Three years after the BJP government led by Narendra Modi came to power in May 2014, Indian markets are booming. This bull run has been helped by various economic policy reforms and initiatives undertaken by Prime Minister Narendra Modi in the three years that he has been at the helm of affairs in the country.
Nifty 50, the broader of the two indices has grown from 7,203.00 points on 16 May 2014 to 9,525.75 points on 17 May 2017, giving a return of 32.25% in these three years and 21.04% in the last year alone. Similarly, Sensex grew from 24,121.74 points on 16 May 2014 to 30,658.77 points on 18 May 2017, giving a return of 27.10% in the three year period and 18.95% in the last one year.
Let’s take a look at the various policies reforms and initiatives of the Narendra Modi government that have helped the markets scale new highs.
On 8 November 2016, in an unprecedented move, Modi announced the withdrawal of Rs 500 and Rs 1000 currency notes, a move that was claimed to be aimed at rooting out black money from the economy with an additional benefit of helping to combat counterfeit currency notes.
“Firstly, it has underscored the government’s drive against black money, which is positive for the core economy. Secondly, it has set India on the digitization path that is now inexorable and will be value accretive for the economy,” Vaibhav Agrawal, Head of Research and ARQ at Angel Broking, said in a post written for FE.
Goods and Services Tax
The GST bill, the biggest tax reform since the country came into existence, is scheduled for implementation from 1 July 2017. It will condense all indirect taxes into one unified tax, which will be applicable across the entire country. GST is expected to usher in a new era in the Indian tax system by dividing the onus of taxation between the manufacturing sector and services sector.
“It will make businesses more efficient, logistics more effective, regulations a lot simpler and in the process boost GDP growth by around 1-2%. On a GDP base of $2.4 trillion, that is an annual boost of nearly $25-50 billion,” Agrawal said in his post.
Pradhan Mantri Jan-Dhan Yojna
In India’s biggest financial inclusion drive till date, this scheme was aimed at providing formal banking services access to more than 15 percent of India’s population that were not able to access these services earlier. Under the Pradhan Mantri Jan-Dhan Yojna, if a person holds an account for more than six months he or she can avail an overdraft facility of up to Rs 5,000. Jan-Dhan accounts holders can also claim an accidental insurance cover of Rs 1 lakh. The scheme also provides a life cover of Rs. 30,000 payable on the death of the account holder. This scheme ensures masses get an easier access to financial services, such as savings accounts, remittance, credit, insurance and pension in an affordable manner.
After access to formal banking, rural masses were promised affordable housing under the Pradhan Mantri Gramin Awas Yojana which aims at providing ‘affordable housing for all’ by 2022. The scheme will benefit about four crore people living below the poverty line. Under this scheme, the central government will provide a financial assistance of Rs 1,20,000/- for constructing a home with an additional assistance of Rs 12,000 for the construction of toilets in households.
“The government has opened the doors for tapping the massive $1.3 trillion opportunity called affordable housing. In a country like India, affordable housing has a massive potential due to its multiplier effect on income and spending,” Agrawal said in his post.
Other Development Schemes
The Narendra Modi government has launched many other schemes to boost the economy, namely Make in India, Digital India, Start-up India. These schemes provide lucrative incentives to participants for their role in helping to boost the nation’s economy. Another notable scheme is Pradhan Mantri Ujjwala Yojana which aims at providing five crore LPG connections to women below the poverty line across the country and replaces unclean cooking fuels with cleaner and more efficient LPG.