One year of Modi - new politics and new economics.
One year ago, when BJP led by Narendra Modi swept the polls, with a single-party majority after 30 years, with his slogan, 'sabka saath, sabka vikas' ( inclusive growth) and development as the panacea for India's ills, a commentator had observed that Modi's regime would be as momentous as that of Jawaharlal Nehru or Indira Gandhi. Both Nehru and Indira Gandhi had changed the destiny of India - Nehru with industrialization and modernization of India, and Indira Gandhi with centralization and leftist authoritarian polity and economy.
Modi has changed the discourse on development from alleviation of poverty through doles to empowerment of the people through skill development, jobs and social security measures. He has 'transformed electoral narrative of caste, class and clientalism into one of growth and development for all', says Rashesh Shah, CEO of the Edelweiss Group. Modi has proved that good economics and good politics can go together.
One of the great achievements of the Modi government during the year is the restoration of the dignity and authority of the of the office of the Prime Minister. Another feather in the cap of the PM is the absence of any scam in the functioning of the central government. The other major feature is the revival of the India story in the world, and the effort to make it easy for the businessmen, both Indian and foreign, to invest in India to promote growth and provide employment to the young who join the labour force in millions..
Social security network for the poor.
Modi had proclaimed from many platforms during the election campaign that he would not be a 'pradhan mantri' ( prime minister) but a 'pradhan santri' (chief guardian) or the 'pradhan sevak' (chief servant ) of the poor. No wonder, he announced from the ramparts of the Red Fort on the 15th August 2014 that poor who have not dared to enter the doors of bank office could start zero-balance savings account and asked the nationalized banks to go to the poor and help them to start a savings account. Now, the Pradhan Mantri Jan Dhan Yojana for the unbanked poor has 15 crore accounts with a deposit of about 16 crore rupees. The banks were nationalized almost 50 years ago in the name of 'garib' and they were never enabled to start an account and access credit.
I was made aware of the importance of a bank account for the poor by our maid when my wife helped her to start an account a few years ago. She was so happy that she asked my wife why it was not suggested earlier. Poor either put their savings in a chit fund with uncertain returns or spend them on many celebrations organised in their area.
The other social security measures of the government are : accident insurance cover of two lakhs for a premium of Re.one per month ; life insurance cover of two lakhs at a premium of Rs.330 per year ; and a pension scheme in the name of Atal Behari Vajpayee of Rs.1000 to Rs.5000 per month after 60 years. Within a few weeks of its introduction some 8 crore people have enrolled in these schemes. Poor manage to eke out a living but are not able to cope with illness and death of an earning member, and the old age is a curse. All these social security measures are long over due.
The self-employed.
The Modi government has also extended helping hand to the self-employed - vegetable sellers, road-side eateries, small traders - who mostly depend on moneylenders for their credit needs as they do not have any asset to pledge with the bank. The government has set up an institution, the Mudra Bank, to meet the credit requirements these small enterprises - from Rs.10,000 to Rs.10 lakhs.
The Mudra Bank could be a boon to the millions of petty traders in India - mostly belonging to SCs, STs,OBCs and minorities. The Grameen Bank of Bangladesh and Self-help Groups in India have proved that these poor people are most trustworthy than the big businessmen who defraud banks, especially nationalized banks. Look at the list of companies in NPA ( Non- performing assets) of the banks.
The Mudra Bank has the potential to transform the unorganised sector and bring prosperity to the lowest rung of the society. It could be a game changer. The Finance Minister Jaitley has rightly called it - bank for the unbanked.
Poor do not ask for charity or doles, they ask for tools to develop their innate talent, and credit is one of the most valuable tools for the betterment of an individual. Every individual should be entitled to it when he starts his career.
Boost to Manufacturing.
Modi's " Make in India" mission seeks to promote manufacturing to create employment opportunities to the young and reap the demographic dividend for the country. Modi has met political leaders and business leaders in various countries to attract more investment in the manufacturing sector in the country. He has received commitment from the President Xi of China to invest $ 20 billion in India in manufacturing and in railways, and from the Prime Minister Shinzo Abe of Japan, to invest $ 30 billion in India in next five years. Japan is also financing the Delhi-Mumbai Industrial Corridor.
India is the largest importer in the defense sector. We import fighter aircrafts, submarines, helicopters, artillery, and many others. India has the third largest armed force in the world and has a huge budget of Rs.2,46,727 cr.( $ 40.4 billion) for the year 2015-16. The country spends 40 percent of this budget on acquisitions, and most of it is imported. Acquisition for the last five years was of the order of $ 16.72 billion ( Rs.1,03,535 crore). Modi government has invited foreign and Indian companies to set up joint ventures to reduce imports and provide employment opportunities to Indian engineers and workers.
