A $5 trillion economy is worth the goal. The first 50 days have set the right tone. What needs to be done is to follow up with a pragmatic on-ground approach
Last week, I met a friend at an Embassy (I would prefer not disclosing the name lest we destroy the already fragile diplomatic relations) over a cup of tea when he asked me, “So, do you think this Government is good for you and this city?” I was a bit puzzled because most diplomats, even if they are friends, would not ask this question. And even if they do, they don’t answer in the same breath, which he did, and said that this Government is working for rural India. Not to be trapped by my echo chamber, I asked my cab driver the same question, to which his answer was pata nahi (don’t know). Perhaps, my cab driver was closer to the overall public mood on the first 50 days of the Modi 2.0 Government. Something is happening, but what? Nobody can point fingers. To begin with, the Prime Minister himself upended everybody by bringing out a 50-day report card when people were expecting a 100-day report card. But then, a headline a day is Modi magic!
Let’s look at some of the key decisions taken by the Modi 2.0 Government: The newly-formed Jal Shakti Ministry, which is tasked with the task of ensuring drinking water to all rural households by 2024; pension benefits for 30 million retail traders and shopkeepers with an annual turnover less than Rs 1.5 crore under the Pradhan Mantri Karam Yogi Man Dhan Scheme; construction of nearly 20 million rural households by 2022; tax deduction of Rs 1.5 lakh on affordable home loans up to Rs 45 lakh; and amendments to the Insolvency and Bankruptcy Code to expedite pending cases of defaulting promoters and free resources before it is too late, among others. All these decisions, and some more, have been curated to achieve the larger goal of making India a $5 trillion economy by 2024. But the question is: How will the Government achieve this? The Indian economy seems to be headed towards, or is, in the middle of a slowdown. This has also been pointed out by some analysts within the ruling party itself, if not the Opposition and the chattering class.
Consider this: Auto sales, considered to be a very important economic indicator, has been on the slow lane for the past six months, hitting a new low month after month. The telecom sector is dangerously hovering on the fringes of going bankrupt even as data uptake is rising. The National Statistical Office cut full-year growth estimate for 2018-19 to below seven per cent. The International Monetary Fund (IMF) has tapered India’s growth to seven per cent and unemployment rate is at an all-time high of 6.1 per cent for 2018-19. Clearly, the two sets of data do not seem to be favourable towards each other right now. Add to it a third dimension of complex external environment, which would make it tougher to negotiate sweet deals with key partners like the US, China, Iran, Russia as also members of Regional Comprehensive Economic Dialogue.
China and the US have been engaged in a trade war, something that was unseen since the Cold War. The US and Iran are on the brink of a showdown. America does not want India to buy Russian defence equipment and many in our country are suspiciously watching the next RCEP negotiations vis-à-vis China. Meanwhile, the Indian economy is still running on a booster dose of great crop yields, which drives consumption in 60 per cent of the country, riding on good monsoon. The rains this year have been below normal so far and chances are that target production may not be met, leading to further announcement of sops for the farm sector. Fuel prices may go up as a result of tensions between US and Iran and the India- bound tech companies, including those willing to participate in the upcoming 5G auction, will have to let go of Huawei and Chinese companies if they want to step on the bandwagon.
The question is where will the next $2.2 trillion come from in an increasingly constricting investment space? One key benchmark to test this would be India’s baby steps towards sovereign bonds when it may raise nearly $10 billion in the first tranche. This will test the Modi 2.0 Government, which has already as sources revealed, relieved the best image makers/influencers from their current positions and set them up for the next target of holding roadshows on sovereign India bonds. Yes, it will also require some answering to tough questions on the fundamentals of the economy by seasoned economists and diplomats (some of whom have chosen to get back to their alma mater and pointed flaws in Indian economy).
It is a tough challenge but Modi 1.0 was always known to spring a different colour rabbit. A $5 trillion economy is worthy the goal and the first 50 days have set the right tone. What needs to be done is to follow it up with some pragmatic on-ground approach and have a series of open-ended discussions with corporates, the industry and economists. A major piece missing has been clear communication emerging from North and South block. This shroud of mystery has to go.
(The writer is a policy analyst)
