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Three Years Of Modi Govt: Of Joblessness And Degrowth

Fitch Ratings recently retained its BBB- rating for India, the lowest among investment grade ratings

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A look at the performance of the Modi government over the last three years on certain broad benchmarks would give a sense as to how it actually faired — the government’s performance is abysmal. The country has seen a rise in riots, communal violence, polarisation, attacks on minorities, job losses and aggression from across the borders.

Despite the emphasis on health, education, job creation and national security, nothing is visible in the Modi government’s policy agenda and its approach to build a consensus around critical issues facing the nation remains unclear.

The youth, especially, is facing an uncertain future; the issue is of jobs. The BJP’s election manifesto had promised two crore jobs every year. Reality on the ground is, we see ‘pink slips’ in several industries across sectors.

The IIP data, which projects industrial growth, shows flat growth line of 0.6 per cent till January 2017 in production. Growth in gross value added at basic price — a measure of actual production — has slipped from 7.8 per cent in 2015-16 to 6.7 per cent in 2016-17. 

Health sector has been a major casualty. In the 2016 Budget, a new health insurance scheme was announced. A year later; this is yet to see the light of day. 

According to a recent government report, just 2.3 lakh jobs were added in eight non-farm sectors last year. The addition of new jobs amounts to a mere 1.1 per cent of the total promised.

Reports from the Mahatma Gandhi Rural Employment Guarantee Scheme indicate that in Modi’s first year, 4.65 crore households demanded work under the scheme. In 2015-16, the number increased 15 per cent to 5.35 crore. Then, in 2016-17, it rose 6 per cent to 5.69 crore households. According to government data, nearly 58 lakh households that wanted work under the scheme were turned back last year.

The disruptive, ill-timed, unplanned demonetisation has led to a further fall in incomes, threatening agricultural production and creating uncertainty in agricultural growth. The cooperative banks have been crippled.

Pradhan Mantri Fasal Bima Yojana, while claiming to increase its coverage to 40 per cent farmers, allocation has been cut from Rs 13,240 crore last year to Rs 9,000 crore. Despite continuous drought, appropriate strategies haven’t been worked to salvage the situation. Farmers’ suicides continue unabated. The UPA had waived Rs 72,000 crore debt in 2008. The NDA government is quite deaf to the ground realities.

Another much hyped scheme is the Pradhan Mantri Krishi Sinchai Yojana that aims to ensure water to all fields with the slogan “Har Khet Ko Pani”. The Budget announced micro irrigation fund with an initial corpus of Rs 5,000 crore and an enhancement of long-term irrigation corpus from existing Rs 20,000 crore to Rs 40,000 crore. If we consider the fact that 47 million hectares of cultivable land is unirrigated, the present allocation will not even mean Rs 10,000 per hectare. 

Slow pickup in capital spending has been a big drag on the market. Deutsche Bank, in a research note said that investment formation has remained anaemic. Private sector capital formation, which accounts for 75 per cent of total fixed capital formation, grew at mere 2 per cent in FY17 over FY16.

Fitch Ratings recently retained its BBB- rating for India, the lowest among investment grade ratings, citing weak fiscal position and a difficult business environment. As per World Bank, India stood at 130th slot on ease of doing business, 155th at starting business, 185th in dealing with construction permits, 138th in registering property, 166th in enforcing contracts and 108th in trading across border.

Thirty five of 38 listed banks that have so far reported March quarter results posted a 26.6 per cent rise in gross bad loans to Rs 6.41 trillion from last year.  Indian banking mess is as much a governance crisis as it is a policy crisis. Banks Board Bureau headed by Vinod Rai is only a paper tiger. A recent report by consulting firm McKinsey shows that the total stressed assets of the Indian banking sector is more than its net worth. The provisions gap is in excess of Rs 6 trillion.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

M. Veerappa Moily

The author is a senior Congress leader and chairman of Standing Committee of Finance

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