One of the key economic parameters is GDP growth.
The government led by Narendra Modi has served seven years in power. It faces headwinds on the political-economic front, thanks to the second wave of Covid-19 and the performance below expectations in the state assembly elections. However, it is time to look back and reflect on your performance on socioeconomic parameters over the past seven years. We also compare and see how it fared compared to the first seven years of UPA (2004-05 to 2010-11) under Manmohan Singh.
One of the key economic parameters is GDP growth. The accompanying chart shows that the average annual rate of GDP growth under the Modi government so far has been only 4.8%, compared to 8.4% during the first seven years of the Singh government. Even if the year 2020-21 (FY21) is excluded due to Covid-19, the six-year average stands at 6.8%, well below what Singh shows. Obviously, at this rate, the dream of a $ 5 trillion economy by fiscal year 25 cannot be achieved.
However, the Modi government fared better on the inflation front, with a CPI increasing 4.8% annually versus 7.8% during the first seven years of the Singh government. Also, on the currency front, the former fared better, with foreign exchange reserves increasing from $ 313 billion on May 23, 2014 to $ 593 billion on May 21, 2021.
On the food / agriculture front, which affects the largest segment of the population, both governments recorded an average annual growth of 3.5% in agricultural GDP during their respective first seven years. However, the Modi government broke all records regarding food and fertilizer subsidies in fiscal year 21, which reached Rs 6.52 lakh crore (38.5% of all Union government revenue, according to CGA). It also accumulated cereal stocks in excess of 100 million tonnes at the end of May 2021. This reflects the great inefficiency of India’s grain management system, and PM Modi avoided reforming this sector. On the agro-exports front, the Modi government performed poorly: in seven years, it could not exceed the $ 43 billion achieved in fiscal year 2014. With slow agricultural exports and low farmers’ incomes, the dream of doubling farmers’ real incomes by fiscal year 23 may remain a pipe dream.
On the infrastructure front, the Modi government has done better than the UPA. Power generation is 78% higher and road construction 30% per year. In the social sector, critical for those at the base of the economic pyramid, we have taken three key indicators to evaluate the performance of the Modi government vis-à-vis the Singh government: (a) average annual days per person generated under the MGNREGA in the first five years of the program initiated by the UPA (FY07 to FY11), which was 200 million rupees, improving under the Modi government to 230 million rupees; (b) annual average number of houses completed under Indira Awaas Yojana and PM Awaas Yojana-Gramin, which improved from 21 lakhs to 30 lakhs per year; and (c) end open defecation (open defecation free or ODF) which was 38.7% on October 2, 2014 and skyrocketed to 100% by October 2, 2019, according to government records. This is certainly commendable; By prioritizing baths over temples, the Modi government achieved full ODF status that had not been achieved even 67 years after Independence.
Overall, it is clear that the Modi government has not performed well on the GDP front. But its track record on the agricultural GDP front is equal to that of the UPA, and in infrastructure and welfare programs it is surely better. One can argue that these numbers should normalize with, say, people below the poverty line or some other deflator, but I’d still say that Modi, the government, has turned out to be more welfare-oriented than reformist. How long this approach to wellness is sustainable without increasing the size of the GDP pie is an open question. One can only hope that once Covid-19 is contained, the government can focus on growth policies and India recovers to a high growth trajectory. Surprisingly, even in the midst of this sadness, Sensex has been roaring, despite RBI’s warning of a possible bubble. Meanwhile, policymakers must boost demand, support MSMEs, and invest more in health and agro-infrastructure and value chains in rural areas during the remaining term of the Modi government. Only then can they hope to increase productive employment and income for more people in a sustainable way.
The author is Professor of Agriculture at the Infosys Chair, ICRIER
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