Monday, June 8, 2015

Analyzing the Past One Year’s Performance of the Modi Government

Last year in May, the BJP Lead coalition with Mr. Narendra Modi at its helm swept the Indian National Elections and Mr. Modi took charge as the Prime Minister of India. The past one year has been a tumultuous ride to say the least. He took over with the expectations of over a billion people on his shoulders and has been a very busy man. The purpose of this article is to analyze the performance of the Modi Government…

Before we Begin: This is not a Politically Motivated Article. I am not affiliated to any political party and the opinions in this article are entirely mine and do not reflect the opinion of any group or political outfit. This analysis is purely based on the government’s financial policies and the economic situation of the country. Please be civil with your opinions about the performance of the Modi Government in the comments section of this article. Hateful or Abusive comments WILL NOT be Published. Thanks.

Ruling a Country is not an easy feat. It is like a Marathon Race of 5 years or maybe even more. Judging the governments performance after just the first year is not ideal because there is still 4 more years to go. So, definitely we will have another review of this governments performance at the end of 5 years and maybe a few times in between also.  In a Marathon the guy who crosses the 1 km mark first is not the winner, the guy who can endure the full distance and cross the finish line is always the winner. But, based on the first 1 km performance we will be able to identify how well a runner will perform until he reaches the finish line – am I right?

The Situation – Before 2 years:

The Narendra Modi led government has been bashed left and right by opposition parties esp. Congress but that is politically motivated and is mainly based out of short-term memory. Just a couple of years ago India was among the “Fragile Five” countries that had the following:
  1.  High Inflation
  2.  Large Current Account Deficits
  3.  Weak Economic Growth Prospects
  4.  Challenging Capital In-Flow Situation
  5.  Widespread Accusations of Corruption and Mismanagement
  6. Political Uncertainty

In short, our future was bleak and everyone considered us among the most vulnerable of the Emerging Market nations. Fast forward to the present date India is among the fastest growing countries in the Emerging Market. Such a transition is nothing short of Phenomenal. Obviously the political party that was responsible for this mess wouldn’t accept that – or would they?

Last year when this Mr. Modi led BJP Government took over, they did so with beyond sky-high expectations. People were fed up of the many different points I just listed down and obviously all of them cannot be satisfied in just one year. So, the judgment of the governments performance should be on absolute terms rather than what may happen 5 or 10 years down the line.

A Cynics Point of View – Of the Current Situation:

Ok, let me be the devils advocate here. An argument can be made that this economic revival is due to the fall in commodity prices especially Crude Oil. Along with this, our RBI Governor has taken a few tough stands to rein in the country’s inflation which may have also contributed to the situation.

The Reality of the Situation:

Of course yes, these two aspects have helped improve the economic situation of the country. But, this alone cannot make the situation better. Any expert can tell you that the biggest contributing factor to the situation has been the governments conscious effort in cutting its spending. Factors like curtailing the food inflation by preventing hoarding, increasing minimum support prices on agricultural produce and supplying enough food to the market as and when required has played a major role in reining in the nations uncontrolled inflation. This lower inflation helped our RBI Governor to cut interest rates twice in the last five months and the real interest rate is positive again after many years…
The Government is consciously taking up efforts to push our PM Modi’s dream initiative – “MAKE IN INDIA”. Ease of doing business in India was at an all time low. Large conglomerates were reluctant to set up shop in India due to the high levels of bureaucracy and corruption. The governments effort of improving the ease of doing business in India is helping address the capital inflow situation. Foreign institutions are now lining up to establish themselves in India.

The Highlight – Hike in Infrastructure Spending:

A country of the size of India where still 2/3rds of the population live in Tier II or III towns or villages with not much infrastructure requires tons of dedicated spending to improve the situation. Considering our countrys size, such an improvement requires a vision and a farsighted plan that should be followed by meticulous implementation. The good thing for us is that, in the last one year the Modi government has taken a lot of decisions in this direction.

The government has fast tracked the construction of freight corridors and has also proposed a master plan for interconnecting coastal cities through road. Along with this numerous rail and road transmission projects have been awarded. New ports are being built and even the Ganges River cleaning project could open up new navigation channels for the northern part of India. Many other projects that were stalled during the previous regime have also been cleared.

The Future:

Decades of bad governance and short-sighted planning had left India in a state of disarray. To be honest, it is practically impossible to rectify such a situation in just one year.  But, based on how the government has performed in the past one year, it is obvious that our Prime Minister has a long-term vision and a plan that could revive the fortunes of the 2nd most populous country of the world our beloved India. If this plan is put into action and implemented as expected, then I am pretty sure our Country will be among the largest and strongest economies in the world.

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