Modi’s First Two Years: Economic Report Card by Wall Street Journal, USA.
Indian Prime Minister Narendra Modi’s first two years in office haven’t included the overhauling of economic policy some had anticipated. Mr. Modi has turned out to be more of an economic policy tinkerer than the radical reformer some optimists had expected.
Despite the disappointment of the investors and executives who had hoped Mr. Modi would become New Delhi’s most business-friendly prime minister ever, India’s economy has been doing better: Better relative to other countries and much better compared with the country before Mr. Modi and his party took over in New Delhi.
A look at 12 key indicators shows that Asia’s third-largest economy is now on much better footing than it was under the last government led by the Congress party and headed by Manmohan Singh.
In the fiscal year ended March 31, India’s gross domestic product rose 7.6%, helping it overtake China as the fastest-growing big economy in the world. That’s up from 6.6% in the last full fiscal year Congress was in power.
Inflation is almost half ofwhat it was at a couple of years ago. India’s budget deficit has shrunk to 3.9% of GDP from 4.4%. Foreign-direct investment and foreign exchange reserves have reached new peaks.
“India’s macroeconomic prospects have definitely improved relative to the period just before Prime Minister Narendra Modi took office,” said Chua Han Teng, Asia analyst at BMI Research.
Of the 12 indicators picked by The Wall Street Journal, as many as eight did better during the last fiscal year compared with the year before Mr. Modi came to power.
India’s stock market, exports and the money raised through the sale of stakes in state-controlled companies were all better during Prime Minister Singh’s last year but otherwise India seemed to experience some sort of Modi momentum.
Mr. Modi’s government has relaxed foreign-investment rules in more than a dozen sectors including insurance, pensions and railways, cut red tape and pushed through legislative proposals to simplify bankruptcy procedures and strengthen intellectual property rights. It has also fast-tracked road building, railway and highways expansion.
It has had some big legislative failures including the inability to get lawmakers’ approval for the crucial Goods and Services Tax as well as a new law to streamline the process of acquiring land for important projects.
Meanwhile, the strong economic fundamentals has not been doing much to lift corporate profits or consumer spending and India’s banks have been struggling to control a growing mountain of bad debt. Skeptics also point to the fact that much of India’s world-beating growth is a result of change last year in how GDP is calculated.
The Associated Chambers of Commerce and Industry of India scores the government seven out of 10 for its work in the past two years, describing it as a “work in progress.”
Some economists say the Modi administration needs more time for its policies to bear fruit.
“We think most investors under-appreciate the medium- to long-term positive impact of some of the policies being pursued by the current government,” Standard Chartered Bank said in a research note. “Although policy changes have been gradual and incremental, they are moving in the right direction.”
Source: Wall Street Journal