The economy of a country is one of the most important criteria of development. The economy of a developing country like India has experienced many changes throughout the years and has impacted its people as well as the economies of different countries that are connected through globalisation. The government of India has always tried to form a budget that best satisfies its people and allocation of resources is done in the best possible way. As Indian economy still needs a lot of improvement, the working of government in economic sector holds importance. Each government’s steps taken in the economy changes it to a certain level. To analyse the economy under different governments, let’s see the condition of the economy before 2014 (UPA government) and since 2014 (NDA government). Let’s see if Is the economy of India doing better under Modi?
ECONOMIC CONDITION BEFORE 2014 (UPA GOVERNMENT) –
UPA (United Progressive Alliance) had been in power for a decade and many changes were brought into the economy. Starting from the GDP, it grew rapidly from 2004 to 2009. In the last year of its tenure, GDP grew 6.9% which was a massive success but made us wonder about their electoral strategies. Asset prices (stock markets, gold, real estate) also grew rapidly during this period as did the share of high denomination currency notes in circulation. However, the lack of creation of jobs overshadowed the achievement of GDP and made its opponents wonder the role of ‘black cash’ in GDP growth rate and imply it as ‘fake’ growth.
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This decade also witnessed a period of inflation due to a large amount of currency in circulation. It increased the price of goods which created a problem for people. Although government cannot be fully held responsible for inflation, however food inflation could have been addressed, which was not the case. The graph below shows that wholesale price inflation (WPI) remained in the double-digit for almost three year’s during UPA’s rule
Another factor that was a drawback in the economic condition under UPA was the fact that India faced a demographic period where more than 1.2 billion of its people were under 35 years which could have been an asset for the country. However, the government was unable to provide jobs and increase the employment rate of the country. Due to this, unemployment increased and it worsened the plight of people. Also, scams under the UPA government are another factor for deteriorating economic conditions. Scams such as 2G case in 2008, Uttar Pradesh NRHM scam in 2012, etc made people wonder of the role of government in the economy.
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This decade was thus seen as a phase of worsening economic conditions and 2014 elections awaited a better government which could improve the overall economic condition of the country. Coming up of NDA in 2014 made people expect a lot from the government. Its election manifesto has detailed steps and procedures to be taken for the improvement however to analyse the situation it is important to trace the difference between promises and actual actions taken.
ELECTION MANIFESTO OF NDA IN 2014 –
The failure of UPA government made NDA a strong upcoming political party in 2014 elections. NDA has expressed many of the procedures it would take for improving the economic situation.
On price rise it contained the following points:
“Runaway food inflation has crippled household budgets and contributed to the overall inflationary trend under the Congress-led UPA’s watch. Even worse, the food and nutritional security of millions is threatened. However, the Congress-led UPA government has remained insensitive and indifferent to the plight of the people; tying itself into knots with short-term, mis-directed steps. The committee of Chief Ministers, headed by Shri Narendra Modi, has already submitted a report on food inflation in 2011. The report was unfortunately not acted upon by the Congress-led UPA Government.
The BJP-led NDA Government’s record of holding the prices is a demonstration of our commitment to break the vicious cycle of high inflation and high interest rates. Our immediate task will be to rein in inflation by several steps, such as:
- Put in place strict measures and special courts to stop hoarding and black marketing.
- Setting up a Price Stabilisation Fund.
- Unbundle FCI operations into procurement, storage, and distribution for greater efficiency.
- Leverage on technology to disseminate Real-time data, especially to farmers – on production, prices, imports, stocks and overall availability.
- Evolve a single ‘National Agriculture Market’.
- Promote and support area specific crops and vegetables linked to food habits of the people.”
Regarding employment, it had the following points:
“The country has been dragged through 10 years of Jobless Growth by the Congress-led UPA Government. Under the broader economic revival, BJP will accord high priority to job creation and opportunities for entrepreneurship. We will:
- Strategically develop high impact domains like Labour-intensive manufacturing (viz. textile, footwear, electronics assembly, etc.) and Tourism.
