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| Edited By: |Source: DNA |Updated: May 22, 2015, 05:10 AM IST
A year is too long in politics, but it is too short for things to happen in an economy. It would be unfair then to question whether Prime Minister Narendra Modi’s government has been able to do anything substantial with regard to the economy in its first year in office. Modi and his Cabinet colleagues made things difficult for themselves by claiming that the Congress-led UPA government was responsible for the all economic woes in the country, including scandals running into lakhs of crores of rupees in the allocation of 2G spectrum and of the coal blocks and for policy paralysis. The expectation was that once the UPA was removed from office, things would, or should, improve. The overall change as indicated by the GDP growth shows no dramatic spurt. The estimated economic growth for 2014-15 is expected to be 7.4 per cent compared to 6.9 per cent in 2013-14 and 5.1 per cent in 2012-13.
There was no dramatic change in the growth rate because the problems with the Indian economy are complex. The domestic economy could not remain immune from the uncertainty in the global economy struggling to get out of the 2007-08 “great global recession”. It is not the fault of Modi and his colleagues that they could not overcome the challenges on the economic front in a jiffy. The Reserve Bank of India Governor Raghuram Rajan was quite right in observing that the expectations from the Modi government were unrealistic.
Both Prime Minister Modi and Finance Minister Arun Jaitley have declared that there is a turnaround in the market sentiment, and that the investors — domestic and foreign — were looking to India as an attractive destination. Market sentiment is indeterminate and even irrational. The inexact and dismal science of economics has no rational explanation. After the general elections, the stock markets responded positively to the new government, and the Sensex, the top 30 scrips at the Bombay Stock Exchange (BSE), soared. Jaitley realised soon enough that the Sensex is not exactly a reliable barometer of the state of the economy.
Mr Modi has been making a pitch for investments during the year-long hectic foreign tours, from the United States to China, from the European Union to Australia and South Korea. The investments are yet to materialise. The Foreign Direct Investments (FDI) in the last one year have been modest. Foreign Institutional Investments (FIIs) and Foreign Portfolio Investments (FPI) have been brisk in terms of inflows and outflows. Foreign Exchange Reserves at the end of March 2015 stood at US$341.6 billion compared to US$304.2 billion at the end of March 2014.
What cheered the government in the first few months was the dramatic fall in global crude oil prices, which came down from around US$120 to below US$ 50 per barrel. The government did realise that it was a coincidence and that it had no role in the prices coming down. The international crude prices are moving up once again. The rupee has firmed up against the US dollar, falling below Rs60 in the first six months after the Modi government took over, after breaching the Rs70 mark in the last days of the UPA regime.
Inflation has been tamed, and the Modi government is rightly flaunting it as an achievement. The Wholsesale Price Index (WPI) was two per cent in 2014-15 compared to six per cent in 2013-14. This has not cheered the man/woman on the street because prices of essential items like vegetables have not come down because of inclement weather. The monsoon, this year, is expected to be below par and it will bring down the food grain production from 265.6 million tonnes in 2013-14 to 257.1 million tonnes in 2014-15.
The BJP and the government are sure to trumpet their initiatives like the Jan-Dhan Yojana, smart cities, Make in India, the setting up of the NITI Aayog. So far, these remain at the level of ideas and initiatives without impacting the economy at the macro-level. This does not in any way imply that these moves are ineffective. After one year in office, the Modi government — unfortunately — is still to put together a well-defined economic road map.
