By Ravi Kant
Milton Friedman once said, “One of the greatest mistakes is to judge policies and programs by their intentions rather than their results.”
Modi’s win in the general elections of 2014 was a byproduct of the success of his economic policies in the state of Gujarat. These reforms are often dubbed famously as ‘Modinomics’. His extraordinary election win was boosted by his promise to replicate the Gujarat model of growth all over the country. He has taken a number of positive steps like the relaxation of foreign direct investment norms in railways, defence, and insurance, after his win. Modi’s one directional policy reforms like the single window clearing system and liberalisation of its industry have been acclaimed internationally. But the strict policies to protect the domestic investor and corporate interest have sent a contradictory message to foreign investors.
However, a deeper analysis of some of his flagship programmes and their performance has given us a distinct view of Modinomics and its success.
Modi’s flagship programmes: Just a mirage?
Modi’s programmes are a representation of his long-term plans for the economy in the coming years. His most ambitious programme, ‘Make-in-India’, was launched to change the Indian economy from being domestic-consumption-driven to being export-driven, by utilizing its demographic dividends. This program did bring a little acclaim to his administration when India became the top destination for FDI investment replacing China and US. On the other hand, even though Make-in-India is largely about manufacturing, FDI in the sector decreased in 2015-16 as compared to 2014-15 (from $9.6 to $8.4 billion). India’s large defence sector, which was open for foreign inventment to make the initiative a successful one, has only received $1 million in last 3 years.
PM Modi’s second flagship programme ‘Start-Up India Stand Up India’ was launched to move the country towards a knowledge-based economy in order to boost entrepreneurship and employment generation, mainly amongst its youth. But over the years it has not rendered the desired results. According to a data analysis firm, Tracxn Technologies, in 2015 the number of start-ups increased by 87 percent but the number dropped by 67 percent in 2016. The funding also slumped in 2016 by 47.7 percent.
The saga of jobless growth
India is the fastest growing economy in the world, having a growth rate of over 7 percent. But there is a grim part of to growth story too, i.e. unemployment. The lack of employment growth with respect to the GDP growth has led to the rise of ‘jobless growth’. According to the latest data release from the International Labor Organization, unemployment in India is projected to increase from 17.7 million in 2016 to 18 million in 2018. Modi’s demonetisation policy has further deteriorated the situation of the job market.
The road ahead: Need for economic overhaul
Our priority should be to strengthen our institutions and improve the standards of governance. The future of productivity depends not only on technology but also on the creation of strong, reliable, meritocratic institutions that are not easily subverted by money, power, and influence. One of the biggest failures of Modinomics is that it could not provide deep structural reforms in the form of price, mobility, incentives, and competition. These are what we refer to as “big reforms”, which had the potential to create the much-needed momentum to make the 21st century a changing point for the Indian economy. While GST has brought some ease to the administration, it would be premature to comment on its success.
Looking at the pathetic state of bureaucracy as well as the current pace of reforms and the questionable policies of the government, it’s highly uncertain that Modinomics will transform India’s future in the 21st century without going through major changes in their priorities and socio-economic policies.
Only the future can tell us that whether Modinomics will lead India towards recovery or social ruin.
Ravi Kant is an engineer who has a deep interest in Finance, Economics, and Cyber Security. He writes for various media outlets like “The Market Mogul” and many others.
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