Economic policy of the Narendra Modi administration

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The economic policies of the Narendra Modi's administration, also known as Modinomics, focused on privatization and liberalization of the economy, based on a neoliberal framework. [1] [2] Modi liberalized India's foreign direct investment policies, allowing more foreign investment in several industries, including in defense and the railways. [3] [4] [5] Modi liberalised India's foreign direct investment policies, allowing more foreign investment in several industries, including defence and railways Other proposed reforms included making the forming of unions more difficult for workers, and making recruitment and dismissal easier for employers. In 2021–22, the foreign direct investment (FDI) in India was $82 billion. India's gross domestic savings rate stood at 29.3% of GDP in 2022. [6]

Contents

Labour reform

Other reforms included removing many of the country's labor laws. Some scholars alleged said labour reforms were made to make it harder for workers to form unions and easier for employers to hire and fire them.[ citation needed ]

These reforms met with support from institutions such as the World Bank, but opposition from some scholars within the country. The labor laws also drew strong opposition from unions: on 2 September 2015, eleven of the country's largest unions went on strike, including one affiliated with the BJP. The strike was estimated to have cost the economy $3.7 billion. [7] [8]

The Bharatiya Mazdoor Sangh, a constituent of the Sangh Parivar, stated that the reforms would hurt laborers by making it easier for corporations to exploit them. [9]

Economy

In his first budget, Finance Minister Arun Jaitley promised to gradually reduce the budgetary deficit from 4.1% to 3% over two years and to divest from shares in public banks. [10]

Over Modi's first year in office, the Indian GDP grew at a rate of 7.5%, [11] making India the fastest-growing economy in the world. For this the basis was a revised formula introduced a year after he took office, which surprised a lot of economists. [12]

However, this rate of growth had fallen significantly to 6.1%, by his third year in office. [13] This fall has been blamed on the exercise of demonetisation of currency.

In July 2014, Modi refused to sign a trade agreement that would permit the World Trade Organization to implement a deal agreed in Bali, citing that agreement will lead to "lack of protection to Indian farmers and the needs of food security" and "Lack of bargaining power". [14] The addition to Indian airports grew by 23 percent in 2016 while the airfares dropped by over 25 percent. [15]

Over the first four years of Modi's premiership, India's GDP grew at an average rate of 7.23%, higher than the rate of 6.39% under the previous government. [16]

The level of income inequality increased, [17] while an internal government report said that in 2017, unemployment had increased to its highest level in 45 years. [18]

The loss of jobs was attributed to the 2016 demonetisation, and to the effects of the Goods and Services Tax. [19] [20] The last year of Modi's first term didn't see much economic development and focused on the policies of Defence and on the basic formula of Hindutva.

His government focused on pension facilities for old-age group people and depressed sections of society. [21] The economic growth rate in 2018-19 was recorded to be 6.1%, which was lower than the average rate of the first four years of premiership. [22]

The fall in the growth rate was again attributed to the 2016 demonetisation and to the effects of the GST [23] on the economy.

Make in India

Indian Government at the launch of the Make in India program. Narendra Modi launches Make in India.jpg
Indian Government at the launch of the Make in India program.

In September 2014, Modi introduced the Make in India initiative to encourage foreign companies to manufacture products in India, with the goal of turning India into a global manufacturing hub. [24] Supporters of economic liberalisation supported the initiative, while critics argued it would allow foreign corporations to capture a greater share of the Indian market. "Make in India" had three stated objectives:

Healthcare

Forecasting public healthcare expenditure by Government of India Forecasting public healthcare expenditure by Government of India.jpg
Forecasting public healthcare expenditure by Government of India

The public health expenditure as a percentage of GDP of the country was 1.3% in 2013-14 was reduced by Modi Government to 1.2% and in the year 2016-17 was increased to 1.5%.[ citation needed ]

Oil prices

In October 2014, the Modi government deregulated diesel prices, [26] and later increased taxes on diesel and petrol by Rs 13 and Rs 11 between June 2014 and January 2016 on petrol and diesel respectively.[ citation needed ]

Later, taxes were decreased by four rupees(Rs 4) between February 2016 and October 2018 for petrol and diesel. Similarly, during January–April 2020, following a sharp decline of 69% in the global crude oil prices, the central government increased the excise duty on petrol and diesel by Rs 10 per litre and Rs 13 per litre, respectively in May 2020.[ citation needed ]

Because of these subsequent changes in taxes the retail selling prices remained stable in India during the period of fall and increase in prices of global crude oil. [27]

Land reforms

In order to enable the construction of defence and industrial corridors, the Modi administration amend the 2013 Act of land-reform bill that allowed it to acquire private land and without the consent of the owners for "only" these five types of projects:

(i) defence, (ii) rural infrastructure, (iii) affordable housing, (iv) industrial corridors set up by the government/government undertakings, up to one km on either side of the road/railway of the corridor, and (v) infrastructure including PPP projects where the government owns the land. [28]

Under the previous bill (Land Acquisition Act, 2013), the government required 0% consent of landowners for Public Projects of any category, 70% consent of landowners for Public-Private projects and 80% consent for Private Projects.[ citation needed ]

Public transportation

The government signed large deals with General Electric and Alstom to supply India with 1,000 new diesel locomotives, as part of an effort to reform the Indian railway, which also included privatisation efforts. [29]

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References

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