Slide Effect


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Does good politics translate into good economics? Not necessarily, at least in the Indian context. The team of Prime Minister Narendra Modi and home minister Amit Shah might have seemed unstoppable in winning elections and delivering on audacious political promises but there has been a sweeping sense of disappointment on the economic front-be it new jobs (he promised 10 mill­ion a year in his 2014 campaign), making a go of ‘Make in India’, simplifying taxes or strategic disinvestment in state-owned enterprises.

Seven months into its second term, the Modi government is faced with a tot­t­ering economy. Although the government was initially in denial, the fall in GDP to 5 per cent in the first quarter of this financial year and subsequently to 4.5 per cent seem to have stirred it into action.

A string of measures were ann­o­unced-among them a deep cut in corporate tax rate and a spate of sector-specific sops-in the hope that the economy could be coaxed back into a growth orbit. If growth continues to lag in the remaining part of the fiscal, then the country may be staring at a less than 5 per cent overall growth for 2019-20.

FOOD FOR THOUGHT A vegetable mandi in Ghaziabad, UP

This will not only mean that India misses meeting its $5 trillion-economy target by 2024, it also points to a dire situation where growth has fallen for the first time below 5 per cent since 2008-09 (3.1 per cent). While that fall was the result of the global slowdown after the Lehman Brothers crisis, the NDA government will find it hard to justify this crash, especially at a time when global indicators are looking far better, led by growth in the US economy and an easing of its trade war with China.

DK/ CS: Don’t know/ can’t say

Cause for concern

It’s no wonder, then, that the general public is concerned about where the economy is headed. When asked which issues concerned them the most, MOTN respondents pointed mostly to economic issues, with 32 per cent identifying unemployment as their biggest concern, followed by farmers’ distress (15 per cent) and price rise (14 per cent). Ten per cent respondents were concerned about the economic slowdown as a whole. There is also a widening gap between the urban and rural economies.

If the rural economy was contributing 55 per cent to the GDP in 1991, the urban economy now dominates with a 72 per cent share as of end-2019. The NDA regime, in its first five years, pumped in more money into rural development, from Rs 80,253 crore in 2013-14 to Rs 1,19,875 crore in 2019-20, but farmers have been dogged by low food prices. The rising food prices now should help offset some of the losses of farmers, but again, in a structure where agri produce passes through the hands of middlemen, farmers may not benefit much.

The country is still grappling with conflicting data when it comes to jobs. The government’s payroll data shows that there has been a net addition of over 1.24 million new jobs in October, but data from the Centre for Monitoring Indian Economy (CMIE) shows that unemployment rate in October stood at 8.45 per cent, compared to 7.16 per cent in September 2019. As companies staring at a slowdown lay off staff or freeze fresh hiring, unemployment is bound to rise. But the people haven’t lost hope yet. As many as 47 per cent of those polled are hopeful that the NDA government will be able to generate additional employment in its second term, with the feeling relatively stronger in the western region.

Grappling with prices

Price rise has been another major concern. Onion prices touched Rs 120 a kg in Mumbai in December 2019, bringing tears to the eyes of the public. The main reason for this has been the unseasonal rainfall in Maharashtra, one of the major onion-producing states. India, among the top three onion-producing countries along with China and the US, produced 23.5 million tonnes of the bulb in 2018-19.

Although onion prices have fallen substantially in January, food prices in general have been a major cause of rising inflation, with retail inflation touching 7.35 per cent in December, the highest since July 2014. It comes as no surprise, then, that a majority of those polled (62 per cent) felt that the soaring prices of onion and other items are indicators of the bad shape the Indian economy is in.

All figures in %; DK/ CS: Don’t know/ can’t say

The general mood on the economy isn’t upbeat. Only 29 per cent of those polled felt the economy is doing well, while a significant 32 per cent felt it is slowing down. Another 28 per cent were of the view that the economy is either not growing at all or actually sliding. That probably explains why more than half the respondents (58 per cent) felt that India is unlikely to become a $5 trillion economy in the next five years.

The number of those who believe the economic performance of the Modi government is worse than the Congress-led UPA is also on the rise. As many as 30 per cent of those polled felt the economy is doing worse than the UPA days, eight percentage points higher than the previous MOTN in August 2019, and double that of the opinion poll in February 2016. Around 11 per cent felt the performance of both governments was similar.

Banking woes galore

The issues in the banking sector are still unresolved to a large extent, affecting credit. Only 28 per cent reported ease of access to affordable credit, down from the 39 per cent in August 2019. A paralysed banking sector and the crisis in NBFCs a.k.a. the shadow banking sector have choked supply of credit to big and small enterprises. A recent RBI report says Indian banks have the highest NPAs (non-performing assets), compared with other emerging economies such as China, Turkey and Brazil. The report states that 9.1 per cent of the total advances of Rs 9.36 lakh crore turned into NPAs in 2018-19.

While Prime Minister Modi spent a large part of his first term staving off criticism of being a ‘suit boot ki sarkar’, now nearly 49 per cent people surveyed feel government policies are only helping big business houses.


On ease of doing business, 49 per cent respondents validated government claims, down from 54 per cent in August 2019. This was despite India jumping 14 places to No. 63 out of 190 countries in the World Bank’s Doing Business 2020 rankings (on account of improvements in resolving insolvency and obtaining construction permits). However, whatever benefits that came from ease of processes have been marred by a slew of disruptive policy measures such as demonetisation and the poor rollout of the Goods and Services Tax (GST).


However well-intentioned, GST’s faulty implementation added to the compliance costs of micro and small enterprises, severely hurting their competitiveness and productivity. An overwhelming 27 per cent of those surveyed reported losses after implementation of GST; 22 per cent reported a gain after India introduced the unified tax regime, overhauling its indirect tax structure. Thirty-one per cent of businessmen and traders reported a loss with GST.

A daunting task

What’s surprising is that more than half the respondents (55 per cent) are sympathetic towards fin­ance minister Nirmala Sitharaman. Thirty-nine per cent respondents felt she had done a good job in tackling the economic slowdown. And 16 per cent said she ought to be given more time as finance minister, though her past seven months in the job have been fraught with uncertainties.

When she took charge, she had several critics and few sympathisers. It hasn’t helped that her political colle­agues and bureaucrats too have undermined her. Although known for her attention to detail and diligence, the lack of political clout has made her job even more daunting. All eyes are now on the Union budget, where Sitharaman is expected to announce various measures to revive demand.

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