Is The Indian Economy Better Under The Modi Government? Let The Numbers Decide

Posted on May 29, 2015 in Business and Economy

By Bishal Paul

On 26th May last year, the Narendra Modi led National Democratic Alliance stormed to power backed by a massive mandate and popular voter sentiment. One year and counting, has the chest thumping rhetoric of the supreme leader yielded to any substantial results, or is the marketing blitzkrieg continuing to dominate the larger political space? Intentions may be motivated by personal bias but facts and numbers never lie.


The Number Game

Let’s then start with economy which they keep harping about all the time. During the elections and even post that, the Modi led government had always maintained that the last government mismanaged the economy and that they would put it back on track. One year later, the situation is rather interesting. In the recent budget session of the Parliament, the Union Finance Minister Shri Arun Jaitely informed us that the country’s GDP is growing by 7.4% this fiscal. However what is interesting in this is the fact that in order to achieve this high growth rate, the government changed the very process of how the GDP was earlier calculated. The move was so sudden that even the Chief Economic Advisor Arvind Subramanian expressed surprise, “I am puzzled by the GDP growth numbers and, consequently, all the constituent elements that went into constructing it.” So if we go by the latest method of calculation, then the growth rate under the UPA in the last year of its government was a healthy 6.9% and not the projected 5.4%. This government has therefore added a growth of 0.5% to the GDP.

Rupee Vs Dollar

When it comes to the value of rupee vis-a-vis the dollar, I would just like to echo honourable PM Modi, who in 2013 said that if trends continue, then the rupee will cross the age of the then Finance Minister, who was 68. Fast forward to 2015, the situation hasn’t changed much, the rupee has crossed not only the age of FM Jaitely (62), but also that of PM Modi who is 64 now. Coming to black money, the BJP President Amit Shah has already publicly called the bringing back of black money and the “15 lakh in every citizen’s account“, an election ‘jhumla’. They’ve been boasting about the dip in inflation but will never tell you that the drop in the international crude prices have contributed significantly to it. After all, why not take credit for something when it’s given to you on a platter. However, despite the heavy fall in the international crude oil prices, the government hasn’t passed on the benefit to the consumer and our petrol prices remain highly disproportionate and the highest in South Asia. Remember those messages we used to get during the UPA days comparing oil prices with neighbouring countries? Well, all you need to do is just google it and you’ll be surprised to know that it is cheaper to buy petrol from Pakistan and even a small country like Bhutan.

Fall In The Production Sector

As of April 2015, production growth in the eight core sectors in fiscal year 2014-15 was at 3.5%, which was lower than the 4.2% growth posted in the previous fiscal year, according to figures released by the Commerce & Industry Ministry. A sharp drop in the production of steel, cement and refinery products resulted in a 0.1% fall in the growth of the eight core industries in March, to its lowest rate in 17 months. The eight core sectors are coal, crude oil, natural gas, refinery products, fertiliser, electricity, steel, and cement, and account for 38% of the overall Index of Industrial Production. Industry representatives are concerned that the fall in production in the core sectors indicate a slowdown in economic activity. Similarly when it comes to taxation, the government has increased the service tax up to 14%. So every time you go out for dinner or to watch a movie from June onwards, be ready to bear the brunt of the government’s latest tax policy.

Setbacks To Agricultural Sector

The government has particularly shown lack of sensitivity towards the farming community which contributes close to 17% of our GDP and employs about 49% of our population. Agriculture and irrigation are one of the worst hit as the Rashtriya Krishi Vikas Yojana has seen a reduction in funds to the tune of Rs 7,426.50 crore. Apart from the massive cuts in several agricultural policies as mentioned above, they’ve brought in several amendments to the Land Acquisition Bill which snatches the rights of the farmers by removing crucial clauses such as the consent clause and the social impact assessment clause. Data shared by their own Ministries reveal that only about 8% of developmental projects are stalled due to land acquisition issues. But yet the government in its arrogance and ignoring the protests held across the country by farmers, re-promulgated the ordinance for the third time as they were unable to pass it in the Parliament. As a result, agriculture growth has gone down from 4.7% to 1.1% in the current fiscal year. Farmer suicides have risen by 40% to 1,306, from May 20, 2014 to May 24, 2015

Farmers in rain-fed areas are going to be paid a meagre Rs 2,750 per acre and Rs 5,465 per acre in assured irrigation areas. However, even then, there are conditions. Norms say that compensation will be limited to farmers having a maximum 4.9 acres of land. This means that more than half the farmers will not be eligible for compensation. A circular by the disaster management division of the Union Home Ministry on April 8 asked Chief Secretaries to compensate farmers from the State Disaster Relief Fund (SDRF) and get it reimbursed from the national fund. But, there’s a ‘jhumla‘ here too: this assistance will only be for the first disaster in a financial year. “In case the state faces another severe disaster during the same year, no adjustment will be made while releasing National Disaster Relief Fund (NDRF) assistance,” the circular said. And as the government continues to resort to such cheap political theatrics, the farmers suffer.

One can do extensive marketing or tweak the numbers to show a very rosy picture, but if the foundation of a structure itself is weak, it can’t sustain itself for long. It’s time the government realises that people are restless for change and intent only can’t serve the purpose.