The double-digit inflation for many years is often listed as one of the most stellar achievements of Sonia Gandhi’s rule (2004 to 2014). Another double-digit achievement during her rule, that is often not given the due it deserves, is the home loan interest rates. The aspiring middle class was investing in buying a home for themselves. Please note that I am talking about the aspiring middle class like you and me. Not about the Rajdeep Sardesai-type middle class who will buy a 25-crore house in the year 2007 itself. This aspiring middle class was witness to a steady increase in home loan interest rates from 2005 onwards; rates that were 7.5% in 2003-04 leapfrogged to 10-11% in 2008-11 years; and then peaked in the 2012-2013 years. Headline after headline told us how the increase in home loan rates was burdening the middle class. At one point in time, we were also paying more than 11% interest on our home loans.
Enter Prime Minister Modi. The home loan interest rates steadily came down from 2015 onwards; came down to below 8% for the first time since 2005, and even reached a low of ~6.75% at one point! Even after the disastrous COVID pandemic, the interest rates haven’t gone as high as when Sonia Gandhi’s economists were at the helm. The closest graph I could find for a trend from the year 2000 onwards is below (Home loan rates vary from bank to bank, but we are more interested in the trend, so this graph is very illustrative of the same)
Let’s assume you took a 10-year, 45-lakh rupee home loan in the later part of UPA-2. A difference of 4% in home loan interest (11% in UPA vs 6.75% in NDA) would ideally mean you will save nearly 12 lakh rupees on a 45-lakh rupee loan! I know, I know that it is not the ideal way given the floating interest rates and all that. But even then, we can safely assume a ~10% average in the 2009 to 2014 period (it will be a tad higher, but I am being nice!) and a ~8% average in Modi’s 2 terms – you would have ended up saving nearly 7 lakh rupees. You can continue to debate with me on how taking an average is also wrong and it should be calculated with the exact number of months a certain interest rate was fixed and all that. Feel free to do that calculation too and you will still end up with the simple fact that we all saved a lot of money on our home loan interest rates, especially if we took the loan in the UPA days.
These savings didn’t happen just by chance or Modi didn’t just happen to be there at the right place at the right time. He ensured that more money first flows into our banking system, thereby helping ease the lending rates for the common citizen. They mocked him when he opened Jan Dhan Accounts. Today, 51 crore accounts hold nearly 2 lakh crore rupees in them! When demonetization brought back all cash into the banking system, one of the most obvious advantages that came with it was a reduction of lending interest rates, because more money came into our banking system! A structural reform like the Insolvency and Banking Code brought back nearly 3.2 lakh crore rupees into our system.
Compared to Sonia’s rule, there has been a whopping ~300% increase in the collections of personal Income Tax; a nearly ~140% increase in the collections of corporate taxes and a nearly 100% increase in the collections of GST. The most important point to note here is the actual taxes on these were NOT increased – In fact, they were decreased! For example, if you were earning 12 lakhs per annum in 2013 versus 12 lakhs per annum in 2023, you would pay 57% less tax in 2023 compared to 2013! The changes to the tax slab structure meant that those earning less than 15 lakh per annum would pay much lesser Income Tax than before. The Corporate Tax %age was reduced to 25% from 32% (much to the chagrin of the opposition); many slabs of GST were in fact bought down; and small-scale exporters now pay lesser tax than before!
A reduction in tax rates helped in increased compliance, which meant more money came into our system. More money in the system means better lending rates and better infrastructure. More people and companies paying taxes would also automatically point out to a simple conclusion – more jobs! Speaking of taxes, we need to make special mention of small yet crucial recovery schemes such as the Sabka Vishwas Scheme & Vivad se Vishwas scheme. These schemes alone have brought in nearly 1 lakh crore rupees back into the system!
Now, the cynic in you might want to question whether Modi is enjoying this newfound money. This article is not about what he did with that money, but given the recent brouhaha over the rights of the states, here’s a very simple yet startling statistic to satisfy your ego. The Modi government’s economic policies ensured that the States of India received a whopping 69.6 lakh crore rupees in just 9 years – a whopping 376% increase from Sonia’s years.
Again, the cynic in you can talk about how taxes on fuel were increased. If that is your argument, then you must also be ready to accept the following fact – Central government + BJP state governments have also brought down fuel prices by nearly 20 rupees per litre. For example, there is a nearly 15 rupees per litre difference in the petrol price in Uttarakhand as compared to Telangana! Fuel Prices haven’t changed since May 2022. India under Modi negotiated a deal with Russia to buy fuel while some other world powers stopped buying fuel from Russia! This ensured that India would remain isolated from the severe inflationary effects many countries of the world are going through, because of the Russia-Ukraine war.
Under Sonia’s stellar rule, the inflation rate hit double digits for multiple years. Modi government’s economic policies meant that inflation was in the 3.3% to 6.7% range, even after the COVID pandemic – this means that the pinch on your pocket is much lesser now than what it was when the universe’s biggest economist was at the helm.
When COVID raged, we were again reminded of how Modi’s lack of economic knowledge would devastate us. Articles were written on how we must blindly follow what the US and European countries were doing. Instead, Prime Minister Modi announced a brilliant 21-lakh crore package that covered multiple sectors and sections of society that the opposition didn’t know what to criticize in that package.
Both of Modi’s finance ministers, Arun Jaitley and Nirmala Sitharaman, faced perhaps the worst flak as compared to any previous finance ministers (Piyush Goyal was FM for a brief time, a stop-gap arrangement for an ailing Arun Jaitley). Both of them were often called the worst finance ministers ever. Turns out, both of them have perhaps been one of the best we ever had. Both of them have steadfastly steered our economy through unprecedented crises and remained great trusted lieutenants of Narendra Modi.
Together, they have also innovated and implemented some of our biggest reforms – the Insolvency and Banking Code; the GST; the big PSU reforms that include the merger of 27 banks into 12; the NPA recovery; the UPI payments; the establishment of the National Infrastructure Pipeline worth nearly 110 lakh crores; the moving of the Budget presentation to February 1st instead of February 28th and more.
The Modi government’s focus and grip on the financial system of our country is simply phenomenal. The equal focus on Big Bang systemic reforms and on benefitting the aspiring middle class; the neo-middle class; and the lower middle class is perhaps unprecedented. The middle class is thriving. It is not a fictional statement. It is what is being experienced. Makes you wonder, why exactly wouldn’t crores of these people willingly go and press the lotus button on the EVM!
This is the 5th article in the series Decoding How PM Modi Hacks EVMs (an allegation the opposition often throws at him). Part-1 speaks about the focus on small-scale entrepreneurs; Part-2 speaks about the revolutions in the labour/employment sector; Part-3 speaks about the focus on both prevention and cure in health; Part-4 speaks about how the lives of women were made better at home, school and work.