The growth in the Indian economy has attracted a lot of attention. India has emerged as the fasted growing large economy, pipping China. It is expected to clock a GDP growth rate higher than 7.2% in 2018. Many international agencies that monitor key economies around the world have been sanguine in their projections on India.
A recent study published by UK based Center for Economic and Business Research (CEBR) states that India’s consistent GDP growth rate will push it to prominence in 2018. It has forecast that India will join the elite group of the top five largest economies of the world. This is a full year ahead of projections by International Monetary Fund (IMF) that India will make it to the top five in 2019.
India’s rise in global prominence has not come easy. In the last four years, Prime Minister Modi’s government has put in an unbelievable number of policy reforms and public investments in hundreds of projects that have borne fruit. This smorgasbord of reforms and investments have deeply impacted key sectors of agriculture, manufacturing, and services like never before. The gamut of initiatives – many of which have longer gestation periods – will continue to deliver results over an extended time horizon.
A dispassionate analysis throws up three key pillars that have provided the bulwark for the emergence of the economy. Firstly, Prime Minister Modi, shedding ideological baggage, has incorporated best practices in economic management that are pragmatic and more importantly, well suited for the country. This is indeed refreshing since for many decades India was hamstrung by ill-advised ideological paradigms that only resulted in poor growth rates and endemic poverty.
Secondly and more importantly, we are witness to an unparalleled excellence in executing these economic reforms and policies. Modi’s personal leadership qualities – acquired mostly as Chief Minister of Gujarat where he virtually passed through a ring of fire – have played an important role. The recent inauguration (May 2018) of the smart Eastern Peripheral Expressway (EPE) is but one example of this mastery over execution. Built at a cost of Rs.11,000 crore in Delhi, this 135 KM long solar power lit expressway was completed in 18 months.
Thirdly, and most notably, the government has ensured that, at least at the political level, there is no corruption, pilferage or fraud. These have been the core secrets of the swift economic transformation we see today. It is well known that India’s track record in delivering government services, particularly welfare benefits to the poor has been dismal. Former Prime Minister Rajiv Gandhi is on record saying that for every rupee the government spent on welfare only 15% actually reached the beneficiary.
But Modi had stopped all that by directly transferring benefits to beneficiary’s bank account. According to data published by the government, welfare benefits of Rs.3,65,996 crores were directly transferred to beneficiaries’ accounts in the last four years (www.narendramodi.in). This is an example of Modi choosing the appropriate service delivery vehicle and executing it well in a given time fame.
Modi’s developmental paradigm and governance strategy are built around these three pillars. Hence his schemes and initiatives, just to name a few – GST, Insolvency and Bankruptcy Code (IBC), recapitalization of public sector banks, unprecedented investments in national highways and railways, 100% electrification, transfer of welfare benefits directly to the beneficiaries’ bank accounts – are runaway successes.
What is even more striking is the fact that the government has used existing laws, existing civil and administrative machinery, existing staff and officers to execute its vast number of projects. The same machinery has in many cases achieved the project objectives ahead of schedule without cost overruns.
Like all previous governments, Modi too had the low-risk option of choosing reforms on a smaller scale that does not tend to rock the boat. But these changes would have yielded only incremental results or benefits that would have continued to keep India hostage to a pernicious low growth cycle, depriving huge sections of society a decent livelihood. But Modi apparently has taken a calculated risk and has instead, boldly opted to choose the transformation route, a high-risk option, to achieve big results in as diverse areas as possible. The gamble, as seen from the optimistic projections by international institutions, seems to have paid off.
Many compare Modi’s transformation exercise to the reforms of 1991 initiated by the then Prime Minister Narasimha Rao. Rao’s reforms were no doubt extremely critical for India then but were more in the nature of a rescue mission. They were focused on deregulation and attracting foreign direct investments to shore up dangerously low levels of forex reserves. They were incremental and definitely on a smaller scale in comparison.
As already pointed out, Modi’s reforms are transformational. Further his efforts must be seen as part of a master plan that includes securing India from internal and external threats as well as forging bilateral ties with various countries around the world to deepen India’s trade and commerce. The truth is that both Rao and Modi have succeeded in untethering the native economic sinews of the country.
Despite the din, distorted and mostly negative reporting in the media, Modi’s developmental agenda has the backing of large sections of society. For them, the economic resurgence passes the smell test, at least anecdotally. For instance, in high growth states like Gujarat and Tamil Nadu, there is a noticeable absence of beggars on the streets or on railway platforms. Long gone are the days when people could not afford footwear or wore torn clothes. The so-called ‘trickle down’ effect which was a just a dribble for several decades, now seems to be drenching vast sections of poor people. Of course, this is not to gainsay the fact that poverty continues to pervade vast sections of society in many states.
The economic survey for 2018 has highlighted the strengths of the economy. But it has also warned of potential risks and threats to the economy, both internal and external that need to be carefully watched. However, the good news is that key statistics and relevant data point to continued robust growth in the economy. Modi’s biggest achievement seems to be the setting up of right the ecosystem via a conducive policy environment, infrastructure building and massive public investments that have since unleashed the economy.
The silent changes that are sweeping across the country– mostly at the lowest levels of the economy – are creating a huge impact on the very fabric of India – economically, politically and socially. The enthusiasm and expectations of the people – particularly the under 35 demographic segment that forms over 60% of India – seem to be scaling up.
The clamour for corruption-free and swift delivery of government services – be it provision of electricity, sanitation, public health services or any service for that matter – is ratcheting up. While citizen experience is positive, this may not be a welcome change for the political ecosystem in India.
Modi’s iron will and mastery of execution are unmatched across the whole political spectrum in India today. He has given India a new mantra to the political class- perform or perish. He has set the bar for performance high enough that many in the current political scene may not be able to achieve. This probably explains the collective hatred seen for Modi among his political opponents and their proxies. But the impact of Modi’s transformations will continue to reverberate for years to come.