India economy: Seven years of Modi’s rule

BBC NEWS, DELHI: Narendra Modi stormed India’s political stage with grand promises – of more jobs, prosperity and less red tape.

His thumping mandate – in 2014 and again in 2019 – raised hopes of big bang reforms.

But his economic record, in the seven years he’s been prime minister, has proved lacklustre. And the pandemic battered what was an already under-par performance.

Here’s how Asia’s third-largest economy has fared under Modi, in seven charts.

Growth is sluggish

Modi’s avowed GDP target – a $5 trillion (£3.6 trillion) economy by 2025, or roughly $3 trillion after adjusting for inflation – is a pipe dream now.

Independent pre-Covid estimates for 2025 had touched $2.6 trillion at best. The pandemic has shaved off another $200-300bn.

Rising inflation, driven by global oil prices, is also a big concern, economist Ajit Ranade said.

India's GDP is too low and its inflation too high

But Covid is not solely responsible.

India’s GDP – at a high of 7-8% when Mr Modi took office – had fallen to its lowest in a decade – 3.1% – by the fourth quarter of 2019-20.

disastrous currency ban in 2016, which wiped out 86% of cash in circulation, and a hasty roll-out of a sweeping new tax code, known as the Goods and Services Tax (GST), hit businesses hard.

This spurred the next big problem.

Joblessness is on the rise”India’s biggest challenge has been a slowdown in investments since 2011-12,” said Mahesh Vyas, CEO of the Centre for Monitoring the Indian Economy (CMIE). “Then, since 2016, we have suffered too many economic shocks in quick succession.”

The currency ban, GST and intermittent lockdowns all reduced employment, he added.

Unemployment has been on the rise

Unemployment climbed to a 45-year high – 6.1% – in 2017-18, according to the last official count. And it has nearly doubled since then, according to household surveys by CMIE, a widely-used proxy for labour market data.

More than 25 million people have lost their jobs since the start of 2021. And more than 75 million Indians have plunged back into poverty, including a third of India’s 100 million-strong middle class, setting back half a decade of gains, according to estimates by Pew Research.

Mr Modi’s government has also created far short of the 20 million jobs the economy needs every year, Mr Ranade said. India has been adding only around 4.3 million jobs a year for the last decade.

India is not making or exporting enough

‘Make in India’ – Mr Modi’s high-octane flagship initiative – was supposed to turn India into a global manufacturing powerhouse by cutting red tape and drawing investment for export hubs.

The goal: manufacturing would account for 25% of GDP. Seven years on, it’s share is stagnant at 15%. Worse, manufacturing jobs went down by half in the last five years, according to the Centre for Economic Data and Analysis.

Exports have been stuck at around $300bn for nearly a decade.

Under Mr Modi, India has steadily lost market share to smaller rivals such as Bangladesh, whose remarkable growth has hinged on exports, largely fuelled by the labour-intensive garments industry.

Bangladesh has become a major export rival

Mr Modi has also hiked tariffs and turned increasingly protectionist in recent years – in tandem with his rallying cry for “self-reliance”.

Infrastructure building is a rare bright spot

Mr Modi’s government has been laying 36km (22 miles) of highways a day on average, compared to his predecessor’s daily count of 8-11km, said Vinayak Chatterjee, co-founder of infrastructure firm Feedback Infra.

Installed renewables capacity – solar and wind – has doubled in five years. Currently at about 100 gigawatts, India is on track to achieve its 2023 target of 175 gigawatts.

Economists also largely welcomed Mr Modi’s populist signature schemes – millions of new toilets to reduce open defecation, housing loans, subsidised cooking gas and piped water for the poor.

But many of the toilets aren’t used or have no running water, and rising fuel prices have undone the benefit of the subsidy.

And the increased spending with no matching income from taxes or exports has economists worrying about India’s ballooning fiscal deficit.

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