Kitne acche din: 7 years of Modi govt for GDP, price rise and jobs

The Narendra Modi government has completed seven years over two tenures. Let’s have a hard look at the three most significant yet contentious parameters to trace the footprints of ‘acche din’.

‘Acche din’ was the catchword that symbolised the election wave that elevated Narendra Modi from Gujarat chief minister to the country’s prime minister in 2014. Vikas (development) was the plank that kept people’s hopes afloat for better days ahead, originally promised by Manmohan Singh in the run up to the 2014 Lok Sabha polls.

Pro-poor outreach through the schemes for toilet building and cooking gas connection, and TINA (there is no alternative) factor saw a bigger electoral victory for Prime Minister Narendra Modi-led NDA government at the Centre in 2019.

The Narendra Modi government has completed seven years over two tenures. Let’s have a hard look at the three most significant yet contentious parameters to trace the footprints of acche din.

Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is an economic concept understood only a little by the public but discussed widely. In the quarter (April-June 2014) the Narendra Modi government came to power seven years ago, India recorded the highest GDP growth rate in nine quarters or two-and-a-half years.

According to the Reserve Bank of India’s report, released on May 27, Indian economy has been passing through cycles of upswing and downswing in the GDP growth rate. The upswing had already set in — a prediction that economist Manmohan Singh had made with “acche din” phrase — when the Narendra Modi government assumed power in 2014.

Currently, Indian economy is in “down-cycle”, according to the RBI. The downswing is extended due to Covid-19 pandemic. The timing of the onset of the current downswing coincides with the decision of demonetisation (November 2016) and alleged hasty launch of the Goods and Services Tax (July 2017).

Both demonetisation and GST came as reforms. Besides, the government tried to introduce reforms in banking to plug loopholes. It resulted in reporting of massive bad loans. These measures, to some experts, were necessary but with a economic-political cost.

The GDP growth rate slipped from the high of 8 per cent in 2016-17 to 4 per cent in 2019-20. Covid-19 forced a contraction for the first time in decades.

The RBI report also shows that India tends to emerge from a downswing with a V-shaped recovery. The economy was on a similar course when Covid-19 hit the country and overwhelmed the government.

Experts hope that in the next fiscal year, 2022-23, India would be the fastest growing economy of the world on account of the logic of rebound, helped by measures taken by the government that caused slowdown after 2016-17. Currently, India’s per capita GDP has slipped below that of Bangladesh.

PRICE RISE

For most of the first tenure of the Narendra Modi government, the rate of inflation was not a political problem. The chief benefactor was the rapidly declining global oil prices from around $110 per barrel to first around $85 in 2015, before going below $50 in 2017 and staying there in 2018 and early parts of 2019.

The Narendra Modi government did a smart thing by increasing taxes on oil to keep the rate steady while earning money to fund its social welfare programmes. It paid good dividends in the 2019 Lok Sabha election.

However, oil prices caught fire in the second half of 2019 and has continued to flare up since then. It has put tremendous inflationary pressure on the government. The onset of Covid-19 pandemic in early 2020 shut the exit door for the government.

All kinds of commodities are selling at much higher prices. Edible oil is a point in case, with popular mustard oil selling at over Rs 180 a litre.

The RBI, due for credit policy review on June 4, is unlikely to alter key rates due to huge inflationary surge. This is significant as the banks are facing cash crunch in extending loans that may refinance micro-businesses, particularly in smaller towns and rural areas.

JOBS

Rojgar or employment was another focal point of the election campaign that fuelled the Narendra Modi wave of 2014. However, despite the government’s robust claims over employment generation through Mudra loan scheme and the MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), lack of enough jobs has been the biggest headache for the Narendra Modi government.

In fact, an academic paper by two independent economists in 2019 concluded that India’s total employment reduced between 2011-12 and 2017-18 by 90 lakh. This was the first instance of actual loss in the number of jobs in India since Independence.

The findings of the study were in sharp contrast with the government’s study commissioned by the economic advisory council of the prime minister. The government study said the total employment increased by 2.5 crore during the period — 43.3 crore in 2011-12 to 45.7 crore in 2017-18.

The government’s own survey, released formally after the 2019 Lok Sabha election, found that unemployment was at 45-year-high at 6.1 per cent.

An unemployment rate of 2-3 per cent has been considered routine in India. It has been in the 6-7 per cent zone during Covid-19 pandemic. Given the economic uncertainty due to prevailing Covid-19 situation, the promised acche din for job seekers is still not in sight.

However, there are several achievements to the Narendra Modi government’s credit. The biggest of them would be penetration of banking among Indians, digitisation of service-delivery mechanism and a series of direct benefit/cash transfer schemes.

Source: India Today

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