Economy

DeMo, GST, slowdown; business stutters, govt loud on big dreams

DeMo, GST, slowdown; business stutters, govt loud on big dreams

When the Modi era began, the laundry list of economic reforms required to move to the second phase of growth rate was conspicuous. Leakages were hobbling socio-economic transformation and PM Modi’s first Independence Day speech launched the Jan Dhan Yojana. Six years later, it accelerated the Direct Transfer Benefit scheme but a mere Rs1 lakh crore in over 37 crore Jan Dhan accounts is a commentary on the distance to be travelled for India to become a middle class country.

Modi 1.0 highs, lows

  • 2014 Jan Dhan Yojana launched, focus on infrastructure
  • 2016 Demonetisation self-goal sees fall in GDP growth from 8 % to 7.1 %
  • 2019 Subdued domestic consumption and GST implementation blues push down GDP growth to 2013 levels

The transaction cost for the manufacturing sector was four times that of China and the knowledge-based workforce remained a far cry. It was easy to remove the regulatory cobwebs but the Modi government shelved the focus on elementary education, increasingly privatised health, and infrastructure remained a victim of state’s inadequacy in implementing large projects.

The Modi government inherited several liabilities. India’s GDP had quadrupled between 1991 and 2011 but the cost paid for a high fiscal deficit to fund government expenditure and social welfare programmes saddled it with tottering public sector banks, a high inflation rate and a time consuming bankruptcy process.

The need for a bank balance sheet clean-up, a simple GST and a simple Direct Tax Code was palpable. Banks remain in a fragile state despite being merged and recapitalised and GST has turned out to be cumbersome and convoluted. By the middle of Modi 1.0, demonetisation struck a deadly blow.

A decade back, the UPA government launched a contra-cyclical stimulus in government spending, investment and exports. Nirmala Sitharaman has not been inventive. She has copied the prescription plus some more — easy loans (Rs 5 lakh crores in October and December alone), special gesture for auto and realty sectors and bonds to fund infrastructure. In addition, labour laws have been cleaned up, as have the bankruptcy laws, while railway management has been restructured.

The economy can expect a temporary bump up till the government fights shy of structural reforms that address the middle half of India.

— Sandeep Dikshit


BIG INFRA GOALS: lowdown

  • Metro hits track in Chennai, Bengaluru, Hyderabad, Jaipur, Gurgaon, Mumbai, Kochi & Lucknow
  • Work on in Kanpur (likely by 2021), Visakhapatanam (2021), Surat (2022), Guwahati (2022), Patna (2022), Coimbatore (2023), Thiruvananthapuram (2025), Indore (2025) and Varanasi (by 2025)
  • Rest of the sectors could not see any major push or fresh idea

KEEPING TRACK

  • Apex body Railway Board restructured, downsized
  • Railway Budget merged with General Budget
  • Ongoing projects fast-tracked
  • National High Speed Rail Corporation Limited, implementing bullet train project with Japanese help, has been facing controversies. With a new government in Maharashtra, the project is in for more delay

Civil Aviation

  • Jet Airways went bust, Air India is finding it difficult to operate with govt failing to privatise it in the first round
  • UDAN scheme failed to take off. Several routes allocated, but barring a few, operations could not start on account of ill-equipped airports or commercial concerns

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