Economic performance: hype vs reality

Economic performance: hype vs reality

The Narendra Modi government has completed four years. Examining the social and economic aspects of the government’s ‘development’ agenda over these years may confront us with an illusion, created from projecting the claimed extent of development that has taken place under it against the actual development seen since 2014. Nonetheless, we have to reckon with the facts as they are.   

There are certainly some key positives that have emerged during the four years of Modi’s rule. At the same time, structural macroeconomic woes, coupled with a waning credibility of (public) institutions in India, remains a feature of much discussion.

Positives: New initiatives on integrating transportation networks across roads, railways, waterways and civil aviation across the country seem to have improved most states’ overall infrastructural capacity for mobility. Power generation and distribution across rural and urban areas have improved. In digital communications and capacity building, one observes an improvement in services of e-participation and government e-services across states, which has enabled the implementation of the recently introduced Goods and Service Tax (GST) system, albeit with its initial period of administrative challenges.    

Macroeconomic woes: India’s public banking system has hardly witnessed a grimmer scenario than in recent times. While ATMs still remain cash-strapped post-demonetisation, the high degree of NPA (non-performing assets) coupled with rising bank frauds is pushing most public sector banks towards a crisis of illiquidity and poor lending capacity. While the legal amendments made to the new bankruptcy code seek to offer some respite to reduce the debt-ridden nature of banks (in the future), however, the actual implementation of the act remains to be seen.

The aggregate performance of India’s employment scenario remains mired in controversy amongst most economists who continue debating which data to rely on in assessing the number of new jobs that have been created over the last few years. In the coming months and years, it is critical to study the trends in real wage levels across sectors, including rural-urban areas, where wage inequality remains the highest. This lowering of rural wages is linked to declining farm incomes and the farming enterprise.  

With farm prices of several agri-commodities falling way below their minimum support prices (MSP) in 2016-17 and 2017-18, agri-distress continues to widen across most Indian states. The recent 50% hike in MSP announced by the union finance minister to cover “all costs” failed to explain the method of cost-accounting based on which the increase in MSP has to be calculated.

Nonetheless, the issue of MSP pricing is just one of the major concerns; other agri-market reforms announced, including e-NAM, the synchronising of tariff rate policies with MSP and facilitating market access for most farmers remain unaddressed. These are likely to have a bearing on the 2019 Lok Sabha election results, particularly in agrarian states like Uttar Pradesh, Bihar, Madhya Pradesh, etc.

The declining profitability of farming as an enterprise in India and the average agri-GDP growth rate (now lowered to around 2.4%) remains a significant concern with likely repercussions on the economy’s overall employment scenario, food inflation levels and food security levels (including public distribution schemes). 

On women’s safety and gender equality, rising crimes against women across states highlight deep fault lines in the justice system, a problem that has received limited political attention from the ruling party and from the prime minister himself. 

Furthermore, the last four years have hardly witnessed any significant reforms or improvement in performance in India’s higher and primary education system. The new education policy is still to be tabled for discussion in parliament. Low public funding in areas of education and healthcare signals a human resource crisis in the making.

Increase in direct and indirect tax collections for the Union government offers enough opportunity for the government to substantially increase public funding and investments in education, healthcare access, along with research and capacity building in areas of social welfare. Unfortunately, the Modi government seems to have done quite the contrary, while increasing defence spending -- India is now the “fifth-highest defence spender in the world”.  

Weakening institutional credibility: Putting aside the growing vulnerabilities of the legislative and executive wing of Indian democracy, along with declining press freedom, the last year or so has witnessed an increase in legitimacy concerns over the functioning of the third sacred pillar of the country’s democratic foundation, the judiciary.

With voices of discontent against the chief justice of India questioning judicial bench allocations in critical cases and the opposition parties’ attempt to initiate an impeachment motion against the CJI, one can observe the growing distrust and erosion of faith in the independent functioning of the higher judiciary, which is seriously troubling. Ensuring trust in the legal and public institutional order remains key to the very survival of India’s democratic roots.

An unconditional faith in the democratic principles of public accountability, property rights and civil society freedom is perhaps India’s only competitive advantage, particularly in comparison to regimes like China’s which echo a more authoritarian, autocratic system of governance. The upcoming 2019 elections will significantly test the ‘Moditva’ phenomenon that has allowed the BJP to sweep the national and state elections since 2014, including in Uttar Pradesh and parts of the North-East. Most of the issues highlighted here indicate an experimental, incomplete and consequence-insensitive approach to development. These concerns are likely to play a part in influencing voters’ preferences across states in 2019.  

(The writer is with the Centre for New Economics Studies, Jindal Global University)