Parsa Venkateshwar Rao Jr is a Delhi-based journalist, who’s worked with Indian Express in multiple editions, and with DNA in Delhi. He has also written for Deccan Herald, Times of India, Gulf News (Dubai), Daily Star (Beirut) and Today (Singapore). He is now Senior Editor with Parliamentarian
There is a fierce argument about what Prime Minister Narendra Modi has been able to achieve in office over the last five years. If many point to the disaster that demonetisation of November 8, 2016 is, then others point to the far-reaching tax reform of Goods and Services Tax (GST) that Modi had rolled out on July 1, 2017.
International Monetary Fund’s chief economist Gita Gopinath observed wryly that the collections from GST were less than expected, and some of the people, not economists, do feel that demonetisation has helped check the generation of black money. There is the battle between perception and fact. Prime Minister Modi is faced with the tricky challenge where perception is both positive and negative as in the case of demonetisation. Similarly, some of the facts related to the economy are also both positive and negative.
Political opponents will focus on the deleterious effects of some of Modi’s economic measures like demonetisation, though this has receded into the background because November 8, 2016 looks a little far away from February- 2019, and there is the farmers’ distress across the country, especially in BJP-ruled states of Uttar Pradesh and Maharashtra which cannot be dismissed as the propaganda of the opposition parties.
But economists are not willing to judge the Modi government’s performance on the economic front too harshly. They see the government’s achievements much more generously. But the views of the economists do not turn the tables in an election year. It does happen that a ruling party loses an election even after it has done a good job in dealing with the economy. This had been the case with the PV Narasimha Rao government, when then finance minister Manmohan Singh steered the economy out of a crisis, but Rao and the Congress lost the election in 1996. The Atal Behari Vajpayee government in 2004 faced the same problem. The economy was coming out of a downturn but the BJP lost the election.
In 2014, it was not the fault of Prime Minister Manmohan Singh and finance minister P Chidambaram and Pranab Mukherjee that the Indian economy was caught in the tailspin of what is now recognised as the Great Recession triggered by 2008 financial meltdown in the United States. But the Congress-led United Progressive Alliance lost the election.
The Modi government has not achieved spectacular success on the economic front, and as Surjit Bhalla, member of Modi’s Economic Advisory Council, points out, the growth rate of 7 per cent is below potential, and former chief economic advisor Arvind Virmani feels that the growth rate of the Modi years is the same as those of the previous five years.
It is only Lord Meghnad Desai who gives thumbs up to the Modi growth narrative because he seems to sense that in terms of perception of the people, the 7 per cent growth rate is good, and no one is going to pause and scrutinise its real significance.
Prime Minister Modi, Finance Minister Arun Jaitley and their colleagues in the government and in the BJP had blamed the previous government for the large non-performing assets (NPAs) of the public sector banking system, which in turn affected the credit flow system. But the NPAs never really posed a critical challenge to the banks and to the financial system.
Reserve Bank of India Governor Shaktikanta Das, speaking at Vibrant Gujarat Summit on January 19, 2019, revealed: “After reaching a peak of 11.5 per cent in March 2018, the gross non-performing assets ratio improved to 10.8 per cent in September 2018. As per the current assessment of the Reserve Bank, the ratio may further improve to 10.3 per cent by March 2019.”
It can be seen the NPAs improved only marginally, from 11.5 per cent in March 2018 to an expected 10.3 per cent in March 2019. In the same speech, Das said, “The progress of IBC (Insolvency and Bankruptcy Code) so far has been encouraging and has resulted in better recovery as compared to the earlier mechanisms. Data available till January 3, 2019, suggest that resolution processes have been approved in 66 cases, involving around 800 billion as resolution value to creditors.”
This shows that the NPAs posed a challenge to credit system but it was not life-threatening at any time, and that the IBC, a far improved and rational mechanism, is only helping in resolving the NPAs in a modest way.
Another major area where the Modi government did not perform miracles was in the segment of foreign investments in India. The Foreign Investment Promotion Board (FIPB) was abolished in 2017. But this has not radically altered the profile of foreign investments in India. Data shows that much of FDI came into the services sector, and much of it came from Mauritius and Singapore. Again, foreign investments in the markets are higher than foreign investment in businesses and infrastructure projects in the country.
It has been noticed that in the last two years, foreign investment flows into India have decreased as part of a global trend.
An assessment of the economic performance of the Modi government cannot be done in black and white, or positive/negative terms. It is a fuzzy picture. The economy does not follow the political diktat of leaders. Though there were many things that Prime Minister Modi wanted to do, he could not. And it is not his fault.
The economic trends are much too complicated.
It is not surprising then that Modi would not fight the election on the basis of economic statistics because there is not much to show there. He will have to fall back on emotive issues like his fight against corruption, which cannot be quantified, or attack the Nehru-Gandhi domination of the Congress party.