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Economic policy of the Narendra Modi government

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The economic policies of the Narendra Modi government, also known as Modinomics, focused on privatization and liberalization of the economy, based on a neoliberal framework.[1][2] Modi liberalized India's foreign direct investment policies, allowing more foreign investment in several industries, including in defense and the railways.[3][4][5] Other proposed reforms included making the forming of unions more difficult for workers, and making recruitment and dismissal easier for employers. In 2021–22, the foreign direct investment (FDI) in India was $82 billion. India's gross domestic savings rate stood at 29.3% of GDP in 2022.[6]

Economy

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In his first budget, Finance Minister Arun Jaitley promised to gradually reduce the budgetary deficit from 4.1% to 3% over two years and to divest from shares in public banks.[7]

Over Modi's first year in office, the Indian GDP grew at a rate of 7.5%.[8] However, the first eight years of Modi's premiership, India's GDP grew at an average rate of 5.5% per cent compared to the rate of 7.03 per cent under the previous government.[9] In recent years, independent economists and financial institutions have accused the government of manipulating various economic data, especially GDP growth rate.[10][11][12]

In July 2014, Modi refused to sign a trade agreement that would permit the World Trade Organization to implement a deal agreed in Bali, citing that agreement will lead to "lack of protection to Indian farmers and the needs of food security" and "Lack of bargaining power".[13] The addition to Indian airports grew by 23 percent in 2016 while the airfares dropped by over 25 percent.[14]

The level of income inequality increased drastically,[15] while an internal government report said that in 2017, unemployment had increased to its highest level in 45 years.[16]

The loss of jobs was attributed to the 2016 demonetisation, and to the effects of the Goods and Service Tax.[17][18] The last year of Modi's first term didn't see much economic development and focused on the policies of defence and on the basic formula of Hindutva.

His government focused on pension facilities for old-age group people and depressed sections of society.[19] The economic growth rate in 2018-19 was recorded to be 6.1%, which was lower than the average rate of the first four years of premiership.[20]

The fall in the growth rate was again attributed to the 2016 demonetisation and to the effects of the GST[21] on the economy.

Make in India

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Main article: Make In India
Indian Government at the launch of the Make in India program.

In September 2014, Modi introduced the Make in India initiative to encourage foreign companies to manufacture products in India, with the goal of turning India into a global manufacturing hub.[22] Supporters of economic liberalisation supported the initiative, while critics argued it would allow foreign corporations to capture a greater share of the Indian market. "Make in India" had three stated objectives:

  • to increase the manufacturing sector's growth rate to 12-14% per annum
  • to create 100 million additional manufacturing jobs in the economy by 2022
  • to ensure that the manufacturing sector's contribution to GDP is increased to 25% by 2022 (later revised to 2025).

Make in India has been unsuccessful at achieving its stated targets. Under this programme, the share of manufacturing in GDP was projected to reach 25% by 2022. However, the GDP share of manufacturing has actually fallen from 16.7% in 2013–2014 to 15.9% in 2023–2024.[23][24][25][26]

Labour

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Modi's labour reforms received support from institutions such as the World Bank but faced opposition from scholars, socialist and communist parties, and worker rights groups within the country. The labour laws also drew strong resistance from unions: on 2 September 2015, eleven of the country's largest unions went on strike, including one affiliated with the BJP. The strike was estimated to have cost the economy $3.7 billion.[27][28]

The Bharatiya Mazdoor Sangh, a constituent of the Sangh Parivar, stated that the reforms would hurt labourers by making it easier for corporations to exploit them.[29]

Healthcare

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Forecasting public healthcare expenditure by Government of India[30]

India's health budget increases under Modi's premiership have been criticised as disappointing despite new measures such as expanded health insurance, a national dialysis programme, and more government-run pharmacies offering low-cost generic medicines. While private healthcare welcomed these steps, public health experts expressed concerns that public healthcare funding remains inadequate, and that public health services were being outsourced to the private sector.[31]

