A government’s job is never simple, especially in a country like India that’s been struggling to realise its true social and economic potential. We take a look at how far the new government has succeeded in making things work.
It’s been over a year since the Bharatiya Janata Party (BJP) and its allies came to power in India riding on a massive majority. As the dust settles down after the elections, we are at a point in time where we can look back at what has changed since then. No doubt there are some harsh realities that would take time to improve, but what one would like to see is if concrete efforts have been taken in the right direction.
Prime Minister Narendra Modi’s first year in office has been a busy one. The PM has been travelling across the globe, to attract foreign investment. Overseas investments, a vital element in any developing economy had slowed down in the previous years following incidents that hurt investor sentiments.
Several positive changes stand out in the past year. Perhaps the most significant among them is the fact that the PM has managed to open the railways and defense segments for foreign investments. This in itself can be considered an achievement especially in a postcolonial country that has broadly remained suspicious and resistant to foreign entities entering the public sector. Moreover the government has taken measures to reduce bureaucratic delays in channelizing funds into the country.
The government has also managed to deregulate fuel prices and allowed the entry of private entities into the Coal mining sector. These are positive signs for the market that will encourage investors to look at India as a viable option.
Wary of being seen as overly business-friendly, the PM has smartly paid due attention to the marginalized sections of the society as well. A project initiated to open bank accounts for all sections of the society along with pension and insurance schemes has attracted wide attention.
But it has not only been about good tidings. On several fronts, the government has been less decisive, much to the increased frustration of many who had expected radical changes once the PM came to power. This is not surprising given that Modi had come to power with a promise to shake-up the economy and put the country on a fast-paced growth track.
The government has not made any efforts to privatise loss making state-run enterprises, with many of them constantly draining the public exchequer. Critics blame the government for resorting to populist measures with an eye on regional elections, an ever-present complaint against the previous coalition government of the United Progress Alliance (UPA). Some reports further suggest that business houses are largely dissatisfied with the efforts so far made in revamping India’s age-old taxation systems.
Then there are projects that remain largely on paper. When the PM had introduced the ‘Make in India Campaign’, much to the excitement of many, it was thought that this would kick-start a manufacturing trend in the country. However, not much has happened on that front several months after the announcement. This in itself is not a simple matter. India still runs on outdated transportation technology; its roads don’t connect key regions of the country, and the infrastructure is nowhere sufficient to support a manufacturing drive.
The ‘Make in India Campaign’ was supposed to boost manufacturing growth in the range of 12 to 14 percent a year but we are nowhere near those numbers. In the year ended March 31, 2015 manufacturing activity grew by only 6.8 percent from 5.3 percent in the previous year, the major reason being electricity outages and congestion at the ports.
According to the government, the economy expanded by 7.4 percent in the year ended in March. But this is debatable as analysts point out that the results were inflated during the recent revisions and the way the statistics office estimates output.
By other indicators, growth in the country is still lagging behind. Capital investment lending, adjusted for lending, fell to a ten year low. Factories are operating at 72 percent of their capacity and still dragging their efforts. Shipments in April were down and there wasn’t much to cheer from corporate earnings either.
If media reports are anything to go by, foreign institutional investors pulled out of Indian stocks and bonds worth around $2 billion in May 2015 compared to a net investment of $15 billion in the first four months of the year.
Perhaps of interest is the way the foreign media is analyzing the PM’s reign with frequent efforts made to highlight the negatives despite the many challenges facing the government. News organizations lament how businesses are suffering. Interestingly, if the government goes all out to help business houses, the same media will accuse it of capitalism. It’s a fine line indeed.
All these might indicate that the honeymoon period for the government may be over and it is time to get started on concrete measures. It will not be just the willingness to do it but also the realization that we live in a country with many complexities. Considering that much of India’s population still remains rooted in poverty, the PM will have to tread carefully if he wants to script a balance between welfare of the country’s populace and the nation’s growth.