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June 04, 2019 Tuesday 01:43:14 PM IST



Even as the general election process comes to its concluding phase, it is time to take stock of the track record of the Narendra Modi government on the economic front. Prime Minister Modi rode to power on the wings of great expectations from millions of people in May 2014.

 There are no two opinions that Modi has worked hard during his tenure in office, putting in long hours of labour to the extent that he has not taken even a day’s holiday. In recent memory, no other public functionary perhaps has worked so hard. This has to be admitted irrespective of whether one agrees with his policies or not.

 Economists have differed in their opinion about the Government’s performance, with at least a few faulting it mainly on rural distress and job creation. The election manifestos of the major national parties have, therefore, heavily focused on what they will do to alleviate the problems of farmers and rural households as also plans for job creation.

 Fast growth

When one looks back, there are quite a few achievements that Modi and his team can be proud of. In a world which is sputtering with growth levels averaging 3 to 3.5%, India remains the fastest growing major economy today overtaking even China. Also, India is now the fifth largest economy in the world after having overtaken the United Kingdom and just below Germany, Europe’s economic powerhouse, and Japan, once Asia’s leading light. If we continue growing at about 7%, it is estimated that we may overtake both these countries by 2030.

 But the gap between the world’s largest economy, the US at about $ 22 trillion, the second largest, China at $ 13.5 trillion and us at $ 2 trillion is so huge that as the saying goes “we have to keep running just to stay where we are” for at least the next two decades unless the system in China implodes like it did in the erstwhile communist paradise of USSR.


While the average growth rate has been about 7% during the Modi regime, it has been accompanied by a period of benign inflation. Quite surprisingly, the control that the Government brought over price rise (which had peaked around the beginning of 2014 with prices of pulses and vegetables skyrocketing) has not received enough attention in public discourse about Modi’s performance. Neither has the Prime Minister himself found it fit to highlight this aspect in his campaigns or speeches.

 If inflation is a tax on the poor and the economically backward sections, the Modi regime can indeed claim credit for having held it on a tight leash and sparing them from its ill effects. One should also remember that it was not too long ago that India had experienced annual inflation rates of about 10%, placing unbearable burden on the common man.

 Farmers’ distress

It is of course to be admitted that the other side of the inflation coin was the distress of the farming community who are still crying hoarse about not getting remunerative prices for their farm produce. Just to take a striking example, the price that the milkman gets for one litre of milk is almost the same as that of a litre of mineral water!

 It is also important to note that the Government had taken a series of steps to improve the country’s Ease of Doing Business where we jumped up from 142 to 77 during the NDA government. (It is, however, to be remembered that the index measures parameters pertaining only to Delhi and Mumbai and may not reflect the reality in large parts of India). This, I believe, helped keep up the momentum of Foreign Direct Investments, which hit a high of US $ 61 Billion in 2017-18 from about $ 45 Billion in 2014-15.

 IBC’s impact

The Government also did well in bringing about the Insolvency and Bankruptcy Code which has fundamentally shifted the balance of power in favour of the lenders, especially the banks. It is an undocumented story that many of the business tycoons of the last decade have had to bite the dust on account of the IBC. In my view, history will record this as the most orderly transformation in the business dynamics of any country which is revolutionary in its impact.

 Similar has been the collaborative move on the unified indirect taxation (known as the GST). Though we have not moved to the highly desirable and simple system of a single tax (which some countries like Singapore have adopted), it represents a leap forward in indirect tax reforms. That the decisions have been taken by getting States (ruled by different political parties including the CPM) on board rebounds to the credit of the political will and accommodative spirit of the Government.


One of the major decisions of the Modi Government which turned out to be hugely controversial was the dramatic decision of November 2016 on demonetisation of high value notes. It is an acknowledged fact that it led to a blip in growth and its blessings are still to be counted.The currency in circulation which was around Rs 17.5 lakh crore has now moved up to about Rs 21.5 lakh crore, claims of digitisation notwithstanding.

 The problems faced by farmers in not being able to get fair and remunerative prices for their crops is an issue which has not been resolved yet. Though the Government came to power promising to double farmers’ income by 2022, this was a period when a large number of cultivators cried out for help to make ends meet. Agriculture is a State subject and the problems are complex with no easy solutions in sight. The introduction of an income support scheme for farmers in the last budget of this Government is itself an admission that traditional solutions have not worked in favour of farmers.


Last but not definitely in that order of importance has been the Government’s record on job creation. There has been widespread criticism that the promised jobs have not come. Data on the job front has not come by for any meaningful conclusions to be drawn or judgments to be passed on it.

 The verdict on May 23 perhaps has thrown more light on the extent of farm distress and jobs creation than any dry data analysis because ultimately development or the lack of it will get reflected in the court of the people.  And India’s common man has time and again proved right in his assessment of Government’s performances.

 Academic verdicts on Governments’ economic performance will have to ultimately be validated by the voters. As Winston Churchill had said, “At the bottom of all tributes paid to democracy is the little man, walking into a little booth, with a little pencil, making a little cross on a little bit of paper - no amount of rhetoric or voluminous discussion can possibly diminish the overwhelming importance of that point.”


( The writer is a Senior banker.The views expressed are personal )

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