In the wake of India’s general elections, there is a lot of debate over the status of the country’s economic sector. India’s economic growth from September to December of 2018 was 6.6%, which was the slowest development in the past few quarters. There is no unified consensus regarding what steps need to be taken next to revive the economy under Prime Minister Narendra Modi’s next term, especially with the Modi’s proclivity towards bold national decisions.
Modi has introduced a wide array of economic policies during his first term, which began in 2014. His administration successfully pushed India to the 77th ranking in the World Bank’s 2019 Doing Business publication, which was possible through Modi’s proposal to reduce red tape in national affairs. This led to increased productivity and a reduction in administrative holdups. However, there have been severe setbacks as well. Modi’s demonization strategy, which intended to tackle corruption through the banning of 75% of circulating rupee notes, led to the destabilization of India’s informal economy. This led to numerous job losses, especially because replacement rupee notes were not prepared in time for this policy to be implemented. Also, the national sales tax that Modi pushed has not been successful in the short-term. It is meant to combine a number of complex taxes into a single one, which would reduce the timeline of many long business processes. A significant number of small businesses were affected by this tax however, as they did not have the capability to adjust to the tax in such a limited amount of time. BBC News has reported that in the long-term, this tax is predicted to improve economic growth; the full extent is yet to be seen.
There are differences in opinion regarding what Modi should focus on while in office for his second term, and what moves he should push to relieve some of the economic burden Indian residents are feeling. According to Surjit Bhalla, who worked on Prime Minister Modi’s economic advisory council during his first term, “The next two years is a good time for the government to [speed up] the process of privatization… During his first term, Mr. Modi has shown the appetite to take up tough reforms and he will definitely try to take even bigger risks during his second term.” During the Prime Minister’s first term he promised to focus on the selling of government enterprises, which didn’t receive the momentum that was expected. With Modi’s emphasis to build and strengthen the country’s infrastructural systems, specifically roads and railways, it seems that his administration will have to focus on national development. His infrastructure projects are estimated to cost around $1.44 trillion.
The Federation of Indian Chambers of Commerce and Industry (FICCI) reported the slowing of India’s economic growth, and related this development to the decrease of industrial output and manufacturing headway. FICCI mentioned in a statement, “The recent signs of slowdown in the economy stem not only from slow growth in investments and subdued exports but also from weakening growth in consumption demand… This is a matter of serious concern and if not addressed urgently, the repercussions would be long term.” FICCI also focused on the importance of cutting taxes, both corporate and individual, and expanding the farmer support program by offering 6,000 rupees annually to poor farmers. This would increase the afflicted consumption demand. The Federation also encouraged the use of tax concessions for manufacturers that are based in the export market. The Confederation of Indian Industry agreed with this proposal of tax reductions and increased investment in the export market.
India’s population is growing at an exponential level, which has consequently resulted in a significantly growing workforce as well. The Economic Times reported, “While manufacturing sector's share in the GDP is still at 18 per cent against the target of 25 per cent, around 7.5 million persons are projected to join the Indian workforce per year on average over the next two decades.” This means that the government will have to maintain steady employment growth in many economic sectors, including the manufacturing and services industries. This is vital for the domestic economy to grow, as unemployment is a hurdle that Modi’s administration has been dealing with since his first term. While Prime Minister Modi won his second term in office quite easily, it is expected that the next five years will be met with a lot of economic reforms. The numerous economic hurdles that India has been faced with over the past decade has taken its toll on the country, and Modi’s administration will have to take bold steps in order to combat their effects.
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