If there is one iconic macroeconomic number which captures the first two years of the National Democratic Alliance (NDA) in office, it has to be retail inflation. When it inherited office in May 2014, retail inflation was 8.28%; it is at 5.39% in April this year.
Even its critics (including the Reserve Bank of India, or RBI, which continues to be hawkish on inflation) would concede it is a singular achievement. Actually, the NDA’s inflation record would have been better, but for the seasonal spurt in the prices of food articles such as fruits and vegetables in April, which forced retail inflation to accelerate from 4.83% in March.
The NDA’s success in containing the threat of inflation—but its inability to find a permanent solution to the problem of seasonal inflation—captures its tenure in office: a good start, but still a distance to go.
The NDA’s first year in office was indexed against the eminently forgettable tenure of its predecessor, the United Progressive Alliance (UPA)—given its record of prolonged policy paralysis, playing havoc with macroeconomic numbers and jobless growth, the verdict was a slam dunk.
Its credits at the time of the first anniversary included the determined push (which continues) for ease of doing business, restoring credibility in governance by carrying out auctions for coal mining and, in the process, creating a credible template for monetizing scarce natural resources, brave efforts to push politically incorrect policy initiatives (such as signalling sunset to the open-ended nature of subsidies and diluting land acquisition norms), return to fiscal rectitude, push for cooperative federalism (by accepting and implementing the recommendations of the 14th Finance Commission), moving from an entitlement regime to one of empowerment (by providing 24x7 power, loans, etc.,) and efforts to revive economic growth.
But going forward, it is unlikely to get such an easy pass, especially since it roused the nation’s expectations in the run-up to the 16th general election and thereafter. Yes, it has persisted with its tinkering at the structural edifice of the Indian economy (and full marks for it), but the results will not be easy to demonstrate. Yes, it is a fact that it had inherited a completely broken public delivery system; but there are limits to outsourcing blame to your predecessors.
What is working for NDA is (as the instaVaani opinion poll reveals) that Prime Minister Narendra Modi continues to work his popularity; even in Bihar, where the Bharatiya Janata Party (BJP) suffered a humiliating defeat, the surging crowds at each rally suggest that Modi outshines BJP, the party. However, at some stage, the electorate will begin posing tougher questions; and its critics are likely to make the outcome of the next round of assembly elections (where it does not hold any apparent advantage) due next year as a verdict on the NDA’s performance in office.
The standout feature of the BJP-led NDA’s second year in office has been its ability to learn from its errors of omissions. While rural distress has been building for some years, the NDA is remiss for not reacting in time—its response in this year’s budget has come a year late. Not only did the Union budget step up resource allocation to rural India to alleviate rural distress in the short term (with the prime minister personally monitoring drought-relief efforts), it has also, through moves such as the crop insurance scheme and an e-market for agricultural commodities, initiated long-term efforts to transition the agrarian economy to one that is based on market principles (a previous column addressed this in detail).
The NDA has also made a virtue out of a necessity. Recognizing that jobs creation in government was unlikely to match the additions to the workforce (annually, about 12 million), it has pushed very hard to create a culture of entrepreneurship among the hitherto disenfranchized economic classes—lower-caste groups such as the Dalits and women—through various concessions and loans. This is low-hanging fruit, but nonetheless something that is tangible. Similarly, its move to expand the social safety net (particularly in providing health insurance for the poor), is something that would mitigate political damage as the gap between expectations and reality grows over the next three years.
In this, the NDA may have discovered its equivalent of the MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act, the marquee rural employment guarantee scheme of the UPA) in the Pradhan Mantri Ujjwala Yojana—it provides free LPG (cooking gas) connections to women from below-the-poverty-line (BPL) households. Launched recently, coincidentally from Uttar Pradesh, a state which goes to polls next year, it looks to target 50 million BPL households.
In the final analysis, it is clear that there is scope for improvement, but definitely not despair. It is, therefore, a glass which is half full.
Anil Padmanabhan is executive editor, Mint.