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Has “Modinomics” Worked??

India emerged as fastest growing economy in the world. We broke into top 5 economies in the world with size of $ 2.7 trillion & expected to be third largest only after US & CHINA by 2027 & size of $ 5 trillion.
Anil Kumar Mathur
(Investment Consultant)

In a few months from now, NDA government will complete its term and PM Narander Modi will seek re-election in 2019. It is hazardous or probably suicidal to evaluate performance of any government in full due to enormous amount of factors involved. A govt has multiple tasks to perform. Governance, law & order, international relations, economy and many more.
I shall restrict my scope of “submission” to “ECONOMY” as this is one factor where we can speak with facts and figures. India is a “democracy”, and first & foremost responsibility of any govt in a democracy is “welfare of its people”. Democracy has its own limitations and fault lines. It’s easy for a China to implement reforms as they wish; they can bulldoze their agenda if leadership decides. No wonder today they are super power not only economically but in every aspect of a strong nation.
Contrary to that in India, we have to go through long process of approvals & procedures. More than anything else, we have politics in everything. Economics is no exception. A wise government has to strike a balance between welfare and growth.
So how has MODI government performed in past 4.5 years, how do we rate it on a scale of 1 to 5?

  • Economic Indicators :

These are more commonly known factors like GDP, Inflation, Fiscal Deficit, FDI, Foreign Exchange Reserve etc. Let’s see how we faired in all above factors.

Indicators 2013 2014 2015 2016 2017 2018 2019(E)
GDP(%) 6.4 7.4 8.2 7.1 6.7 7.3 7.4
Inflation(%) 10.2 9.5 6.0 5.0 4.5 3.6 3.5
Fiscal Deficit(%) 4.8 4.5 4.1 3.9 3.7 3.5 3.2
Net FDI         (Billion US$ ) 36.05 45.15 55.56 60.22 60.97*  
Foreign Exchange Reserves

(Billion US$)

293 303 342 360 372 424*

Most of the economic indicators published in this article, are showing that country has progressed reasonably well. GDP is firmly above 7%, in spite of big disruption due to Demonetization & implementation of GST. Fiscal deficit is well within budgeted estimate of 3.2% of GDP. If you compare it from past government record, this govt’s fiscal discipline is far better. “The difference is earlier government use to borrow & spend but this government has earned & spent”. CPI Inflation is the biggest relief for us ordinary people. From Approx 10% in 2013, we have come down to 4% in the end of 2018.

  • World View :

India emerged as fastest growing economy in the world. We broke into top 5 economies in the world with size of $ 2.7 trillion & expected to be third largest only after US & CHINA by 2027 & size of $ 5 trillion. We have taken some significant jumps in ease of doing business ranking; rating agency Moody’s has upgraded India’s Sovereign Credit Rating to Baa2 from Baa3 in November 2017 & expected to rise further during next review.

  • Economic Reforms :

It is not easy for any government to perform well without bringing “REFORMS” & when you bring big changes, the performance suffers. DeMo & GST were two reforms which brought some excellent changes in economy but also caused pain to economy & people. DeMo has formalized economy and forced cash economy to be converted in formal economy. This has caused some disturbance to small businesses but was very important action. GST was a tricky but very bold reform which no govt in past touched it due to difficulty in implementation. To credit this government, they took the challenge and with lots of hard work have implemented it. Now we are in process of reforming GST to make it simpler. Two indirect benefit of DeMo & GST were Huge rise in number of people filing Income Tax Return from 3.8 Crore to 6.8 Crore & New enterprises registered for indirect tax from 66 Lakh to 1.2 Crore. Another BIG reform was introduction of “Insolvency & Bankruptcy code”. This has helped Indian Banks & Lenders to recover their dues from businesses which are failed for genuine reasons. As of now 12 large cases are under consideration with value of Rs 3 Lakh Crore and out of which Rs 80,000 Crore are already recovered by banks. This money used to be written off earlier.

  • Markets :

Ever Since Mr. Modi was nominated PM candidate on 13th September 2013, BSE Sensex has risen from 19732 to current 35695 (January 4th 2019) before hitting a life time high of 38645 in August 2018, Almost doubling in 5 years. This could be considered a decent performance by any yard stick. Not to forget that we have seen so many internal ( DeMo, GST) and international (US-China trade war, Oil prices, Brexit) disruption. Another fascinating development happened in Indian stock markets & sadly no one is talking about is gate crashing entry of domestic Indian investors & more specifically “Retail Investor”. Domestic Institutional Investors (DII) have outnumbered Foreign Institutional Investors (FII) in terms of net investment in Indian markets. 2014 (FII +69781 Cr, DII -29975 Cr), 2015(FII -18715 Cr, DII +66441 Cr), 2016(FII -10670 Cr, DII +35972 Cr), 2017(FII -43550 Cr, DII +90639 Cr) & 2018(FII -73733 Cr, DII +109366 Cr). So except 2014, net investment by DII remained positive and post DeMo just shot up. Retail investors are putting avg. Rs 7000 Crore every month through SIP in markets. An endorsement of their confidence in economy. Investors will do well if they invest now & remain invested for next 7-8 years to enjoy fruits of being part of third largest economy with approx size of $ 5 trillion.

  • Conclusion :

This is no one’s case that this government has achieved everything in these 4.5 years. We can agree to disagree on above facts; we can point out short falls of this government and argue till cow comes home. There are no doubts that this government has laid solid foundation for a quantum jump in economy. From a “subsidy based economy to asset building”, from “exclusive growth to inclusive growth”, from “freebies to hard core reforms” & from “mai baap sarkar” to “empowerment”, this government has done more right than wrong on economic front. On my assessment, this government deserve 4.5/5 marks. We only hope that the continuity in policy remains post 2019 election and India don’t see an “accidental prime minister” again.

Can we conclude that “Modinomics” worked?? Yes, it has.


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