Today most of the Indians have a mobile phone and it has benefitted farmers to know the prices of produce in the cities - food grains, vegetables, fruits etc. However, most of the mobile phones are imported. Now the government seeks to give incentives to manufacture them in India. Though India is good in software which gives employment to millions of educated Indians, India's hardware production is dismal. The companies like Samsung of South Korea and Oppo of China are planning to set up manufacturing facilities in India. Micromax, an Indian company, which has production facilities in China, has announced its decision to manufacture its phones in India.The 'Make in India' mission seeks to encourage all manufacturing industries to make India a hub for all these sectors just like the automobile industry.
Bouquets & Brickbats.
The opposition parties like the Congress, the Janata Parivar and the Communists have criticised the Modi government for the economic policies. The Congress Vice President Rahul Gandhi, who has suddenly found his voice, has given zero marks out of ten for the Modi government's first year. The Congress seems to be fixated on zero. It had told us that there was zero loss to the exchequer when it distributed coal blocks free of charge and spectrum for a song. Modi government has amassed three lakh crore for the treasury of the central and state governments by auctioning coal blocks and spectrum.
Some businessmen who expected big bang reforms are not happy with the pace of economic reforms. A very senior businessman Deepak Parikh has given expression to it. However there are others like Ratan Tata who have asked for patience since the government going in the right direction. Modi believes in pragmatism, not in capitalism or socialism. He believes in the maxim of Mahatma Gandhi - that government is the best which governs the least. He encourages the bureaucrats to be responsive and politicians to be proactive.
Lauding the Modi government's commitment to ' minimum government and maximum governance' and improvement in 'ease in doing business', Uday Kotak, MD of the Kotak Mahindra Bank observed, "Reality is better than it was one year ago, but expectation of one year ago have to be tempered by the fact that they were sky-high."
" I believe more reforms and measures to restore sick economy to health have been implemented this year", stated another industry stalwart, R.C.Bhargava, Chairman, Maruti Suzuki India," than ever before in the past except perhaps for 1991." The corruption and scams that plagued the UPA 2 government have been absent, he added.
While some businessmen are impatient with reforms of the Modi government, some others have happy with the direction of present government - effort to implement GST ( Goods and Services Tax), decentralization of economic power ( states share to go up from 32% to 42% of the divisible pool) to the states as mandated by the 14th Finance Commission, effort to reduce the number of permits/approvals/licenses to start a company,decision to invest in infrastructure (railways, roadways, waterways, ports, metros, and power generation and distribution), and many other changes which promote economic growth.
The Indian economy is on the move. Stalled projects have come down to 6.9 percent of GDP from the 8.3 percent during UPA. FDI has gone up to $28,813 million from the earlier year's $20,766. The private sector has raised Rs.56,801 crore in 2014-15 while it was Rs.29,381 in the previous year. Food inflation has come down to 5.36 percent in 2014-15 from 9.89 percent in 2013-14. Similarly, power generation, coal production, rural roads, tourist arrival have increased.
World hails Modi government.
The Modi government has received appreciation from abroad as well. The President of the World Bank, Jim Yong Kim, has congratulated Modi and hailed " one year of visionary steps toward ending poverty in India. The world needs more leaders like you". President Obama has called him "the Chief Reformer of India".
" Bold moves on the world stage" commented Kishore Mahbubani, former diplomat and the Dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, referring to the visit of Modi to various capitals of the world to renew India's engagement with the world. Modi would be able to make India one of the four pillars of the emerging multi-polar world with his economic initiatives in India." The world will happily welcome this strong india", he observed.
Even the Economist of London, a critic of Modi, has grudgingly acknowledged that inflation is down, interest rates are dropping, rupee is stable, and fiscal and current account deficits have shrunk. But it has added that the small improvements do not constitute transformative gains, and for that India's one-man band needs a new tune. The Economist has missed the message of the polls. Modi came with a message of hope,change and development for all. This new tune is reflected in all these small steps which would lead to the transformation of the Indian economy in the next few years.
India should not miss the bus now.
India started industrialization in 'fifties by assigning a leading role to the public sector and curbs on the private sector. At that time resurgence of the economies of Germany and Japan started and our politicians told us that were already advanced, and we cannot follow them.Two decades later, Korea and Taiwan became prosperous with free enterprise. The Indian politicians said that they are small countries and India cannot follow their example. India under Indira Gandhi became more rigid both in economy and politics.
In 1979, after the death of Mao-tse Tung, the new leader of China, Deng Xiaoping said that it does not matter whether the cat is black or white as long as it catches the mice, and changed Chinese economy to state capitalism, and the whole world knows how China became the second largest economy in the world in a few decades.The Indian Prime Minister P.V.Narasimha Rao was compelled to follow him in 1991 by the economic circumstances of the country after 40 years of socialism. He ushered in the liberal economy, and consequently, India entered the high-growth path and rapidly reduced poverty.However, the reluctant Congress reformers frittered away the fruits of the liberal economy by its populist measures.
Now, India has a chance to abolish poverty with higher economic growth under the Modi government's new politics ( Decentralization, Team India and Co-operative Federalism), and new economics ( empowerment through education, enterprise, jobs, Make in India, Swachh Bharat).
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