farmers In crisis, with no real gains
With Preetha Nair