Apr 15, 2019, 10.40 AM
Narendra Modi’s first big challenge on becoming the prime minister was the big farmers’ crisis in March 2015. Unseasonal rains damaged crops in Punjab and Haryana and many committed suicide.
Modi instantly ensured that affected farmers got a higher compensation and that all the grain they produced was procured at the minimum support price (MSP).
Prime Minister Modi was flustered by the criticism that he personally did not visit the affected families, but Modi was clear in his thoughts: He was the PM and his job was to take decisions and get the machinery to act. Modi knew perception matters first, but actions last forever.
The NDA – despite the Congress blitzkrieg – has done plenty to alleviate the plight of farmers. It has prepared soil health cards for 170 million individual farm holdings to improve productivity, provided water through completing irrigation projects, ensured power for pumps and neem-coated fertilisers to prevent adulteration.
The Pradhan Mantri Fasal Bima Yojana, an insurance scheme, now compensates the farmers for crops lost to natural calamities. He raised the MSP for grains and pulses.
Modinomics at work was at its best. Remember, when he had taken the oath, he had inherited an economy derisively scorned by both domestic and global investors.
India was a part of the ‘fragile five’ and there was the sword of Damocles of a credit rating downgrade to ‘Junk’ status. It was a precariously perched economy, akin to a poisoned chalice. But Modinomics has triggered a sturdy ballast to help India emerge as the world’s fifth largest (in GDP terms) and fastest growing economy.
So what has helped Modinomics’ work even as rivals stepped up their hate campaign? It was all about the nation and its economic growth. The most important trigger of Modinomics was the goods and services tax (GST) - the biggest indirect tax reform since Independence - which is now demolishing trade barriers, fuelling aggregate demand, compelling tax compliance, reworking logistics and manufacturing architecture.
It has done away with sub-scale operational outposts. What is in place is efficient, scalable and closer-to-consumer operational hubs, which are harmonising rates across states by demolishing trade barriers.
So who’s in trouble? Tax evading entities and unorganised brokers. The GST, in short, is giving a leg-up to aggregate demand by IBC regime for creating a transparent and legally-sound mechanism for resurrecting financially-distressed entities into viable, productive entities.
The World Bank says resolutions in Insolvency and Bankruptcy Code (IBC) era is now taking 270 days, as compared to the pre-IBC era and its five-year period. In short, Modinomics is working.
Demonetisation - loudly criticised by the opposition - has been a brilliant force multiplier for the economy’s financialisation. It was like an assault on tax cheats, terror financiers and illicit carpetbaggers.
It helped the billion-plus nation to emerge out of its excessive reliance on a cash ecosystem that for generations, fuelled a dirty, dark, parallel economy, depriving India of legitimate taxes and posing tough challenges to law enforcement and security agencies.
It was Modinomics’ bold assault on tax cheats and cash hoarders, asking Indians to follow the rule of the law and not avoid taxes.
Indians realised increased tax means increased government expenditure on its people. The move also helped the mutual fund and insurance market, because a large chunk of cash in bank deposits moved through these intermediaries into the equity market.
Modinomics also did wonders when the government signed the Monetary Policy Framework Agreement with the Reserve Bank of India (RBI) on the maximum tolerable consumer inflation rate that RBI should target to achieve price stability.
In one shot, Prime Minister Modi made the RBI responsible through the Monetary Policy Committee (MPC) for containing consumer inflation at 4 per cent -- with a standard deviation of 2 per cent -- in the medium term.
Hence, Modinomics tackled the issue of high inflation impacting the poor and - at the same time - encouraged long-term capital investments by businesses.
Realising that the previous government messed up natural resources, getting embroiled in big buck corruption scams like the Coal and 2G scandal, Modi turned auctioning of natural resources into a crystal clear, competitive and price optimising allotment of natural resources like coal, minerals, spectrum and land.
This is growth and power for a billion-plus nation.