The COVID-19 pandemic led to a major economic fallout in India, with a rise in poverty, unemployment, and a recession. In May 2020, Modi announced an overall economic stimulus package worth ₹20 lakh crore (equivalent to ₹24 trillion or US$270 billion in 2023). By December 2020, it was revealed that less than 10% of the stimulus had been disbursed.[32] By December 2021, India was back to pre-COVID-19 growth.[33]

Public transportation

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The government entered into significant agreements with General Electric and Alstom to supply India with 1,000 new diesel locomotives as part of a broader effort to reform the Indian railway system, which also encompassed privatisation initiatives.[34][35]

In December 2015, the Modi administration signed an agreement with Japan to jointly develop a high-speed rail network connecting Mumbai and Ahmedabad.[36]

Under his leadership, the Railway Budget was merged with the Union Budget of India. Additionally, the date for presenting the budget was changed from 28 February to 1 February, and the financial year was adjusted from July to April. Moreover, the distinction between planned and non-planned expenditure was abolished. The Modi government also dismantled the Foreign Investment Promotion Board (FIPB), which had been viewed as a barrier to foreign direct investments.[37]

See also

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References

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  1. ^ Ruparelia, Sanjay (12 January 2016). "'Minimum Government, Maximum Governance': The Restructuring of Power in Modi's India". Journal of South Asian Studies. 38 (4): 755–775. doi:10.1080/00856401.2015.1089974. ISSN 0085-6401. S2CID 155182560.
  2. ^ Shah, Alpa; Lerche, Jens (10 October 2015). "India's Democracy: Illusion of Inclusion". Economic & Political Weekly. 50 (41): 33–36. Archived from the original on 28 March 2023. Retrieved 23 October 2021.
  3. ^ Miglani, Sanjeev; Das, Krishna N. (10 November 2015). "India frees up foreign investment in 15 major sectors". Reuters India. Archived from the original on 11 June 2016. Retrieved 10 October 2017.
  4. ^ "Cabinet approves raising FDI cap in defence to 49 per cent, opens up railways". The Economic Times. 7 August 2014. Archived from the original on 17 October 2021. Retrieved 17 October 2021.
  5. ^ Zhong, Raymond (20 November 2014). "Modi Presses Reform for India—But Is it Enough?". The Wall Street Journal. Archived from the original on 29 March 2016. Retrieved 17 October 2021.
  6. ^ "Reserve Bank of India – Publications". Reserve Bank of India. Archived from the original on 8 July 2022. Retrieved 8 July 2022.
  7. ^ "Budget 2016: Full text of Finance Minister Arun Jaitley's speech". The Economic Times. Archived from the original on 28 February 2022. Retrieved 28 February 2022.
  8. ^ "Overview". World Bank. Archived from the original on 18 November 2021. Retrieved 28 February 2022.
  9. ^ Tiwari, Amitabh (30 May 2022). "PM Narendra Modi's 8 Years: How He Has Performed Compared to Manmohan Singh". The Quint.
  10. ^ Kumar, Manoj (9 May 2019). "India's incredulous data: Economists create own benchmarks". Reuters. Archived from the original on 9 May 2019. Retrieved 9 May 2019.
  11. ^ Sharma, Mihir S. (13 June 2019). "GDP data under cloud: Govt should know that this is a crisis of credibility". Business Standard. Archived from the original on 13 June 2019. Retrieved 13 June 2019.
  12. ^ "What Is Wrong With India's GDP Numbers?". thediplomat.com.
  13. ^ "WTO deal failure: Valid reasons why PM Narendra Modi's government refused to yield". The Economic Times. Archived from the original on 28 February 2022. Retrieved 28 February 2022.
  14. ^ Jha, Somesh (17 January 2017). "Domestic air passenger traffic grew 23% in 2016". The Hindu. ISSN 0971-751X. Archived from the original on 28 March 2023. Retrieved 28 February 2022.
