As his government nears the two-year milestone, speaking at the Bloomberg India Economic Forum, Prime Minister
Narendra Modi outlined its economic policies and achievements. His central message: That India is being seen as a “bright spot” in the global economic landscape is a “result of good policy, not good fortune”. The PM detailed the new policy initiatives, including the Real Estate Regulatory Act, the Hydrocarbon Exploration and Licensing Policy, and the Ujwal Discom Assurance Yojana. He stressed the steps taken to improve job creation — the correcting of corporate taxation, which has traditionally favoured capital expenditure as against promoting a more labour-intensive approach. The PM highlighted that India was better-placed on most macro-economic parameters if compared to the two years preceding his term in office. The PM is right, India is better-off, be it in terms of inflation or the fiscal deficit, but there is still a long way to go.
The government’s claims cannot distract attention from the fact that it has failed to push through crucial legislation. This includes a newer version of the Land Acquisition Act, the implementation of the long-pending Goods and Services Tax, and the promised radical overhaul of labour reforms. Notwithstanding India’s economic growth data — which is often questioned — the fact also is that the NDA government has not yet ushered in the structural reforms it had talked about, and which are so necessary for sustaining growth. An overhaul of the Food Corporation of India is still pending and it is the same story on banking-sector reforms, where the changes have been more cosmetic, less structural.
The fact that India has registered a better growth rate than other major economies, such as China and the US, must be seen in perspective. According to the World Bank, as of 2014, the GDP per capita (PPP terms) for India, China and the US was $5439, $12,599 and $52,118, respectively. This is not to mention the more impressive health and nutrition achievements in such countries. Given the wide difference between overall GDP levels — India’s is one-third of China’s, and one-tenth of that of the US — a percentage point increase in GDP generates widely varying amounts of actual income in the three countries. Concluding his speech at the Bloomberg India Economic Forum, the PM rightly said: “Many steps have been taken, many more have to be taken.”
