Dr D M Deshpande
The present NDA Government has completed four years in office. This is as good a time as any to review the economy in terms of what has been achieved. However, a non-partisan review should also look at what could have been achieved. With cricket heavily in the air, it is tempting to use some of it’s terminology. Has the Modi Government reached the slog overs in a limited over match? Or is it the fourth day of a five test series with both sides evenly poised? Did to make best use of the pitch batting/bowling first?
It must be pointed out that the economic performance in the four years has been quite good, with GDP growth clocking an average of 7.3% per annum. This of course, is assuming that the CSO’s estimate of 2017-18 growth rate is correct. Going just by the numbers, this is a tad lower than the average growth of UPA 2 in the previous five years which was 7.5%. But considering the two massive disruptions caused by demonetisation and GST and their prolonged effect on the economy, it should still rate as good performance. Going forward, economy shall not be held back due to these two reasons. Economy apart, polity is a mixed bag. While the NDA has added state after to its tally, taking the count now to 21, yet there is a perception that it finds itself on slippery ground now.
During these four years, two reforms-resolving large NPA’s through the route of Insolvency and Bankruptcy Code (IBC) and GST will be cherished as game changers. IBC is a reflection of the strong political will to back up RBI in it’s attempt to cleanse the banking system. It is chugging on nicely. It is a remarkable reform because it draws curtains on crony capitalism; at least a section of our industry chieftains were brazenly defaulting on their loans without the fear of losing their companies. Most of the implementation issues of GST, too, seem to have been resolved and monthly collections have now crossed the one lakh crore mark! Just look at how much time we took, first, to make up our minds to usher in GST and then to implement it. It was first announced by Manmohan Singh as finance Minister in 1991; it took all of 26 years to see the light of the day. Demonetisation, though was not an absolute disaster, it still did cause unnecessary disruption that took a much longer than expected time for return of normalcy.
The Government has achieved reasonable success in macro-economic management in terms of curtailing fiscal deficit to 3.5% in 2017-18 from over 5% in 2012-13. Of course, it did benefit from windfall gains that accrued due to fall in international oil prices, almost magically, as soon as new NDA Government assumed office. It must however, be said to it’s credit that it did not squander away the opportunity, choosing not to pass on the entire benefit to consumers. Instead, it used the gain to reign in deficit, spend heavily in infrastructure, especially roads and railways, and also hike outlays for social and rural sector. For example, it increased the spending on employment guarantee (which is actually a proxy for rural unemployment insurance) besides several other welfare initiatives such as Ujwal Yojana. As per an estimate, the Government must have made a windfall gain of around 8% of GDP due to oil prices sliding in it’s initial years. Whether a better use of this huge chunk could have been made is a moot question. The US and China built big ‘war chests’ of reservoirs of oil during these lean years which we too embarked upon, but did not do solid progress. If we had saved for a rainy day, wouldn’t that have now helped when the oil prices have sky rocketed?
While the Government did well in social sectors, there were disappointments in disinvestment, tax terrorism (Vodafone and Cairns still are unresolved, while Nokia required direct PM’s intervention), stagnating private investment, lack of reforms in education, agriculture and manufacturing are lagging behind because the hurdles are not addressed. Farm distress, distressingly, has become a recurring theme. Job creation has become all the more challenging due to a host of factors like increasing use of artificial intelligence like robots, global developments and slowdown and manufacturing operating on an average at three-fourth of it’s capacity.
Yes, in case of India, historically, it is about incremental improvements and changes, not just as a nation but also as a civilization. But it can also cope up with a ‘big push’ at times as was successfully proved by PM Narsimha Rao in 1991.