The Modi Mania which took the whole country by storm exactly two years ago may have waned slightly, But to its credit, it has unleashed some game changing reforms that have put Asia’s third biggest economy on a stronger footing. The NDA government has also found itself in the thick of controversies amid its face-off with the opposition in the Parliament, leaving key reform bills in limbo. Overall, NDA’s two years in power have been a mix of hits and misses.
Aggressive reform doze lays the foundation for strong economic growth– in its two years in power, the Modi government has lived up to its image of being a business friendly government by undertaking key structural reforms, thereby building the foundation for a paradigm economic shift.
- Relaxed regulatory environment, making India a more investor friendly nation– measures to cut red tape, reduce cumbersome regulatory procedures, fasten project approvals, simplify labor laws & bankruptcy procedures and strengthen intellectual property rights will boost investment and entrepreneurship, by making it easier to do business in the country. A 12- point jump in India’s position in the latest World Bank’s Ease of Doing Business rankings signals that the Modi government’s efforts on this front are starting to yield results.
- Easier FDI norms power investment- relaxed foreign investment rules in more than a dozen sectors including defence, construction, pension, insurance and railways has enhanced India’s attractiveness as a leading global FDI destination, with India emerging as the highest ranked country in 2015 in terms of capital investments, garnering FDI projects worth USD 63 billion, according to a Financial Times report.
- Increased infrastructure focus a step in the right direction– a country which has been long crippled by inefficient infrastructure including poor transport connectivity & insufficient power supply that has served as a major impediment to investment, the NDA’s decision to fast- track road building, railway and highways expansion is a welcome move indeed. Flagship schemes such as creation of 100 smart cities, Swachh Bharat Mission and the Modi government’s pet project to make India a global manufacturing hub i.e. ‘Make in India’ are still a work in progress but the government is laying the groundwork for their success.
- Plugging the subsidy loophole– the government’s reforms to curtail subsidy leakage are on track. A push for Aadhar-bank account linkage for the purpose of the Direct Benefit Transfer (DBT) and the successful rollout of the LPG direct benefit scheme will ensure that funds directed for subsidies to the needy and poor are not diverted elsewhere.
- Improved transparency– programmes such as Digital India will help improve accountability, governance and transparency while the NDA has also been successful in sorting out the coal and spectrum issues by conducting transparent auctions, which has helped kick-start projects that were stuck previously.
- Financial inclusion push via its highly successful Jan Dhan Yojna scheme with around 220 million accounts opened. The programme has made it to the record books for the maximum number of accounts opened in a week.
- Economy in better shape-a glance at key indicators including GDP, inflation, fiscal deficit, current account deficit, forex reserves, car sales, industrial output show that the Indian economy is in much better shape than two years ago when the NDA assumed office. While lower oil prices have certainly helped the government’s cause by trimming the subsidy bill and softening inflation and paving the way for monetary easing, power-backed reforms too have helped bolster consumer and business sentiment, accelerating economic growth. India’s growing global economic prowess which can be partly attributed to Modi’s strong global outreach and smartly advertised flagship schemes can also be seen as a success for the NDA government.
- Legislative challenges– the inability to get Parliamentary approval for the long pending Goods and Services Tax (GST) and the bill on easing norms for acquiring land for key projects has been a dampener .
- Economy not firing on all cylinders- India’s rise to the world’s fastest growing major economy hasn’t done much to improve corporate profitability, while exports are on a 17-month losing streak, banks are struggling with a mountain of bad debt and private investment is yet to significantly pickup despite the Modi government’s reform spree.
What the future holds for Modi’s reform agenda
Going forward, the NDA in its remaining tenure will look to carry on with the reform momentum and capitalize on the missed opportunities. With 55 MPs from the Rajya Sabha retiring in June, the BJP maybe able to increase its tally in the Upper House of Parliament, where it is in minority, that has crimped its ability to get key bills passed. This coupled with Congress’ defeat in recent assembly elections in Assam & Kerala will provide a helping hand to the NDA as it seeks to push forward its legislative agenda such as getting the GST and the Land bill passed in the Rajya Sabha. Getting over the GST hurdle and clarity on the tax front will give a massive impetus to the government’s ‘Make in India’ initiative and bolster FDI and economic growth. Finding a credible solution for the country’s bad loan problem to avert a full-blown banking crisis is the need of the hour while enhancing the subsidy reforms to the food and fertilizer sector is very important.
In the last two years, the building blocks for stronger economic growth have been laid but much more work needs to be done over the next three years to ensure that a broad-based and sustainable economic development of the country is in place.