MODI@2. Off to a good start, but has miles to go

As a time-frame, two years may not be much, but for governments with a life of five years, it is almost half a lifetime. Which means even two-year-old governments raise much expectations, especially from a regime that rode to power on many promises.

At 2, the Narendra Modi regime has had a good start, but has miles to go.

On the plus side, corruption at the government level has been brought down significantly; even if it is there, it is not glaring. The Centre has gone after black money single-mindedly, and has also taken the bitter pill to contain fiscal deficit. All this can go a long way in strengthening the fundamentals of the economy.

Yet, the performance of the government has disappointed those who believed that Modi had a magic wand to bring achhe din . This set wants to see more action, as do Modi’s political opponents and critics.

But Narendra Taneja, National Spokesperson of BJP, counters saying: “Many suffer from political glaucoma and, unsurprisingly, cannot see the unprecedented economic achievement… The economy was left in a coma. We had to bring it back to consciousness and then focus on repairing and transforming.”

This is still work-in-progress.

The biggest challenge before the BJP government is creating ‘jobs’, a fact that the powers-that-be acknowledge, as they work on programmes such as Skill India, Start-up India, and Make In India.

As a key advisor to the government said, “We need to encourage big businesses in our areas of strength like textile. We do have many small businesses, but what we have to think about is having big business houses which can create employment as well as encourage ancillary units.”

The manpower problem is hurting the country at every level. Ironic, considering the country’s human resource is its greatest strength. Education and skilled manpower remain a challenge in the private and public sectors and even the government. So much so that even the NITI Aayog and the Central Statistics Office are on the hunt for home-grown economists, statisticians, and analysts.

Exports down Moving from men to material, the country has been having a torrid time in selling its products in the world markets. One set in the government wants to blame this on Reserve Bank of India’s reluctance to devalue the rupee, even as key competitors such as China, Brazil and Turkey have. This, they say, has hit the competitiveness of Indian exports.

But another set feels that more than policies, to blame is the lacklustre global demand. For example, says a government functionary: “The drop in crude oil prices has hit export of petroleum products. The demand for IT services has fallen with crude prices as oil economies re-look business strategies.”

This drop in oil prices has worked well for the overall economy, though. With the country importing almost 80 per cent of its crude requirement, low oil prices have translated into considerable savings for the government straightaway on the bill as also on the subsidy element.

In 2015-16, with Indian crude basket at $46.17/ barrel, the country spent ₹4,16,361 crore to import 202.148 million tonnes of oil against ₹6,87,416 crore in 2014-15 for 189.435 million tonnes. In dollar terms, the crude import bill for 2015-16, at $63.9 billion, was half the $112.74 billion in 2014-15. The savings on LPG subsidy alone works out to ₹3,300 crore for 2015-16.

If this was fortuitous, the Modi regime worked to redeem its promise of financial inclusion. The government has successfully opened 21.74 crore accounts till May 4, 2016 under the Pradhan Mantri Jan-Dhan Yojana, one of the flagship programmes of Modi. Another success has been the Direct Benefit Transfer of ₹61,824.30 crore to 30.78 crore beneficiary accounts in 2015-16. Of this, transfer towards the Mahatma Gandhi National Rural Employment Guarantee Scheme was ₹25,861.77 crore.

What the government was able to achieve on the social front, it could not in equal measure do so on the economic plane. Industrial production has disappointed while consumer prices have stubbornly remained elevated, if not high.

Data crunchers blame Chennai floods and the demand slowdown for the poor showing of the Index of industrial Production. As for the Consumer Price Index, they are quick to point out that minus pulses, the numbers are good. “Though Dal is a legacy issue, this government did say sorry,” said another key government functionary said.

The source is upbeat about 2017, saying that “things will be different”.

To emphasise the point, he cites the case of Coal India. “What is interesting to note is that it is the same team of officials and workers who were there earlier and are working now, but look at the performance. The question to be asked is what has changed from years before May 2014 and today.”

He also cites the rural electrification programme, getting the Railways out of the ICU, and the revival of road projects as some examples of the government’s successes.

Others from the government point to the good run in attracting Foreign Direct Investments as proof of the economy’s robustness. FDI flows touched a record $ 51 billion during April-February 2015-16.

In 2014-15, $44.29 billion came in as FDI, a good 23 per cent more than in the previous fiscal. The government has also made efforts to remove irritants for businesses and improve the ease of doing business in the last two years. The country was ranked 130 out of 189 countries in the Ease of Doing Business Report, 2016, moving up four notches from the recalculated rank of 134 in 2015.

Deft handling Most observers agree that there has been some deft shepherding of the economy, and credit this to the team Modi has put together.

The top heavy-hitter is Finance Minister Arun Jaitley, who managed to contain the fiscal deficit, and successfully push through the Insolvency and Bankruptcy code.

Piyush Goyal handling Power/Renewable Energy; Dharmendra Pradhan at Oil Ministry; Nitin Gadkari (Road and Transport); Nirmala Sitharaman (Commerce) and Suresh Prabhu (Railways) have provided stellar support to Jaitley.

So, how would you rank the Modi Government? Mahesh Gupta, President, PHD Chamber of Commerce and Industry (PHDCCI), gives 7 out of 10 for its policy support.

However, he wants the government to devise a strategy to take the manufacturing share in GDP up to 18-19 per cent over the next few years. The tug-of-war around the Goods and Services Tax is a worrying factor for him.

“The mindset change required at the operating level has not come. Bureaucrats still see you (industry) as robbers. But at the top there has been a change for the better. The government is engaging with us for policy related consultations,” says Gupta.

“If you ask whether achhe din have come? I will say Raastha khula hai (the road is open) but Achhe Din have not yet come. There is lot of distance to travel.”

(With inputs from KR Srivats, Amiti Sen, Surabhi)

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