By Nikunj Turakhia
In a November 2013 speech, Narendra Modi had said: “If the BJP comes to power (in 2014), it will provide one crore jobs.” Jobs, and the hope of a better economic future, were key planks on which the BJP came to power. With the Lok Sabha elections just having taken place a few months back, it is important to analyse the economy and how it will impact PM Modi’s future. While the state of the overall Indian economy has been improving, the average Indian voter is concerned with basic things like jobs, food inflation and fuel prices.
The Modi government’s first four years in office have been a mixed bag. The government has overseen implementation of the GST – one country, one tax – for streamlining the entire indirect tax mechanism, brought in the IBC and bankruptcy laws to tackle non-performing assets in the banking system. Besides, the Modi government is also credited with increasing FDI in Defence and railways, improving the business climate as suggested by a rise in India’s rating in ease of doing business.
But the government had its shares of criticism too, which include a hasty decision to go in for demonetisation, which hurt the informal sector of the economy and removed many small-scale jobs. Besides, the government has been lagging behind in pushing private investment.
But, “what agenda did the Opposition have? Remove Modi?” We believe the 2019 general elections were fought based on the personality of the leaders.
PM Modi has plans for the economy to work through whereas the Rahul Gandhi-led Opposition was armed only with anti-Modi rhetoric. There was a very prevalent fear that if Gandhi manages to upset Modi in 2019 with the help of a grand alliance, he will have the coalition interests to deal with, which would have caused a further drag on the economy yet again. In other words, despite the many levels of criticism against PM Modi the politician, and the administration (for instance, quality of data, government narratives on various campaigns versus ground reality and controversial economic moves such as demonetisation), investors thought that PM Modi was the better bet in 2019 rather than the Gandhi-led Opposition.
Prime Minister Narendra Modi clearly had an upper hand over the Opposition on economic issues in Asia’s third-largest economy, seen to be a contender to China in the race to become the world’s manufacturing hub in the next three decades. Even when confronted with allegations on economic mismanagement, PM Modi came well prepared to defend the charges with figures and logic that are still easy to contest but certainly not something to write off outright even by experienced economists. PM Modi presented a strong defence on economic growth and jobs. The campaign of a jobless economy must come to a halt now, Modi said, citing progress on various fronts in the economy such as construction, e-commerce, start-ups, tourism and topped up his case with the new EPFO-based payroll numbers. In the last one year alone, one crore jobs have been created from across the board.
Even when one can accuse the government for cherry-picking data and presenting a misleading picture, Prime Minister’s political rivals cannot deny that his term at the Centre has offered a fresh direction to the economy through a mix of incremental and new reform steps. Most importantly, the creation of the Insolvency and Bankruptcy Code, reforms at the monetary policy panel structure, and GST (goods and services tax) were important reform steps the Indian economy saw after a long period of policy stagnation. These have shown results already at various levels. Of course, some of the much-hyped campaigns like Make in India have not taken off yet, so are the promises of increasing the share of manufacturing to the national income, privatisation of ailing public sector units (PSU), especially banks, and resolving the agriculture crisis. Land and labour reforms, too, are still pending.
But PM Modi still scored well on the reforms front and continues to have a conviction on the future course, which is lacking in the Opposition.
PM Modi’s return in 2019 will now allow policy continuity. This was critical for the economy to continue on the path of structural reforms. India suffered a long period of policy stagnation at the Centre during the UPA-II regime, marred by scams and corruption charges. What PM Modi did was initiate a fresh course to get the economic momentum back through various measures (bank NPA clean-up, GST, subsidy rationalisation and start-up push). Continuation of these policies is critical for India to keep going in the global race for growth leadership. And India doesn’t have an eternity to achieve that.
The International Monetary Fund recently gave three decades for India to catch up before its working population begins to decline. India has the advantage of a younger working population at this point but that benefit will start fading in the approaching decades.
Investors, looking at India, will be seeking a political leader who can take up this challenge. Which this government has, in the form of PM Modi, who has all the ingredients in place to take India to a USD 5 trillion economy by 2023. Today, every Indian’s dream is in sync with PM Modi’s dream.
The author is President & CEO, Standard Group India & President, Steel Users Federation of India (SUFI).