Economic Highlights

New Delhi, 24 March 2017

Lucky 8 For Modi

SCEPTICS WRONG ON ECONOMY

By Shivaji Sarkar

The number eight has proved decisive for Prime Minister Narendra Modi. On November 8 he declared demonetisation of high value notes leading to his worst criticism by skeptics. He came victorious on March 8, the final date of recent Assembly polls as voters of Uttar Pradesh and Uttarakhand gave the BJP a massive mandate. Does this mean that the people want him to pace up three times in about 24 months to the Lok Sabha polls?

While a lot has already been written about the polls and the message it sends out, the fact is that people believed, unlike experts, that demonetisation was a bold decision in reforming the Indian economy. Even the civic and local body polls in Maharashtra, Chandigarh and Odisha endorsed this.

However, skeptics had said the economy was to roll down.But they were completely off the mark. This is indicated by the sudden surge in the stock market and sharp gain of rupee. The Nifty hit an all-time high of 9160 and the sensex soared to 29648 on March 17, on a continuous spree since the announcement of results on March 11. On a weekly basis, the BSE Sensex rallied 702.76 points, or 2.42 percent, and the Nifty 225.50 points, or 2.52 percent, extending gains for the second straight week. The sensex is predicted to touch 35,000 by December 2017.

The rupee strengthening to Rs 65.46 in a couple of days, maintaining a spree since the Union Budget presentation, indicates that political stability that the polls indicate may take make it stronger. A few weeks back rupee was over Rs 68 to a dollar. It helps overseas borrowers. The stock market in itself is not an indicator. But the mood of the investor speaks volumes and better than the industrial output numbers so far.

The market buoyancy is an indicator of high expectations. Even foreign institutional investors (FII) after continuous selling through 2016 have come back. The FII purchases in between March 14 and 16 touched Rs 22,000 crore, a high. The sales, a normal trading process, were at Rs 14,000 crore, indicating FIIs are keen on pouring more.

Thus, it seems that voters belief in Modi has carried on since November. Despite problems, they trusted that the move was to cleanse Indian economy and purge black money. The marginalised combined Opposition will now realise that in politics the higher one can take the risk, the better are the gains. Soft-pedaling, appeasement, postponing decisions are politically risky.

Even Punjab though having voted for Congress has given a strong message that non-performers be it the Akalis or AAP would not be trusted. So would the UP, Uttarakhand, Goa and Manipur victories of the BJP lead to a new economy?

The expectations are based on the performance of the BJP governments in the States and better coordination with the Centre. There are expectations that law and order would have drastic improvement in UP – the primary reasons stated to be for the poor performance of the SP. Even the Congress government in Punjab would be watched how they come out of the shadow of maladministration. Even Manipur is expected to junk the epithet “Money Pour” – that had led to unstable regime for decades, lawlessness and social strife. Goa, with Manohar Parrikar back as Chief Minister hopes to have better performance.

UP, the largest State, and Punjab that was supposed to be the country’s granary had been pulling down the country’s growth. UP’s 5.9 per cent growth conceals more than telling it is developing at a slow rate. Much of the development of the Samajawadi Party government trumpeted by its Chief Minister Akhilesh Yadav did not actually happen though money had gone out of the State coffers. That adds to GDP but does not indicate growth.

This apart, caste and family bias of the SP government had led to widespread corruption in recruitment even at the State Public Service Commission. At all levels surprising only one caste group did “excellently well” while all others missed the development bus.

People, businesses and the industry expect the new UP Chief Minister Yogi Aditya Nath to bring the State out of this dark shadow and establish a rule that ensures equitability, end the “protection tax” levied by the State’s various mafia on entrepreneurs (they were reportedly assisted by the State police too) and reach succour to the farmers, who are in high debt. The State also has not been helping the farmers in marketing.

Notwithstanding a rural-oriented SP had concentrated developments to the capital, Lucknow, as it helps get easy media mileage. Yogi has to spread this to all corners of the State and particularly to the laggards like Bundelkhand and Purvanchal. Since 1993, UP’s SP and other governments signed over Rs 150 lakh crore of investment deals, not even 10 per cent has come for those government’s poor image and myopic vision, aptly summed by the epithet BIMARU.

Even a small improvement in UP’s growth would have cascading effect on GDP figures. It can change the investment pattern in the entire country. This is what Modi has been harping at his blitzkrieg poll rallies. If UP Marches ahead India could become the world’s top investment destination.

The people believing in Modi, is the greatest asset as well as liability for the BJP. It is his greatest hope for sailing across 2019 Lok Sabha polls about 24 months away – three times of number eight. But he has also to rein in PSU banks from becoming usurer and that they act in the interest of the poor, farmers and general people. They would not tolerate custodians eating into their earnings and savings. The western world has lost trust in banks and financial institutions. A repeat of that in India could spell disaster.

The recent elections mean a lot but people do not expect Modi to slip on their trust index. His vigorous efforts on performance and delivery have to continue – a strength he has exemplified till now. He had said, “It has not been vanvas (exile) of BJP but vanvas of development in UP”, to the voters taking a dig at SP and BSP; now his Chief Minister has to prove it.

Fast growth in all spheres is a must. Manipur has been sliding the North-East; UP, Uttarakhand and Punjab, the entire north. As opportunities would grow in these States, so would the purchasing capacities. This would boost ‘happiness’. Yes, that is what people want. They do not trust the stock market but have faith in the trust they have imposed in Modi and his BJP. They have to turn the highest populated region into engine of growth.—INFA

(Copyright, India News and Feature Alliance)