Three Years of Modi Man­age­ment: The Num­bers Don’t Tell a Good Story

Business Sphere - - NARENDRA MODI, PRIME MINISTER OF INDIA - By Our Cor­re­spon­dent

How­ever much Modi tries to con­vince peo­ple that things are bet­ter to­day than in the pre-NDA era, his gov­ern­ment has strug­gled to make last­ing progress in most ar­eas of In­dia’s po­lit­i­cal econ­omy. If one sim­ply goes by the key eco­nomic data re­leased by the Modi gov­ern­ment, the per­for­mance of the NDA over the last three years has been sub­par. We are far from ex­pe­ri­enc­ing the achhe din Modi had promised in his elec­tion speeches in early 2014. Even af­ter “re­fin­ing” the method­ol­ogy for cal­cu­lat­ing GDP and In­dex of In­dus­trial Pro­duc­tion the Modi gov­ern­ment has ended up mak­ing the last two years of UPA look bet­ter and its own three years much worse. Re­mem­ber, just a few months af­ter tak­ing charge, fi­nance min­is­ter Arun Jait­ley had con­fi­dently pro­claimed that the econ­omy had bot­tomed out and was on a ris­ing tra­jec­tory. Three years later, most in­de­pen­dent es­ti­mates of GDP growth for 2016-17 are about the same or even lower than the worst year of eco­nomic growth (6.9%) un­der UPA in 2013-14 when de­spon­dency was the dom­i­nant sen­ti­ment. The BJP, in its run-up to the 2014 elec­tions, had heav­ily ex­ploited this fact and raised the slo­gan of achhe din in its elec­tion cam­paign. As things stand to­day, ad­di­tional job cre­ation in the or­gan­ised sec­tor un­der NDA has been less than half of what was ex­pe­ri­enced in the last three years of UPA. The Modi gov­ern­ment is most em­bar­rassed about this data re­leased ev­ery quar­ter by the labour min­istry. When the BJP pres­i­dent Amit Shah was point­edly asked about the sharp slow­down in the for­mal sec­tor jobs in a press con­fer­ence called to dis­cuss NDA’s achieve­ments, his re­ply was less than sat­is­fac­tory. “It is im­pos­si­ble to pro­vide jobs for 125 crores peo­ple … self-em­ploy­ment is a big source of em­ploy­ment,” Shah was re­ported as say­ing. An un­char­i­ta­ble in­ter­pre­ta­tion of Shah’s state­ments could be that most In­di­ans in the job mar­ket must fend for them­selves. In­deed, data does sug­gest that nearly 50% of in­cre­men­tal em­ploy­ment in re­cent

