Modi’s 4 years not bad bargain for economy

Anjan Roy 

[dropcap]I[/dropcap]t has been four years since the Modi government came to power and the next General Elections are on the horizon. People will have to judge in whom to repose their faith in the coming election. Stock-taking is in order.

The Narendra Modi government;s achievements may not be of sterling quality, but these could not be cursorily dismissed, either. The judgement would depend on the scale of ambition of the assessor rather than sheer facts.

From that background, the first positive score would be that, in four years, we have not had one single instance of a major scandal. Accusations of money-making on the sly by high functionaries of the state have, by and large, been absent. In sharp contrast, this is what had dogged the functioning of the immediately preceding government. That is a lot, given the social environment, we had developed earlier about the inevitability of corruption in high places.

The apparent effort to bring norms-based decision and probity in economic decision-making has redeemed the prestige of the administrative process, or whatever has been still left. This is no small achievement, as every penny of public money misused, or misappropriated, is a burden on the people. Tainted decision-making detracted from efficiency and caused losses.

Coming to the functioning of the economy, as such (and this is the second redeeming feature), we have been through a period of benign inflationary environment. This may not be exactly the achievement of the government of the day; it may have been fortuitous. But imagine, if the past four years of Modi government had been accompanied by runaway inflation, the blame would have squarely rested with it. The Opposition would have torn apart the government for failure to contain prices.

Holding fast onto the free-pricing regime for petroleum products so far has been not only prudent but a saving grace. Had the pricing of petroleum been retained in the control format, either the public oil companies would have gone into liquidation, or the government’s finances would have gone haywire.

The related issue of fiscal balance, which influences the overall tempo of the economy, has also remained stable. The fiscal deficit level in the last year of the earlier government was reined in and the deficit has been tethered to manageable limits. This has happened mainly by gradually eliminating some of the subsidies, as well as surging tax revenues. But it appears that the experience with rising revenues has been taken too ardently and the tax calculations this year are somewhat over-enthusiastic. A jump in tax revenues of over Rs2 lakh crore on a base of ₹12.69 lakh crore could be a tall order at the end of the day. Hence, fiscal slippage could be the result.

More so, when the economy is already going through a most difficult process of transition to the GST regime. Although GST is a radical change and called for a massive effort, the full benefits will come only years from now. Meanwhile, the system will impose additional burdens on the Centre’s finances, such as larger transfers to the states to compensate for their losses.

Nevertheless, so far so good and the positive vibes emitted by a stable economic regime have attracted global attention. India has turned out to be an oasis of strength and stability in a global atmosphere of uncertainty and volatility. One off-shoot has been the hopeful flow of funds from overseas. We have never received as much funds from global investors as we did in the past four years. This has been possible due to another perceived change. The ease of doing business in India appears to have improved and some of the globally accepted benchmark surveys have charted out India at a much higher slot than previously. Procedural quagmire that used to mark, say, the setting up of a business in this country, had become the stuff of legend. These have been streamlined. But the effort to rationalise and clear the cobwebs of red tape belongs largely to the state governments. They have realised that changing the outmoded rules is to their benefit.

But the biggest hurdle in the way of fresh green-field investments remains intact. That is, land acquisition without which new investment cannot be absorbed. And quickening the pace of growth will critically depend on a massive dose of such fresh outlays. This will also determine how many new jobs we are creating every year for those who are joining the labour force. This is a political issue, which has repeatedly been put on the back-burner. However, on the whole, what we got in the past four years is a stable government moving towards a certain direction of a liberal economic order, not too much buffeted by conflicting interests and policies at the centre of the government. It was the operation of a common minimum programme on the ground. But it was not a bad bargain considering from where we started in the terminal year of its immediate predecessor.

(The author is a political commentator)