An Assam victory, success at Chabahar, social schemes working and a better Q4...
With his party forming a government in Assam and opening an account in Kerala almost to the day he swept the Lok Sabha two years ago, Prime Minister Narendra Modi couldn’t have asked for a better start to his third year in office. On the diplomatic front, he’s just concluded a tripartite India-Iran-Afghanistan pact that gives India a gateway to Central Asia outside of Pakistan, through Iran, and helps counter China’s presence in Gwadar in Pakistan.
And on the economic front, despite the obvious setbacks in the form of the IIP and the PMI, after several quarters of contracting sales, revenue growth is once again in the black even if at less than 5% for a sample of 686 firms excluding Cairn, Vedanta, banks and financials. At 7.8% for the March quarter, CitiResearch estimates GVA will grow the fastest in six quarters.
While Make in India is still a long distance away, cellular phone manufacturing rising 83% from 6 crore in FY15 to 11 crore in FY16 shows the tweaks in the import duty structure in the budget are making a difference. Though Apple is not starting manufacturing operations in India in a hurry, it has plans for a 4,000-member centre working on maps in Hyderabad — given India’s tech-manpower and the greater value addition in R&D than in manufacturing, that’s probably good news. Tim Cook’s visit comes on the heels of other tech giants like Google’s Sundar Pichai — by 2019, Google’s Hyderabad centre will have 13,000 employees and, at around 150,000, IBM’s work force in India is larger than that in the US.
More than that, Modi has to feel happy his social agenda is already bearing fruit (see graphics). Though a brainchild of the UPA, the government has taken Aadhaar forward in a positive manner and, in FY16, `61,000 crore of cash transfers were made to people — that’s around a fifth of the government’s annual spend on subsidies and other social sector spend. Though the oil collapse reduced subsidies automatically — it’s impact on growth, through higher taxes though, was partially offset by the NDA’s horrible luck with the monsoons so far — the fact that 1.5 crore Indians have voluntarily given up their LPG subsidies speaks for Modi’s success since #GiveItUp is linked to providing subsidised LPG to the rural poor.
Experts like Govinda Rao argue (see his piece on the opinion pages) that ‘cooperative federalism’ is more rhetoric than reality, and it doesn’t help that a large part of taxes are collected in the form of cesses which are not shared with states, but perhaps that is to be expected when the government is cash-strapped and, at the same time, needs to spend to revive the economy.
Though there is some doubt as to how jobless economic growth is — EPFO data suggests a lot more jobs are being created than the Economic Survey does — there can be little doubt that much higher spending on roads and railways will boost construction jobs that are one of the fastest poverty-alleviating measures. Close to 3 crore persons have got their lives insured under the PMJJBY scheme and around 9.4 crore have accident insurance under PMSBY — along with 21.9 crore Jan Dhan bank accounts, Modi can with some pride claim credit for his ambitious rural agenda already bearing fruit.
The Congress party losing elections in six states since the 2014 Lok Sabha elections and the changing composition of the Rajya Sabha means the legislative chokehold over Modi is also loosening. Which is why, despite the Congress holding Parliament to ransom, the government did manage to get an important Bill like the bankruptcy one, among 21 others, through Parliament in just the last session — with a total of 90 bills passed in the last two years, and the Congress expected to lose a few more seats in the Rajya Sabha’s rotational elections, the finance minister is confident of getting the critical GST Bill through in the monsoon session.
Though private investment is yet to revive, the fact that this has been the best year ever for FDI — this was buoyed by the etail boom and the start-up mania — does suggest there is some truth to Modi’s claim that the gloom of the UPA years has begun to dull.
There are, needless to say, many negatives, but who expected that the landmines the UPA left behind — the Food Security Act and the Land Act come to mind immediately — could be cleared immediately. Renu Kohli’s piece on the opinion pages outlines the structural constraints to growth to show how overdone the ‘policy paralysis’ catchphrase was. While this means there is only so much the NDA could have done in two years, much of the criticism could be avoided if there was less chest-thumping and triumphalism and more sharing of the credit for work in progress — like the success at Chabahar, ISRO’s moves towards an indigenous space shuttle on the eve of Modi’s second anniversary undoubtedly makes the cake that much creamier but the role of the Congress in creating, and nurturing ISRO, is quite significant.