When Prime Minister Modi was elected in 2014, there was a huge wave of expectations of change. And he did very quickly push for change. He gave a huge push like never seen before. Jan Dhan Accounts, Aadhar cards for all, (even though these were programs for the previous government), toilets for all, gas connections for rural households, electricity for all. These were radical changes, which brought about radical change in the lives of the common man and the poor. The middle class was also excited about moving away from Congress socialism, which was long outdated and a huge burden, to a more open and liberal economy.
This is the reason why he has swept back into power, 5 years later. But unfortunately, by the middle of that term, although the language did not change, much of the momentum was lost. Soon we started falling back into measures devised by bureaucrats, just as in the past, particularly in the all-important areas of the economy. Almost no important enterprise was privatised, barring Air India. The hapless Mrs Sitharaman, gave long budget speeches which were almost immediately forgotten. The government resorted to huge capital expenditures to keep the economy growing, but this did not get reflected in significant change in the lives of the middle class and the poor. In fact, in spite of growth, we were saddled with high rates of inflation and a steadily falling rupee. It was therefore not surprising that the sheen of Modi started wearing off. This was reflected in last year’s election, forcing the BJP into a coalition government.
As we are ready for the first full budget of the government in this term, the circumstances do not look encouraging. We may still boast about being the fastest growing major economy, but with a rate of growth at 6.4 per cent annually, we certainly cannot become a developed economy by 2047, a hundred years after independence! With per capita income rising even more slowly, there is no perceptible difference in the lives of the poor and the middle class, who are more concerned about the continuous and relentless rise in prices.
There continues to be global uncertainty, with the war in the Middle East, and the continuing war being waged by Russia in the Ukraine. Europe is flirting with its own hard-right wave. And Trump’s election can quickly upend and disrupt global economic relations and trade. With this global turmoil, we cannot afford to chug along the same old path.
At the same time, there are huge opportunities if we can use this time to institute major economic changes. The government can keep trying to push the economy with huge capex, but without the private sector participating wholeheartedly – including agriculture which is wholly in private hands – we will not see the 8-9 per cent growth that we need and must aspire to.
Will there be a 1991 moment? Can this government let go? Can we emulate the best practices of US, Europe and even China in the world of business and the economy?
While we have seen industrial liberalisation, we have yet to see financial liberalisation. The RBI continues to try and hold on to its strong control of the financial sector, with poorer outcomes year after year. At the same time SEBI continues to treat all market intermediaries with scant respect. Finance is the grease for the whole economy. And only by letting go, can we see the economic and financial genius of Indians flourish.