Modi 1.0: Five Unflattering Years With Only Four Economic Reforms

After five years in power, Modi’s complete majority government can claim only four economic reforms.

1.25 billion Indians want to know if Modi strengthened the economy or squandered a priceless opportunity?

(Photo: The Quint/Shruti Mathur)

Video Editor: Mohd Ibrahim and Vivek Gupta
Video Producer: Anubhav Mishra
Cameraperson: Nitin Chopra

Perhaps the most “grey” or “contested” 'achievement' during Modi 1.0 is his record over the economy. People are truly divided here. His fans, from sharp-shooting statistical doyens to celebrated ex-CFOs, believe he performed miracles.

Less shrill, but equally intelligent analysts believe he was plenty of sound and fury, but little action. So, to paraphrase Prime Minister Narendra Modi himself: Sava sau crore Hindustani yeh janna chahtey hain ki Modi ne arth vyavastha ko mazboot banaya ya ek bahumulya mauka gava diya? (1.25 billion Indians want to know if Modi strengthened the economy or squandered a priceless opportunity?)

Here are PM Modi’s four reforms in 5 years in descending order of importance:

1. Pradhan Mantri Ujjwala Yojana

Under this scheme, over 60 million poor/rural women were given free LPG connections, to yank them away from harmful smoke chullahs. Wait, I can already see that many of you are up in arms. Why am I calling just another subsidy/freebie a “reform,” you will ask angrily?

Because this is perhaps the only Modi scheme whose underlying economic principle is genuinely reformist ie, a move from generalised to sharply targeted subsidies. And even more critically, the prime minister donned a free marketer’s hat, launched a non-coercive campaign to persuade non-merit subsidy takers to voluntarily give up in favour of those who needed the handout.

Just see the half a dozen words I have emphasised? Targeted. Free-Market. Non-Coercive. Persuade. Voluntary. Need.

These words should be at the core of any pedigreed economic reform. But alas, Ujjwala is the only Modi initiative that ticked all these touchstones.

2. Insolvency and Bankruptcy Code (IBC)

Finally, badly run companies in India can be legally wrenched from corrupt (sometimes, incompetent) owners. India was often derided (and correctly so) as an economy thick with poor companies/shareholders but extremely wealthy founders (sub-text: Those who had skimmed value from public to private assets).

Mercifully, now the fat cats/crooks can be brought to book. The only reason I’ve placed this fundamental change at second place is because the legal architecture could have been tighter, with fewer loopholes. But heck, this is a big reform, no question about that.

3. Direct Benefit Transfer

While this is another huge reform – nearly Rs 2.8 lakh crore ($40 billion) of sops were transferred directly into the bank accounts of authentic beneficiaries this year, thereby saving Rs 1.20 lakh crore ($18 bn) in leakages/fraud over the last four years, and eliminating almost 70 million fake accounts over several schemes – Modi will have to share credit here with his abhorred Congress/“family”.

Because, whether he concedes it or not (he never will!), the foundation for this massive reform was laid by the political foes he endlessly vilifies, viz Dr Manmohan Singh and Sonia Gandhi who created the Aadhaar digital identity superstructure for over a billion people (to complete this messy picture for Modi, he had vehemently opposed it under the earlier regime).

4. Goods and Services Tax (GST)

This is truly one-legged, but nonetheless a reform. It’s been made horribly complicated, the very antithesis of what a GST is supposed to be. Here’s one egregious example from just the last week – one fine day, the GST Council changed the design for real estate transactions from a 12 percent rate to 5 percent, but “without any input tax credits”!

Now tell me, if there is no credit, can it even be called “GST”? Shouldn’t it be called just another plain indirect tax?

And wait – less than a week later, this change was changed again! Now you could choose ie, you could do 12 percent with input tax credits, or 5 percent without.

This astounding illustration merely proves why the “Modi GST” is really a GST more in nomenclature far less in substance. To cap it up, you’ve got half a dozen rates, cesses, exemptions for alcohol and petroleum etc.

Net net, it’s hardly a GST, but given that it’s a generic, elemental change in our federal tax structure, let’s be charitable and cut Modi some slack. At least he’s taken the first (albeit faltering, stumbling) step on the road of this arduous tax reform.

So that’s it. Four economic reforms in five years of a full-majority government after 30 years!

In another video that I will record soon, I will list all the economic negatives of Modi Raj. Brace yourself for a tough ride.