The eighth anniversary of the Bharatiya Janata Party (BJP) government headed by Prime Minister Narendra Modi (NaMo) falls on 30 May 2022.
This comes at a time when India is facing severe challenges on the economic front in the form of high inflation and unemployment, agriculture distress and low economic growth.
The stock markets have fallen by close to 6% year-to-date (YTD), while the rupee has depreciated by around 4% this year.
While no event was held to mark the anniversary last year due to the pandemic, this year, the BJP has made elaborate plans to commemorate the event.
How does Narendra Modi (NaMo) compare with ex-Prime Minister Manmohan Singh on the economic front? This is an often-asked question.
Let’s find out.
While Manmohan Singh had to face the 2008 global financial crisis, Narendra Modi is grappling with the COVID-19 pandemic’s aftermath.
Excluding the abnormal years, ie, 2020-21 and 2021-22, the GDP growth during Modi’s tenure improved to 6.84%, marginally lower than Manmohan Singh's time.
But the average FDI in NaMo’s tenure is twice that of Manmohan Singh’s tenure.
During Modi’s rule, the currency has depreciated by around 19% to date, from Rs 59 to a dollar to Rs 77-78 levels currently.
It’s difficult to choose one Prime Minister over the other on economic performance as the environment was different during the tenures of Singh and Modi.
Lower GDP Than Manmohan Singh Years
In the first eight years of the Manmohan Singh tenure, the GDP growth averaged 7.03%, while the comparable number of NaMo’s tenure is 5.25%, adversely impacted by the two years of the COVID-19 pandemic. Indian economy contracted by 7.3% in 2020-21, the year of the lockdown.
Excluding the abnormal years, ie, 2020-21 and 2021-22, the GDP growth during NaMo’s tenure improved to 6.84%, marginally lower than Manmohan Singh's time.
Price Rise Was an Election Issue in 2014
Average inflation has been comfortably lower during NaMo’s tenure in comparison to Manmohan Singh, by 2.6%. Albeit here, the low crude prices have helped a bit. Price rise was an important issue in the 2014 general elections, and bringing it under control was a key manifesto promise of the BJP.
This year, inflation has inched up to 7% in the aftermath of the Russia-Ukraine war. It has forced the government to reduce fuel and LPG cylinder prices to provide relief to poor sections.
Unemployment Has Shot Up
In April 2012, ie, the eighth year of the Manmohan Singh tenure, the unemployment rate in India was close to 5.6%. It has shot up to 7.83% in April 2022, the eighth year of NaMo, due to COVID-19 induced lockdowns and resultant job losses.
But FDI Has Doubled
India has emerged as one of the most favoured FDI destinations (Top 10) due to the opening up of many sectors such as retail, civil aviation, defence, insurance, construction, etc, under the Narendra Modi regime. The average FDI in NaMo’s tenure is twice that of Manmohan Singh’s tenure.
While global flows collapsed in the last two years due to the economic fallout from COVID-19, India recorded the "highest-ever" annual foreign direct investment of $83.57 billion in 2021-22.
Was the Market Better Under Manmohan?
During Manmohan Singh’s first eight years, the Nifty50 generated returns of around 15.5% per annum. This has declined to 10.5% per annum during NaMo’s tenure. The low base effect came into play during Singh’s term as Nifty50 was just seven years old when he became Prime Minister.
Some could argue that the market had been moving upwards since the day of the announcement of NaMo as NDA’s Prime Ministerial candidate in September 2013. Taking this into consideration, the stock market return during NaMo’s tenure increases to 12.5% per annum.
The Struggling Rupee
NaMo had made currency depreciation one of the main election planks to target Singh during the 2014 campaign. During the first eight years under Singh, the Rupee depreciated by around 22% in relation to the US dollar, from Rs 45 to a dollar to Rs 55.
During NaMo’s rule, the currency has depreciated by around 32% to date, from Rs 59 to a dollar to Rs 77-78 levels currently.
Exports, Imports & Aatmanirbhar Bharat
Export growth has been under pressure during NaMo’s tenure due to rising protectionism and global economic slowdown. The COVID-19 pandemic has further impacted trade flows. During Singh’s tenure, exports grew significantly, led by the services sector.
Under NaMo, the pace of growth of imports has declined as well, led by the ‘Aatmanirbhar Bharat’ programme and the decline in the price of crude oil. Resultantly, the trade deficit in 2021-22 is not very high compared to 2013-14.
(Figures in USD Million)
(Source: businesstoday.in and timesnow.com)
India's Ease of Doing Business: A Massive Jump
Our EODB ranking globally has jumped 69 places from 132 in 2011 under Singh to 63 under NaMo on account of structural reforms such as the Insolvency and Bankruptcy Code, 2016 (IBC) and the Goods & Services Tax. The World Bank has discontinued this report from 2021.
Our forex reserves have nearly doubled from $300 billion at the end of Singh’s tenure to close to $600 billion currently.
To sum up, it’s very difficult to choose one over the other on economic performance as the environment was different during the tenures of the two Prime Ministers. While Singh had to face the global financial crisis of 2008, Modi is grappling with the COVID-19 pandemic’s aftermath.
What Would Define Modi's Legacy?
The Modi juggernaut continues to roll as evidenced by the victory of the BJP in four out of five state assembly elections early this year despite the noise around the economy. It shows that people may be appreciative of the steps taken by his government to neutralise the impact of the pandemic and feel that Modi may be the best person to tackle the economic challenges.
From here on, the ability of Modi to lead a path of economic recovery and progress will determine whose legacy prevails.
(The author is an independent political commentator and can be reached at @politicalbaaba. This is an opinion piece. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)
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