  15. ^ V., Harini (14 November 2018). "India's economy is booming. Now comes the hard part". CNBC. Archived from the original on 21 November 2018. Retrieved 6 February 2019.
  16. ^ "Unemployment rate at 45-year high, confirms Labour Ministry data". The Hindu. 31 May 2019. ISSN 0971-751X. Archived from the original on 23 February 2022. Retrieved 28 February 2022.
  17. ^ Gettleman, Jeffrey; Kumar, Hari (31 January 2019). "India's Leader Is Accused of Hiding Unemployment Data Before Vote". The New York Times. Archived from the original on 31 January 2019. Retrieved 7 February 2019.
  18. ^ Kumar, Manoj; Ghoshal, Devjyot (31 January 2019). "Indian jobless rate at multi-decade high, report says, in blow to Modi". Reuters. Archived from the original on 9 February 2019. Retrieved 7 February 2019.
  19. ^ Sengupta, Hindol (October 2019). "The economic mind of Narendra Modi". Observer Research Foundation. Archived from the original on 15 January 2021. Retrieved 14 January 2021.
  20. ^ "GDP growth rate for 2018-19 revised downwards to 6.1 pc". The Economic Times. 1 February 2020. Archived from the original on 26 January 2023. Retrieved 14 January 2021.
  21. ^ Mishra, Asit Ranjan (10 January 2019). "What India GDP growth rate forecast for 2018-19 means". Live Mint. Archived from the original on 16 January 2021. Retrieved 14 January 2021.
  22. ^ Choudhury, Gaurav (25 September 2014). "Look East, Link West, says PM Modi at Make in India launch". Hindustan Times. Archived from the original on 27 September 2015.
  23. ^ Raghavan, TCA Sharad (25 September 2024). "10 yrs of 'Make in India' & the manufacturing sector is back to where it was in 2013-14". ThePrint. Retrieved 1 October 2024.
  24. ^ Mondal, Dipak (26 September 2024). "Make in India fails to lift manufacturing share in GDP in 10 yrs". The New Indian Express. Retrieved 30 September 2024.
  25. ^ Shastry, Vasuki (24 September 2024). "As Modi makes ambitious pitch in the US, Make in India is qualified failure 10 years on". Scroll.in. Retrieved 30 September 2024.
  26. ^ Babu, M. Suresh (19 January 2020). "Why 'Make in India' has failed". The Hindu. Retrieved 30 September 2024.
  27. ^ "Millions strike in India to protest against Modi's labor reforms". CNBC. 3 September 2015. Retrieved 3 November 2023.
  28. ^ "Millions strike in India over government labour reforms". Al Jazeera. Retrieved 3 November 2023.
  29. ^ Mohan, Archis (12 May 2020). "Bharatiya Mazdoor Sangh asks state units to oppose changes in labour laws". Business Standard India. Archived from the original on 28 February 2022. Retrieved 28 February 2022.
  30. ^ Avishek Majumder (6 December 2018). "Understanding public healthcare expenditures by the Government of India". Project Guru. Archived from the original on 28 February 2022. Retrieved 28 February 2022.
  31. ^ Mudur, Ganapati (4 March 2016). "Rise in India's health budget is "disappointing," say experts". The BMJ. doi:10.1136/bmj.i1338. PMID 26944481.
  32. ^ "Rs 20 lakh-crore pandemic package: Barely 10% disbursed, says RTI". The Economic Times. Indo-Asian News Service. 13 December 2021. Retrieved 14 December 2020.
  33. ^ "HTLS 2021: We're largely back to pre-Covid growth, says FM Sitharaman". Hindustan Times. 7 December 2021.
  34. ^ Riley, Charles (10 November 2015). "GE to build 1,000 trains for India in massive deal". CNNMoney. Archived from the original on 27 June 2022. Retrieved 17 October 2021.
  35. ^ Narayan, Adi (9 November 2015). "India's $5.6 Billion GE, Alstom Deals Step Up Rail Overhaul". Bloomberg News. Archived from the original on 24 August 2021. Retrieved 17 October 2021.
  36. ^ "Japan and India sign bullet train deal amid closer ties". BBC News. 13 December 2015. Archived from the original on 17 December 2015. Retrieved 17 October 2021.
  37. ^ Dutta, Prabhash K. (26 May 2017), "3 years of PM Narendra Modi: Here's how NDA government performed on economic front", India Today, archived from the original on 3 December 2017, retrieved 19 October 2021
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