Continuing from yesterday (The great Indian carnival)
With the presentation of the union budget earlier this month, the incumbent government has entered the final phase of preparations for the 2024 general elections. The preparations would be tested in several state assembly elections to be held prior to the general elections. Amongst these Karnataka, Madhya Pradesh and Rajasthan shall be keen contests.
As per most of the recent surveys, the ruling National Democratic Alliance (NDA) led by Prime Minister Narendra Modi, is likely to return to power for a third successive term in 2024. The alliance is mostly riding on the popularity of PM Modi for its electoral success. Of course the lack of a strong national alternative is also working in favour of the incumbent government, to some extent. It is therefore pertinent to examine what PM Modi has done right to maintain its popularity for the past nine years.
I would not like to delve into the role of the political strategy of BJP in sustaining the popularity of PM Modi, as it could involve dealing with several controversial issues. Besides, the political strategy is too obvious for everyone to see. I would therefore focus on the economic strategy of the PM Modi led government.
Continuing the good work of previous governments
The first thing that PM Modi has ensured is that the key growth drivers of the Indian economy that have evolved over the past two decades are not only sustained but also provided additional impetus. His government has continued and even accelerated the infrastructure development program, especially connectivity & logistics (roads, ports, airports and telecom), self-reliance in defence and development and commercialization of space programs, initiated under the Vajpayee led NDA-1 government and sustained under UPA governments (2004-2014).
The incumbent government has materially enhanced the program to digitize the economy with Aadhar and UPI developed by NPCI at the core. The financial inclusion program started in early 2010s has gathered significant pace with wider acceptance of Aadhar and UPI, and evolution of digital payment technologies.
In a recent presentation Nandan Nilekani, succinctly summarized the key drivers of the economic development and growth of India in the next ten year. Speaking to a group of investors in Bengaluru, Mr. Nilekani said, he believes “the Digital Public Goods (DPG) used in India today will form the basis for India’s economic development because the three cornerstones of the modern economy are no longer roti, kapda, aur makaan; they are identification, financial inclusion, and mobile + internet connectivity. The creation of the ‘India stack’ – Aadhaar (universal identification), Jan Dhan (bank accounts for all), Unified Payments Interface (UPI: online transactions using mobile phones), and Open Network for Digital Commerce (ONDC: seamless & democratized eCommerce) – is helping India get closer to delivering on this critical trinity. These initiatives will impact three key sectors – credit, logistics, and eCommerce – which in turn could have positive spillover effects thus propelling India towards becoming a $10 trillion economy”.
The government adequately supported DRDO and ISRO to continue with their missile and space development programs; and added significant impetus to domestic defence production by opening some key areas to the private sector.
Supporting the bottom of the pyramid through food and social security
Like the previous governments, the incumbent government has also maintained a socialist character and continued to support the bottom of the pyramid through social security programs like MNREGA and National Food Security Act. It has in fact further enhanced the social security programs through introduction of basic universal income and health insurance for select segments of the society.
Widening the global trade
The incumbent government has not only continued the policy of deepening the trade ties with the traditional trade partners, but materially widened the global trade of India, by engaging with new trade partners and introducing many new lines of goods and services in India’s trade basket. The policy of bilateral free trade agreements has been continued and assigned high priority. This widening of trade engagements helped India in enhancing its strategic relevance to some extent.
Energy security with focus on green energy
A key area of achievement of the incumbent government is enhanced focus on energy security with high focus on green energy. Significant capacity has been added (is being added) in the areas of solar energy, wind energy and biofuel production. The green hydrogen mission has been initiated. Though it is still early days, the strategy is likely to yield material benefits in socio-economic terms in the coming years.
Fiscal discipline
Fiscal discipline has been a hallmark of the economic policy of the incumbent government. Despite several social and political challenges the government has successfully reigned fuel subsidy; and managed the food and fertilizer subsidies reasonably well to keep the overall fiscal deficit within the acceptable parameters.
These features of the economic policy have ensured that the Indian economy has weathered the pandemic & consequent global slowdown; and monetary tightening with minimum damage. Though the growth trajectory has stagnated at suboptimal level; employment generation has been poor, and performance in some key areas like disinvestment, farm sector reforms etc., has not been good, the popular sentiment continues to be in favor of PM Modi.
