Narendra Modi government’s first year in power in 9 charts
A progress report on the Modi-led NDA government—from foreign trips and rural distress to financial inclusion and foreign investment
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Prime Minister Narendra Modi completes a year in office next week following a historic election victory in 2014 in which the Bharatiya Janata Party (BJP) won the majority of seats in the Lok Sabha. Commentators are divided on whether it has been a successful year or not. Others are fighting over whether one year is enough to judge performance of the BJP-led National Democratic Alliance (NDA) government. We present nine charts which try to capture the first year of NDA rule.
One of the first things Modi did after taking office as prime minister was to visit Bhutan. It triggered off a travelling spree, one that has overshadowed his predecessor Manmohan Singh’s foreign travel record by a significant margin. Having travelled 17 times out of the country on state visits and international summits in his first year in office, Modi has tried to overtly attract international investment far more than Singh, who travelled an average of 6.8 times a year in his first term and an average of five times in his second term.
Rural India is suffering more under the Modi government, though that also has to do with the vagaries of the weather. Mint’s rural distress index, based on the growth of farm output, rural wages and tractor sales, indicates a worsening rural situation. In addition, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), the previous government’s flagship rural employment programme, has seen a dip in performance under the Modi government, as measured by the person-days of work it has generated each year, adding to the woes of the rural Indian.
With social-sector spending as a percentage of the gross domestic product (GDP) falling to its lowest levels since 2010, it is high time the government made good on its election promises of greater attention to this sector. In its election manifesto, the BJP had said that public spending on education would be raised to 6% of the GDP. That is a far cry from the current number—less than 3% of GDP, including food subsidies. The recent launch of three social security schemes—the Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Jeevan Jyoti Yojana and Atal Pension Yojana—that seek to provide accidental death and disability risk cover, life insurance and contributory pension is a major step towards increasing social security.
New private investment
Private-sector announcements of new projects have finally seen a rise, following several years of consistent decline. A good part of that is owing to a single Rs.1.5 trillion order of new aircraft by IndiGo, but there is an increase in new project announcements even adjusting for that. The key question is whether this rise is sustainable. The state of corporate earnings and capital goods order inflows don’t support the thesis of an on-the-ground revival in investment activity.
The 16th Lok Sabha under Modi has already surpassed the previous Lok Sabha’s productivity levels in Parliament and has come close to the performance of Parliament in the United Progressive Alliance (UPA)’s first term. In the first year of both his terms as prime minister, Manmohan Singh’s Lok Sabha saw more bills introduced in Parliament than Modi’s Lok Sabha, but saw a far lower pass ratio (bills passed as a proportion of bills introduced). Further, the current Lok Sabha has spent many more productive hours in each session of Parliament so far, and has asked more questions.
More power to the states
Although the 14th Finance Commission has recommended that 42% of Union taxes be shifted to the states, the degree of fiscal autonomy enjoyed by the states currently is still lower than what it was a decade ago. To be sure, the share of untied transfers that go to states—74.1%—is higher than it has been for a long time. But this is not unprecedented and is not the highest share that states have received—states received as much as 77% of untied transfers in 2005-06.
One of the government’s most important programmes, the Pradhan Mantri Jan-Dhan Yojana, has seen 150 million bank accounts being opened, mostly in rural India. The idea is to convert the existing subsidy programme into a direct cash transfer scheme, with money going straight to the receiver’s bank account. However, while this looks good on paper, the fact is that more than half of these newly opened bank accounts have nothing in them. But a good sign is that the proportion of zero-balance accounts has been steadily falling since the creation of the programme. The new social security and insurance schemes should also increase the usage of these accounts.
Modi’s rise to power thrilled the business world, and it showed. The benchmark Sensex zoomed to unprecedented levels and India became the most loved emerging market for foreign institutional investors (FIIs). Falling oil prices, moderating inflation and a smaller current account deficit also helped. That excitement has since cooled. FIIs have begun fleeing India, finding that nothing has really changed on the ground. A tax row with the government has only made matters worse. So far, the government has been lucky, capitalizing on falling oil prices and moderating inflation. But a combination of poor weather and weak demand is likely to delay economic recovery. So, unless it does something more concrete soon to make India more business-friendly, the outflow of funds from India may continue.
GDP magic tricks
The Central Statistics Office released a new set of GDP numbers that made everything look far rosier than it was. Under a new method of GDP estimation, the country’s growth rate jumped several percentage points overnight. But that doesn’t tally with the picture on the ground, with companies reporting weak demand and earnings. Even the Reserve Bank of India has said repeatedly that it wasn’t sure what to make of these numbers. For the record though, India is forecast to be the fastest growing major economy this financial year.