Modi's First Term: Hits, Misses, and a Hypothetical UPA-3 Comparison

Were India’s Prime Minister Mr. Modi’s policies different from that of the previous UPA regime? The Article tries to find answers to these questions. Mr Modi stormed into power in 2014 after two successive terms of the UPA government led by the Congress Party. If the UPA was voted to power for a third term instead of Mr. Modi, what would have been the economic policies it would have followed? The effectiveness of Mr. Modi’s policies could be better evaluated if we have this hypothesis before us.

The UPA-3 would have built on its existing initiatives including schemes like job guarantee, minimum employment for rural households, unique identification number, letting the central bank to fight against the inflation etc.

However, the UPA 3 would have been reluctant to bring in much needed labour reforms, privatization of Public Sector Undertakings and moved slowly on fixing the bad loans situation in the banking systems fearing adverse public opinion. As the next election approaching, the UPA 3 would have doled out giveaways to the farmers, like in the past, and managed the fiscal targets through budgetary tricks.

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However, the GDP growth and job creation would have improved further. Modi’s promise for a radical change in the way the government works, however, brought him to power. Despite his promises, his first term has delivered similar results if the UPA 3 was voted to power based on the hypothetical situation described above. The GDP growth under Modi was at 7%, similar to that of UPA regime, no major land or labour reforms, continued with the job guarantee schemes, delayed tackling the bank’s bad loans etc.

The only proud moment for Mr Modi is the implementation of nationwide Value Added tax , which was initiated by the previous UPA government. This continuity is attributed to India’s parliamentary system, its courts, public audits and the states which are partners in reforms. Capitalism in India remains Stigmatized, as noted by the former Chief Economic Advisor in his book. However, Mr. Modi managed some victories-- India has risen 65 places in the World Bank’s rankings of the ease of doing business since 2014, attracted more FDIs, tamed the inflation by removing the fuel subsidies and limiting the increase in minimum prices of Crops, introduced new bankruptcy laws and opened bank accounts for poor, reduced corruption etc., Mr. Modi’s most bold and innovative decision was his worst—demonetization of high-value bank notes!

What aimed at weeding away the black money brought most of it to the banking system! It’s a miracle that the act did not make much lasting impact in the economy. Did India’s Prime Minister Mr Narendra Modi lived up to the expectations of the masses during his first term as the Prime Minister of the country? Well, this question will be answered soon in the upcoming General elections in India. Its interesting to see how Mr. Modi could not “disrupt” the established political system in India though he promised to do so before the 2014 general elections. Rampant correction and “indecisiveness” of the government officials, largely concerned by the Right To Information Act (RTI) were among the major reasons for the fall of UPA 2. Mr. Modi could well position himself and his party to offer an alternative and won the elections with a majority that the people of India had not given to any political party in the recent history.

This article gives a Birds Eye view of the “hits” and “misses” of Modi government while adding an interesting hypothetical comparison with a UPA-3. Reducing corruption and red tape in government is one of the biggest achievements of Modi government in my opinion , which is evident from India’s rise in ease of doing business ranking. Taming inflation, though aided by falling global crude prices, is another big one for Modi. Removing / reducing subsidies in many areas was another bold decision that helped to maintain the fiscal deficit target. Though PM Modi could not make big departures from the baseline, he made his mark in foreign policies and India’s relationship with the world.

He was able to position India as one of the world’s powerhouses and fastest growing economy. The question of Modi government’s effectiveness shall now move beyond this. High unemployment rate, farmer destress, poorly managed implementation of Nationwide Goods and Service Taxes and the big, bold, surprise decision to demonetize the high value bank notes are, in my opinion, the biggest failures of the Modi Government. Demonetisation- the most publicized policy decision of Mr. Modi put great stress on the economy, which ironically brought all the black monies in the banking system! Implementation of Laws relating to Protection of Cows added to the rural destress as the farmers could not sell their cattle to slaughter houses after they stopped giving milk and now they are released to the open. Debates are abundant on freedom of expression/ speech, nationalism, politicizing of armed forces etc., Though, many of these topics were present in UPA regime but got huge traction during Modi regime.

The opposition’s accusation of Modi of capturing institutions of Importance like the Reserve Bank of India, Central Investigating agencies etc were widely debated in the country. One wonder if the latest policy on e-commerce is bordering on protectionism! So, did Mr. Modi deliver on all his poll promises? Well, the experts and the political class are divided. So, do we have enough official statistics to prove the government’s claim? Apparently, no. The government has either revised (like GDP data) or withheld publishing data (like one on employment). Some feels that with less reliable statistics, it will be harder to know the real picture under Mr. Modi.