Modi Government Launched Big Ticket Reforms in Past Four Years
The completion of four years of the NDA regime has prompted a flurry of debates over the extent to which this government has made progress on bringing the country into the era of Achhe Din for the masses. Comparisons are being made with the tenures of the UPA regime. Comparisons of course are always odious. Circumstances are always different especially the external environment which is difficult to control for any government.
Even so, it is possible to take policies in a particular direction and hence intent becomes equally important in making any assessment.
As for the UPA, the biggest problem in the last few years of its tenure on the economic policy front was the paralysis in decision making that had crept into the government following a series of highly publicized scandals. These included the the notorious telecom and coal mine allotment scams. In addition, the Manmohan Singh government was faced with enormously high international crude oil prices that even touched a peak of 140 dollars per barrel at one stage. Even so, it managed to attain an average growth rate of 7.7 per cent but was 6.6 per cent in 2013-14 when its term ended,
The Modi government, in contrast, had the good fortune of having world oil prices crash to 50 dollars within a year of taking over. This not only brought down the oil import bill and enabled them to keep the current account deficit under control, it also emboldened them to raise excise levies sharply. It brought in a revenue windfall that helped keep the fiscal deficit under check. The deficit has been brought down gradually from 4.5 per cent at the end of the UPA tenure to 3.5 per cent in the last fiscal (2018-19). This has been made possible partly due to some good luck in having a benign external environment and partly by efficient management of resources.
At the same time, unlike the well known policy paralysis of the UPAs last term, the NDA has taken a series of major policy measures over the last four years which have had a big impact on the economy, both in a positive and negative way. The two most significant ones were demonetization and the launch of the Goods and Services Tax GST).
Demonetisation in 2016 not only slowed down the economy for several months especially in rural areas but also created severe hardship for the common man. This was followed in mid-2017 by the introduction of GST which made times equally hard for small businesses. The growth rate slowed down owing to the double whammy of demonetization and launch of a radical new tax system. Fortunately, the GST Council gradually made the new tax system less complex and bureaucratic. This eased many problems faced by small and medium industry but much red tape still needs to be cut out of the new system.
Other significant policy decisions have also been taken over the past four years, several of which have far reaching consequences. These include firstly, the passage of the new Real Estate (Regulation and Development) Act. This pathbreaking law has brought tremendous relief to homebuyers who have been cheated over the years in a systematic way by real estate developers. The legislation which is still in the process of being ratified by states has brought a considerable measure of discipline and regulation to the real estate sector.
The second much-needed and long awaited legislation is the Insolvency and Bankruptcy Code. It has enabled companies to be declared bankrupt and hence allow the assets to be sold, ensuring that lenders get at least some of their money back. The process has begun successfully with some large entities having been sold recently enabling banks to recoup some of their losses.
The third scheme that has transformed lives is the Ujjwala scheme to provide free cooking gas to women in rural areas. This has come as a boon to women living in rural areas who were using wood as a fuel, which posed a threat to their health as well as their environment. The fourth major policy has been the launch of the Jan Dhan accounts, a much reviled programme since many of these were found to be fake accounts in order to meet government targets. Even with this caveat, there is no doubt that that the Jan Dhan scheme has expanded the scope of financial inclusion to large segments of the urban and rural poor.
Despite these problems, economic growth is still not doing too badly. Even with the impact of the twin setbacks mentioned earlier, growth in 2017-18 is expected to be around 6.6 per cent while the Reserve Bank of India expects it to accelerate to 7.4 per cent in the current fiscal. Clearly, the economy is on a upward path at this point. But it is roughly at the same level of growth as when the UPA ended its tenure. Numbers, however, do not tell the whole story.
The NDA has certainly been more proactive in implementing economic reforms over the last four years and these will have their impact in the long run. It may thus be too early to make a clear assessment. There is no doubt, however, that this is a government that has boldly launched big ticket reforms like GST and these may finally push the economy on to a high growth path over the next few years.
(Views expressed are personal.)