After 70 years, India going through a new phase. Government under Narendra Modi has tried to bring a structural change of the entire economic, social and governmental setup mostly influenced by the right-wing ideologies. Since 2014, India has also experienced many reformations some of which are government induced and some independently through legal and international aspects. Can all these reformations bring a better future? There is no simple answer to it, but a section is Hopeful and another section is skeptical to it.
After 3 years, we are in the middle of the evolution of Economical, Social, legal and political policies. However, the situation is such that we neither rewind the process nor has same enthusiasm to embrace all of them. Now be specific to the question, can this Perestroika of Indian Economy move forward with the same spirit? International Monetary Fund (IMF) in its recent world economic outlook and the World Bank both are positive but with an asterisk mark, which clearly stated: “if government thrust for the change remains unchanged”. Will the Government resolution remain same? It is a big question and also a game changer. Many International and national financial and governmental policy watchers including IMF and WB positive towards Modi Government for a single most powerful reason that it has a strength of democratic numbers, unlike previous government. In the contrary the forecast based on the mechanical analysis of statistical data only which has complete blind towards several relative issues like, the commitment of government machinery, implementation strategy, and people’s emotional response to the pros and cons of the policies.
Policies are the binding force between centre and state, more precisely it determined the quality of the relationship between Government and its people, which in turn establish a collective effort for the nation’s development. Besides this, most of the economic policies are designed to solve particular problems at a particular time. Not all policies are a panacea to the plethora of problems for all the times. So, for the sustainability of the economic development, we have only two options, allow the policies for continuous evolution or formulate it with a collective approach. But, the fundamental predicament of the policies which brought disasters and severe criticism is Modi government’s plan to build watertight and congruent policy order with an aim for universal application throughout time (!) in a simple sentence, Modi Government unlikely to accept India as a unity of diversified interests and economic life.
Of Late, the intellect of the Modi Government accepted the truth. On 11th of this month, in the 1st meeting of Economic Advisory Council (EAC) to Prime Minister emphasised the government to stay firm on the reformation but recommended to evaluate the policies and ready to take suggestions from beyond the rightwing contours. However, when the government has a congenital right-wing instinct and within a few months going to face series of assembly elections and general election, will this suggestion be implemented with its true spirit? The voters of 2019 will not be like 2014’s, the Image of the BJP is diminishing, Voters trust much strained due to promiscuous promises. In such condition, these democratic exercises have largely determined the future of the policies and the ability of the government.
Even if we presumed that the Modi Government will pass through unscathed in the next 2 years, the IMF figures are not so high-flying for India in comparison to the other nations with a similar economic scenario.
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| India's forecast in IMF's World Economic Outlook, 2017 |
In 2009, the year when the whole world was under the grip of severe economic recession, India’s total investment was 36.480 percentage of the GDP. In the current year, it further declined to 29.936 and as per the IMF forecast in 2022 it will be 30.936. It will be wrong to give a reason that with an increase of the government investment in infrastructure and productivity of the human resources the forecast will be altered. Without proper utilisation of the human resources and private investment, the government spending will be more than the revenue and subsequent decrease in savings.
This situation further pointed out by IMF, in 2009, the Gross National Savings (GNS) was 33.665 percentage of GDP. In 2017, it is 28.558 and in 2022 it will be 27.939 (% GDP). This implies government is spending is more its income than it produces.
The government revenue in the current year is 21.130 percentage of GDP while it was 18.518 in 2009. In 2022 it will be 21.326. Mean, the subsequent years the revenue generation is not increasing but will remain static. In contrary to the static revenue generation, the government expenditure is decreasing around 10% year-on-year basis. In 2009, the expenditure was 28,052, in 2017 it is 27,488 and in 2022 it will be 26,683. But recently, more WB supported SANKALP and STRIVE scheme and increase of salaries by implementing 7th pay commission recommendations, the government showed its keenness for the more government spending to counter GDP growth. This is also somehow against to the suggestions of the IMF and detrimental to the future sustainable and inclusive growth of India.
Further, the declining government savings implies two issues, one, in future manufacturing industry will be more dependent on the government purchases and second, and people will spend more on consumption. If we take the 2nd issue, it implies the growing CPI inflation in coming years.
Although IMF is hopeful for the Increase of GDP, it will reach 300,223,330 Billion INR (at current price) than the current 167,184,181 billion INR. Meanwhile, the data also indicates that the GDP deflator index also increasing. In 2009, it was 87.183 and current year it is 128.518 and in 2022 it is forecasted to 158.002. This implies two major things, the loopholes of the government planning to subdue the declining GDP and increasing the cost of living. Increasing cost of living is a clear sign of an increase of Poor-Rich gap and expansion of population under chronic poverty.
While, Modi government tries to blend its Right-wing economic model to the neoliberalism, but to tackle the economic problem it follows the Keynes model. If the government went further without any amendment to the present economic model, in near future government will be more blamed. If in order to gain mass popularity, the government would reduce or avoid taxation (Land, Gold, Oil not under the GST purview) and then meet the revenue shortfall by the creation of more artificial money, eventually it will lead more corruption like previous government coupled with a maladroit economic situation.
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