The last one year has seen flat industrial output and a gloomy property market. But at the same time, inflation has been tamed and social schemes have had an impressive reach of 19 crore takers. Will the coming year bring back the much-touted euphoria?
By Shantanu Guha Ray
If he could double the days in a year to 730, Prime Minister Narendra Modi would have a lot to brandish about on his government’s first anniversary. He could have helped a portion of some 13 million Indians looking for jobs, checked a depreciating rupee, restored confidence of the bourse and helped corporate giants increase their earnings. But that has not happened. His critics are already at his throat for a number of misses, the biggest being the controversial Land Acquisition Act that has had the government in a complex bind.
Modi has made his ministers and bureaucrats work hard and ensured his government remained free from scams that had sunk the previous UPA II regime.
But Modi’s supporters argue that a year in power is not long enough to evaluate the performance of a new government. Worse, it is difficult in India, mired in countless social and economic issues. “At the most, you can take stock of the government,” remarked economist Bibek Debroy, a key member of the newly-created Niti Ayog that replaced the Planning Commission.
Modi and the BJP that swept to power on a presidential-style campaign promising achhe din last May have the opinion polls on their side. Consider the one done by The Times of India, which rates the Modi government as getting up to 77.5 percent. Another poll by Mint said the prime minister had an app-roval rating of 74 percent, although down eight percentage since last August.
That, in short, means there are enough hopes in India surrounding Modi. On paper, he has tried hard and pushed for some economic fundamentals. Finance Minister Arun Jaitley has taken several economic measures since May 2014 but foreign portfolio inves-tors (FPIs)—once popular as FIIs—have spoilt the first anniversary party ostensibly because they are still unsure about tax liability under the controversial minimum alternate tax (MAT) imposed by the UPA. Pressing their panic sale buttons, FPIs have reduced their risks in the Indian market. This is not good news for both the PM and the FM.
A protest against the land acquisition bill
Take these numbers. In April alone, FPIs sold net stocks worth $2.3 billion (excluding the $2.6 billion net inflow through the Sun Pharma deal), making India one of the worst markets in the world for investor returns. Around the same time, the Sensex lost nearly 2,200 points because FPIs were still nervous over tax issues. Worse, bills were stuck in parliament because of squabbling between the ruling party and the opposition.
This was not all. There came a report that showed sales and profit of as many as 300 companies, which recorded the slowest growth in the last three years. All complained about tensions in raising capital because of rising bond yields. Industrial production for March also slowed to 2.1 percent against 5 percent in February. With global crude prices hardening and foreign investors selling their investments and taking out dollars from India, it was clear the rupee would give lesser returns on greenbacks.
There are other issues worrying the PM and the FM—industrial output is flat, bank credit is languishing and the property market is gloomy. The Land Acquisition Act, which India badly needs to build infrastructure and industry, has become a lightning rod of discontent and the chances of it passing through parliament are very low.
Then, there is the Goods and Services Tax, India’s single biggest tax reform after Inde-pendence, which remains embroiled in serious political differences. The act may—eventually—become a law but there are many who believe it will be a watered-down version. And this summer, bad weather has led to an unprecedented crisis in farming. The lack of urea availability has made the overall condition bad due to reported cutbacks in social welfare programs.
There are other confusions straddling the Modi government. Consider the case of Modi’s 100 Smart Cities plan which has not offered a clear picture to those in the infrastructure and construction business because most of India’s main cities are urban nightmares. Modi also has not explained his vision of Digital India and how it will work in a nation where elementary mobile telephony remains a mess.
Then, there is Modi’s most ambitious program, Make In India, symbolized by a lion made of nuts and bolts. The idea is grand but how it will work in a nation of low-skilled people is still not clear to the masses.
NO OVERNIGHT SOLUTIONS
HDFC chairman Deepak Parekh, always known to speak his mind, made his disappointment public when he said nothing much has changed on the ground. But there are others who differ.
“The BJP has remained on top of most of India’s problems but the problems are really insurmountable in nature, and there are no overnight, quick-fix solutions. But the PM knows what needs to be done, and he is on the job, not relying—like the previous government—on corrupt ministers,” says Prabir Sen, a top data analyst.
The Make in India program needs to be fleshed out
Sen argued that the despair, as amply reflected in statements by the opposition parties, was totally misplaced. “And it certainly does not mean all is lost for the PM and his party,” he reiterated.
