“Source: Economic Times”
Prasenjit K Basu
In his first five years in office, Prime Minister Narendra Modi delivered the basics of a civilised existence to 50-60% of Indians who had been denied access to bank accounts, cooking gas, toilets at home or school, and health insurance for 67 years since Independence. And he quintupled the pace at which rural homes were built, rural roads and world-class highways were extended. The world’s cheapest mobile phone and internet access were spread across the land, and micro-finance loans reached 130 million rural households. The audacity of this ambitious programme, and the spectacular effort in delivering it, enabled Modi to receive the largest pro-incumbent vote swing in independent India’s history.
The extraordinary aspect of the social achievement is that it was delivered despite adhering to a programme of fiscal rectitude that saw the fiscal deficit decline (as a share of GDP) steadily over the five years. When Raghuram Rajan became RBI governor in September 2013, his target was to bring inflation down to 6% by 2016. When Narendra Modi became PM, he brought it down below 6% within 6 months (by end-2014, two years ahead of the RBI’s schedule).
It is not an accident that inflation averaged over 10% YoY during UPA-2, and that the current account went from a surplus of 2.5% of GDP at the end of NDA-1 to a deficit of 2.3% of GDP at the end of UPA-1 – until India became part of the “fragile five” emerging economies in 2011-13.
BJP is the party of fiscal prudence in India, Congress the party of doles, handouts, fiscal profligacy and crony capitalism. The NPL mess was entirely created during the rampant lending boom under UPA. Inflation in India is always a political choice, and BJP chooses to contain it, while Congress chooses to let it run rampant in the hope of winning the “farmer” vote failing to see that the majority of Indians now are consumers rather than producers of food.
Having delivered the Securitisation Act in 2002, BJP-led NDA delivered an Insolvency and Bankruptcy Code in 2015 that will be the basis for a fundamental rebuilding of the strength and integrity of our financial system. GST had been spoken about by every government since finance minister VP Singh introduced ModVAT in 1985. But it was the Modi government that finally delivered the tax that would fold India into a single unified tax regime. There were flaws in its design – having to do with the cumbersome mechanism of a federal GST Council (necessary to get the law passed by the Rajya Sabha that no non-Congress government has ever controlled). A GST should have a single national rate to really deliver its full benefit – ease of collection, and smoothing the wheels of commerce. But even the flawed GST was a huge advance on what had previously prevailed – interstate octrois and multiple levels of labyrinthine taxes that made the nation a warren of corruption and bureaucratic bullying.
Demonetisation was an unnecessary political gamble, but let nobody tell you it didn’t have enormous economic benefits. The number of registered direct tax payers more than doubled as a result, and digital transactions have increased manifold.
This time, India’s manufacturing transformation is on the anvil: while Taiwan, Korea, Indonesia and Singapore have seen their exports decline for the past 6 months amid a slump in global electronics demand (and China’s exports have stagnated, declining in 3 of the 6 months YoY), India’s merchandise exports have risen in each of the past 6 months, mainly because electronics exports have continued to grow over 50% YoY. Labour market reforms in the next half-year will unleash the full magic of the long-delayed Indian industrial revolution.
And decisive policy making ensured that India faced no significant terrorist incident outside Kashmir in 5 years. When Pakistan instigated terrorist acts in Uri (2016) and Pulwama (2019), Modi responded with decisive action. And the world sat up and took notice. For the first time since it got a bloody nose in Vietnam (March 1979), China’s PLA was obliged to stand down after weeks-long stand-off with the Indian army in Doklam. So it is with hope and infinite expectation that we citizens of India look forward to five more years of decisive and visionary leadership from the PM, who rose by the sheer dint of his own determination and dedication to the top of the bean pole.