EDITOR-IN-CHIEF
As his primary calling card, people usually talk of Prime Minister Narendra Modi in personality terms. Aspects like charisma take precedence over all else. But governance produces its own kind of personality, forming the true measure of a leader. While elections may be won or lost on emotions and perceptions, there is a decisive underlying factor. Which is, as Bill Clinton once bluntly put it, “It’s the economy, stupid.” In February, the biannual Mood of the Nation (MOTN) poll found unemployment and inflation to be the two issues that concerned India’s public the most, besides economic growth. As voting gets under way for the seven-phase general election, much of the political discourse centres around both these livelihood issues. This is reflected not just in the speeches of leaders but also in their party manifestos released recently. To win a third term in power, Modi holds out a vision of the future. This is the idea of Viksit Bharat—the target of transforming India into a fully-fledged developed nation by 2047. The ruling Bharatiya Janata Party (BJP) has adopted the slogan ‘Modi ki Guarantee’ as its refrain and main campaign plank. It cites the 10-year track record of the PM’s handling of the economy as proof of his ability to deliver. For the Opposition, though, joblessness and inflation take prime slots in their critiques and form the leitmotif of their campaign promises.
Rather than merely report the rhetoric, we decided to make a factual assessment of the Modi government’s 10-year performance record on the economic front. Experts sum up Modinomics, as it is termed, as being characterised by a blend of fiscal prudence and investment-led growth, laced with a strong dose of targeted, tech-enabled welfarism.
Key aspects of Modi’s governance personality emerge here. His vision leans decidedly towards the long term, resisting the temptation for immediate gratification. We saw this capacity to bite the bullet during and after the Covid shock. India’s economy endured and bounced back when even major economies were flailing, and GDP projections for FY24 are a robust 7.6 per cent, making it the world’s fastest growing major economy. That didn’t happen by accident. The trajectory owes directly to the conscious (and hard) choice Modi made to be monetarily conservative rather than profligate while battling the pandemic. Not making the panic-induced error the West made to pump in massive stimulus packages.
Driven by this belief in first securing the base rather than performing cosmetic surgery, Modi focused massively on building infrastructure. Yearly average capital expenditure on railways trebled during 2014-23 from what it was during 2009-14, resulting in an eye-popping 25,871 km of new tracks, with 37,000+ km being electrified. You see these impressive numbers all across, whether highways, shipping or airways. The spike in capex not only broke the cycle of underinvestment that had plagued these critical sectors for years, but government spending also filled in at a time of feeble animal spirits globally in the private sector. This emphasis on physical infrastructure flows from the conviction that they provide jobs as well stimulate economic growth.
But while the GDP figures are respectable, every analysis points to K-shaped growth: a widening gap between rich and poor, nothing to shore up incomes for the latter, and even rural wages falling, besides what many economists call disguised unemployment. While government figures show unemployment figures have dipped post Covid, a drilling down of those statistics brings out the nuances. Out of all those employed, some 57 per cent are self-employed, according to the Periodic Labour Force Survey report of 2022-23. Many jobs are in the informal sector—both unsecured for the individual and simultaneously indicative of underemployment, when seen from the standpoint of e¯cient utilisation of human resources. About 21.8 per cent are casual labour. Formal jobs cover only 20.9 per cent of India’s workforce.
Once this pattern started getting noticed and critiqued, especially since the pandemic, Modi has focused on welfare to alleviate hardship and ensure there is no outright destitution. For example, with the free grain scheme that covers 810 million poor. But this is also proof of how dire the circumstances are at the bottom of the pyramid. Being naturally wider than the top, it also influences a key economic factor: consumption. Lack of surplus money in common hands leads to low demand, o°ering no spur for production, and hence reduced appetite for risk among investors. This low mood is what resulted in a scenario where private investment never kicked o° despite corporate tax reductions. This is the big conundrum of the Indian economy and a problem for the government.
Also, disinvestment in PSUs has slowed after Air India, and manufacturing remains stagnant at 17 per cent of the GDP. Agriculture growth, meanwhile, stayed sluggish at an average of 4 per cent over the five-year period ending FY23, and hit a deep trough thereafter, slipping to 1.8 per cent in FY24, according to the first advanced estimates. Erratic weather patterns are keeping growth predictions below one per cent even over the next year, likely sustaining that dark undertow on the GDP. The external environment, too, has not been favourable with all the geopolitical tensions, and the trend towards deglobalisation has meant that exports are not firing enough and seem to be not gaining fully from the global turn to the ‘China Plus One’ strategy. That apart, the prudent fiscal management and the growing spread of the GST net have led to an ongoing formalisation of the economy and boosted government revenues. However, the government should take heart as the future outlook for the Indian economy looks positive on most counts.
In this issue, we present a comprehensive mapping by our bureaus of the hits and misses of Modinomics, to enable voters to cut through the clutter and make informed choices.
Ultimately, democracy will be the final judge.