decades has come from the ranks of the self-em­ployed. This is mostly in the un­or­gan­ised sec­tor which con­sti­tutes about 85% of the to­tal work­force of 480 mil­lion. No study has em­pir­i­cally de­ter­mined the qual­ity of self-em­ploy­ment in In­dia though the skill de­vel­op­ment min­istry be­lieves only 5% of the to­tal work­force has for­mal skills. One can well imag­ine the qual­ity of the re­main­ing 95% of the work­force. The larger point is that the NDA gov­ern­ment in its three years has not been able to re­verse the sta­tus quo rep­re­sented by job­less growth. The gov­ern­ment has made an as­ton­ish­ing claim that the Mu­dra Bank loans of Rs 3.15 lakh crore dis­bursed to 7.5 crore poor must be seen as pro­vid­ing self­em­ploy­ment. The only prob­lem here is that a sub­stan­tial part of this port­fo­lio was pre-ex­ist­ing and trans­ferred to Mu­dra Bank from other pub­lic sec­tor banks. Be­sides, many in­di­vid­u­als who have bor­rowed up to Rs 5 lakhs from Mu­dra Bank were al­ready in the self-em­ployed cat­e­gory. And their com­mer­cial ac­tiv­ity may not be big enough to pro­vide jobs to oth­ers. How­ever much Modi draws upon his con­sid­er­able com­mu­ni­ca­tion skills to con­vince peo­ple that things are bet­ter to­day than in the pre-NDA era, the stark truth of wors­en­ing job­less­ness is not easy to counter. Agri­cul­ture U-turn An­other sec­tor where data clearly points to a wors­en­ing sit­u­a­tion is agri­cul­ture. Ac­cord­ing to Ashok Gu­lati, the agri­cul­ture economist, “The three years of the NDA pro­duced 1.7% growth in agri­cul­ture. In the last three years of the UPA, agri­cul­ture sec­tor grew by 3.5%. Of course, NDA was unlucky to ex­pe­ri­ence two back to back droughts in its ten­ure.” The fact, how­ever, re­mains that Modi made a huge prom­ise of en­sur­ing 50% profit over costs to all farm­ers. A prom­ise that his gov­ern­ment has not been able to keep. Later, the agri­cul­ture min­istry scaled down its com­mit­ment by say­ing farmer’s in­come would be dou­bled by 2022. This would mean at least 10-12% growth in their in­come ev­ery year un­til 2022. Re­cently, the Niti Aayog has said even this will be dif­fi­cult to achieve be­cause farmer in­comes have hardly shown any sig­nif­i­cant growth over the last three years. Other lead­ing in­di­ca­tors also sug­gest that the econ­omy is yet to show a sec­u­lar, up­ward growth tra­jec­tory. Bank credit growth in the last six months since Novem­ber has been around 4% and this is the low­est recorded in 60 years. We were told bank credit would im­prove dra­mat­i­cally af­ter re­mon­eti­sa­tion as banks were flush with de­posits. That does not seem to be hap­pen­ing sim­ply be­cause there is lit­tle de­mand in the econ­omy. Pri­vate in­vest­ment is still to pick up in three years of the NDA even though the gov­ern­ment de­part­ments such as roads and rail­ways have sub­stan­tially upped their in­fra­struc­ture spend­ing. The Key­ne­sian logic of pub­lic sec­tor spend­ing crowd­ing in pri­vate sec­tor in­vest­ment had not hap­pened so far. In an ar­ti­cle in Busi­ness Stan­dard, Vi­nayak Chat­ter­jee, a lead­ing in­fra­struc­ture con­sul­tant, has said over­all in­fra­struc­ture spend­ing as a ra­tio of GDP is fall­ing short by close to 4% of GDP an­nu­ally in the 12th plan pe­riod (2012-2017). A short­fall of 4% of GDP works out to $80 bil­lion or Rs 5 lakh crore an­nu­ally. This is en­tirely due to the with­drawal of the pri­vate sec­tor from in­fra­struc­ture. This is largely be­cause the bulk of the big in­fra­struc­ture pro­vid­ing com­pa­nies in In­dia are among the 50 large groups who owe the In­dian banks an out­stand­ing debt of over Rs 10 lakh crore. Fi­nance min­is­ter Arun Jait­ley re­cently said the prob­lem cre­ated by th­ese 50 com­pa­nies had caused a paral­y­sis in the ac­tiv­i­ties of pub­lic sec­tor banks. The NDA has de­layed fix­ing this prob­lem for three years and only re­cently it passed an or­di­nance em­pow­er­ing the RBI to deal with th­ese busi­ness groups who fund elec­tions of both Congress and BJP. The messy and cor­rupt po­lit­i­cal econ­omy of the large bank de­faults by cor­po­rates is still to un­fold be­fore our eyes. In its three years, all the NDA has done is to post­pone deal­ing with this prob­lem by sim­ply blam­ing it all on the UPA. Dur­ing this pe­riod the size of the prob­lem loans has nearly dou­bled. Since pri­vate in­vest­ment has not been forth­com­ing, the slo­gan of ‘Makein-In­dia’ too re­mains un­re­alised. The NDA would find it dif­fi­cult to name just a few bil­lion dol­lar plus green­field projects that have come in the stream. The claim of $45 bil­lion plus for­eign in­vest­ment in 201617 is sub­stan­tially in the form of ac­qui­si­tions and takeovers of ex­ist­ing ven­tures by for­eign com­pa­nies. For in­stance, in 2016-17, the big­gest chunk of FDI is in the form of the $13 bil­lion ac­qui­si­tion of the Es­sar re­fin­ery by a Rus­sian oil com­pany. There are sim­i­lar ac­qui­si­tions in the new econ­omy space.

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