- Strengthen the traditional employment bases of agriculture and allied industries, and retail – through modernization as well as stronger credit and market linkages.
- Harness the opportunities provided by the upgradation of infrastructure and housing, for its job-generating potential.
- Encourage and empower our youth for self-employment – incubating entrepreneurship as well as facilitating credit.
- Address the employability issue by initiating a multi-skills development programme in mission mode. The focus will be on job creation and entrepreneurship, in both rural and urban areas.
- Transform our Employment Exchanges into Career Centres – connecting our youth with job opportunities in a transparent and effective manner through the use of technology; as well as providing counselling and training.”
For fighting against corruption, it had the following points:
“Corruption is a manifestation of poor Governance. Moreover, it reflects the bad intentions of those sitting in power. All pervasive corruption under the Congress-led UPA has become a ‘National Crisis’.
We will establish a system, which eliminates the scope for corruption. We will do this through:
- Public awareness
- Technology enabled e-Governance – minimizing the discretion in the citizen-government interface.
- System-based, policy-driven governance – making it transparent.
- Rationalization and simplification of the tax regime – which is currently repulsive for honest taxpayers.
- Simplification of the processes and procedures at all levels – bestowing faith in the citizens, institutions, and establishments.
By minimizing the scope for corruption, we will ensure minimization of the generation of black money. BJP is committed to initiating the process of tracking down and bringing back black money stashed in foreign banks and offshore accounts. We will set up a Task Force for this purpose and to recommend amendments to existing laws or enact new laws. The process of bringing back black money to India what belongs to India will be put in motion on priority. We will also proactively engage with foreign Governments to facilitate information sharing on black money.”
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However, it is important to analyse the fact how many of these promises have actually been fulfilled.
ECONOMIC CONDITION SINCE 2014 (NDA GOVERNMENT)
Many expectations were created after the NDA government came to power in 2014. People expected it to take actions to improve the economy in which the Congress-led UPA had failed. Modi as the Prime Minister of the country has always been keen on improving the economy by curbing black money, encouraging industrialisation, foreign trade, etc. Data shows that economy was booming under Modi since 2014 as per the GDP. However, it faced a clampdown in 2016 due to his policies of demonetisation. Also, Trade improved due to his agreements with many countries including the US with which India runs a trade surplus. As promised, it took steps to curb black money for which he introduced Demonetisation in 2016. Its effects shook the whole economy which faced a serious setback. Its implementation has often been criticised by its opponents.
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Inflation since 2014 has also experienced some changes. When Modi took over as the prime minister, the retail inflation stood at 8.33 percent. In April 2017, it was 2.99 percent. It has fairly managed inflation better than UPA. However, its critics give this credit to Demonetisation and its bad implementation which made people worse off. Prices are still seen to be growing.
Other schemes of Modi such as ‘Make in India’ also requires our attention. It aims to develop India as a manufacturing hub and creating jobs for the masses. Manufacturing growth is linked to industrial growth rate. If the gross domestic product and gross value added arithmetic are kept aside and the increase in per capita income is kept in mind, the compounded annual growth rate of 8.69% is registered. This does not only represent the increase in income of the very rich but of also middle class. The creation of jobs has also not found clear records due to various factors such as global economic scenario and disruption caused by demonetisation. The government has promoted schemes like Skill India. Their impact is yet to be seen.
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Another action that has changed the economy is the introduction of GST. Many of the consumer goods have received a relief by reduction of taxes but on the other hand, it has increased tax rates of other luxury products. As this classification of goods is subjective for people, it has created a lot of speculations among the people.
The economy of India under Modi has thus faced many changes such as due to Demonetisation, Make in India, GST rollout, etc but have by far been the most rapid years in terms of economy’s ups and downs. Despite its failures in certain sectors, it can’t be blamed for the stagnant economy. NDA government has taken steps to break the stagnant legacy of UPA’s decade. Budget 2018 has also seen many positive changes and are expected to improve the economy. Its critics, however, argue it to be an electoral budget so that NDA could win votes in 2019 elections.
Our Indian economy still awaits many improvements by the Modi government.