The National Democratic Alliance (NDA) government led by the Bharatiya Janata Party (BJP) is now nearly half way through its term. For a government that inherited an economy crippled with policy paralysis and decelerating growth rates, the challenge was not just to revive economic activity but also to provide clear policy alternatives for an economy struggling with worsening fiscal deficit and external account deficit. While the government may have done well on the deficit indicators, partially helped by the collapse in petroleum prices, its track record in reviving the economy is still shrouded in mystery, despite claims of improvement by the Central Statistics Office (CSO) based on the new national accounts series.

A cursory look at some other economic indicators would suggest that the situation is far from normal, leave alone a recovery. Exports have been falling throughout the major part of the two-year period. The manufacturing sector is yet to see a revival, with production indicators oscillating between positive and negative territories. Most manufacturing industries are suffering from excess capacity. Bank credit and deposit rates are at their lowest in the last 10 years. Private investment hasn’t picked up despite sharp interest rate cuts in the last one year. Overall wholesale inflation is in the negative territory, but retail inflation continues to threaten with occasional spikes in food items.

But the biggest failure of this government has been its failure in responding to rural distress. Rural distress has been building up since the beginning of this decade but triggered a crisis with the fall in international commodity prices since August 2014, shortly after the new government took over. With back-to-back droughts, the situation in rural areas worsened. The government took some time to respond to these external and internal shocks, but the response was less than commensurate, leading to farmer suicides in some states.

While the government can be given the benefit of doubt as far as its handling of the drought and the commodity price collapse are concerned, given that a part of the blame lies with state governments, what is worrying is its lack of vision on reviving the rural economy. A large part of the response has been doing more of the same, including the flagship programme Pradhan Mantri Fasal Bima Yojana as far as the agricultural sector is concerned. But the failure of the government in providing relief also came under severe criticism from the Supreme Court (SC). Most of the orders passed by are nothing more than what has already been mandated by various programmes of the government, be it Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), National Food Security Act (NFSA) and the Mid Day meal (MDM) scheme.

The resentment of the finance minister on the judiciary stepping on executive domain is understandable. But what the government did not realize is that it was precisely the inaction and inadequate response of the executive which forced the judiciary to step in. The government’s failure to step up expenditure on MGNREGA or implement NFSA is not just an executive failure. It stems from a lack of political understanding of the government which has not yet come out of its opposition mindset. In its zeal to belittle an already comatose Congress, the centre has continued to treat most of the rural development and nutrition programmes with apathy.

This was articulated by none other than the Prime Minister himself on the floor of Parliament when he mentioned MGNREGA as a monument of failure of the previous United Progressive Alliance (UPA) government. While the UPA was responsible for destroying the demand-based character of MGNREGA by fund cuts and other administrative measures, the NDA continued with the same policies in the first one-and-a-half years. It was only in the beginning of this year that the Prime Minister corrected himself, lauding the role of social security programmes such as MGNREGA during times of crisis, such as the current agrarian crisis. So was the case with NFSA, which was to be implemented by July 2014 but is yet to be implemented fully across the country. This was also seen in the case of a half-hearted attempt to dilute the UPA’s land acquisition bill. All this has certainly not helped the government revive the rural economy but has certainly dented the credibility of the government among the rural poor and farmers.

The second front on which the government is yet to earn its credibility is on improving the ability of the economy to generate jobs. The task of creating remunerative and decent jobs is far more difficult at a time when the economy is going through demand compression. If the track record of the economy when it was growing at its fastest rate during the UPA regime is any indicator, this is certainly a task that requires urgent attention. The consequences are already visible with the decline in real wage rate growth in the past two years. The combination of low employment and low growth is something that the economy can ill-afford at this time. While the government does seem aware of the issue with a number of programmes launched recently, these are yet to show any tangible impact on the ground.

If there is one big message from the recently concluded elections in five states, it is that governments which have taken pro-poor measures have been rewarded. At least that is the message from West Bengal and Tamil Nadu, the only two states where incumbent state governments have been re-elected. Both these governments have taken pro-poor schemes such as cheap and subsidized rations as well as various schemes such as bicycles and other subsidies to the poor. Unfortunately, the NDA is yet to come to terms with some of these policies and instead of owning up and revamping these, it has so far ignored them.

Notwithstanding the success of BJP in the recent assembly elections, the central government is yet to prove its ability to manage the complex Indian economy. While the worst seems to be over for the economy with a normal monsoon forecast, its success will depend on how well the government uses this opportunity to effect a mid-term course correction in the remaining part of its term.

The author is associate professor, Jawaharlal Nehru University, and visiting fellow, Centre de Sciences Humaines.

Close