Sen further pointed out the government’s acceptance of the 14th Finance Commission’s recommendations in the context of devolving more funds to the states was a landmark move. The figure now stands at 42 percent of the total revenue collection, up from the earlier 32 percent.
Some social schemes have had budget cuts, but some have been very impressive in their reach of the common man. The Jan Dhan Yojana, Pradhan Mantri Jivan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana schemes have close to 19 crore takers.
Sen said his research showed that multinational CEOs were even more optimistic about India, enthused by IMF projections that India would clock 7.5 percent growth in 2015-16 and overtake China, riding on several economic reforms introduced by the Modi government over the year.
Then, Sen quoted the latest RBI figures to claim that growth in credit may have come down to its lowest ebb in almost two decades, but reforms that had been put in place would soon push both corporate earnings and growth. “Look at the telecom spectrum auctions, credit has picked up marginally. Foreign brokerages have put their weight behind the Indian markets. The Sensex could hit 33,000 by December or February next,” Sen said.
Sen rests his argument by claiming a growing consumer confidence in Modi, reflected in the rise of car and consumer durables sales. “I am confident that if the investment cycle turns in the next 6-9 months, the euphoria should be back by the time government enters the second anniversary,” added Sen.
It means Modi, arguably, still has enough firepower stacked on his side. In reality, he faces virtually no competition from the Congress which remains largely bereft of ideas to fire India’s restless young, who form nearly 67 percent of the voters.
Political analysts feel the Congress under an ailing Sonia Gandhi and her son, Rahul, has still not recovered from last year’s debacle, despite Rahul’s recent efforts to pick up the gauntlet. “These are hop, skip and jump efforts, lacking seriousness,” said Sankar Ray, a veteran political observer.
Modi also has had good luck on his side. For the record, inflation has been tamed and fiscal deficit contained. The PM has been extremely lucky because his government managed cheap commodity—mainly crude—prices. And then, there are reports that electricity generation—a bane for almost all governments in India—has touched a record high, thanks to 494 million tons of coal production this summer.
Modi, who works for a little over 17 hours a day, has made his ministers and bureaucrats work hard too and ensured his government remained—till date—free from scams that had sunk the previous UPA II regime.
Corporate captains now admit corruption at the top—synonymous with the previous scam-tainted Congress regime—had dec-lined dramatically. The PM, unlike his predecessor, is extremely prolific on social media and speaks to the people frequently through a monthly radio address, Mann Ki Baat. In many ways, Modi has proved to India he is a better communicator.
“There is a sense of positivity in the government and those trying to do business know exactly what the government wants,” said Soumya Kalyan Ghosh, the India head of Albright Stonebridge Foundation, a top global advocacy firm.
He added that Modi’s plan to auction mineral rights—he started with the coal auction this year—was his first step to check corruption and foster transparency. “The government raised `2,00,000 crore and the states got their shares, including West Bengal which had little cash to pay salaries to employees,” said Ghosh.
Internationally, India has acquired a face of promise, a face of hope, a face of honesty, all larger than before. The PM has mined the 20 million-strong Indian diaspora and over-energized New Delhi’s foreign policy by cour-ting countries like China, Israel, Australia, Japan and the US. His government earned brownie points by evacuating stranded people in conflict-zones like Yemen and rushing relief to earthquake-ravaged Nepal.
NEW WORLD ORDER
Delhi’s diplomatic community saw Modi’s moves as binding South Asia with a focus on China. “He is not too West-heavy; he is pushing for a new world order, which is interesting,” said a New Delhi-based US analyst on conditions of anonymity.
For example, passing of the Bangladesh Land Accord Bill was historic, aimed at transferring enclaves with a clear demarcation of territory. In the defense sphere, Modi’s decision to acquire 36 Rafale fighter jets was a win-win move since the squadron strength of Indian Air Force is already down to 35 against a sanctioned strength of 42.
Modi has energized India’s foreign policy by courting several
countries, including the US
The PM is also making the right noises. Consider the one he sent to right-wing Hindutva activists that the government would not tolerate attacks on churches as also unpleasant rants. He may have to keep up that pressure.
After all, India will not wait patiently, endlessly. Probably the prime minister knows that and is trying his best to do more.