One year of Modi government

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Bikky Khosla | 02 Jun, 2015
The Modi government has completed its first year and a reading into developments in the economy during this period certainly gives us a positive picture. When the NDA came to power after winning a high decibel election campaign, expectations from it were unrealistically high and the real achievements now hardly meet them, but it will be wrong to deny the government credit where it deserves. Everybody is expecting more, but the economy is much better off now than one year ago.

Some key economic indicators support this argument: consumer inflation is at 4.87 percent and wholesale inflation is at (-)2.65 percent in April; fiscal deficit is contained at 4 percent of GDP in 2014-15; total foreign exchange reserves touched a record high of USD 351.86 billion for the week ended May 1. In addition, rise in business confidence, curb in high-profile corruption, successful regulatory clearance in major areas such as roads, mining, power and telecom, etc. are some major achievements of the current government.

Concerns still exist, however. Slow IIP recovery is one of them. Latest data shows industrial output growth of 2.1 percent in March, with manufacturing growth crawling at 2.2 percent. Electricity grew by 2 percent while mining by a measly 0.9 percent. Similarly, export is not in good shape. High interest rates, lack of government and private sector investment and weak job creation are some other major concerns. In addition, I think the Centre should work on a mechanism to tackle corruption at state and local levels.

In the backdrop of these challenges, I think some strong measures need to be taken urgently. First of all, the issue of interest rates should be addressed. The Indian industry, including the MSMEs and the small exporters, is in dire need of this. Second, steps to push government and private sector investment and generate employment should be prioritized. In addition, the Centre should step in to rescue the public sector banks by means of recapitalization. Also, reform must be pursued aggressively as the future growth trajectory will greatly depend on it.

Overall, the government has done a great job in bringing back people's aspirations. There is very strong leadership. Issues like governance, social security, financial inclusion, economic and legislative reforms, etc. have been approached in the right way. Also, globally the country is seen very differently today. The latest GDP figures tell the same story-- the economy is moving in the right direction. The building blocks are in place for faster growth and each successive year will be better than the previous one if the government continues its positive efforts in the coming days.