Wednesday, April 24, 2024

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বাংলা
Dhaka Tribune

Modi focuses on economy in election push

  • Indian PM Narendra Modi is aiming to win a third term in office at the forthcoming general election
  • His reelection campaign is already focusing on economic glory
Update : 03 Apr 2024, 10:11 AM

The biggest democratic exercise in human history takes place across India in April and May. Close to 1 billion people are eligible to vote in parliamentary elections at more than 1 million polling stations stretching from the Himalayas to the Indian Ocean.

Prime Minister Narendra Modi, who is seeking to extend his decade-long premiership, sounds bullish on one key issue: the economy. He and his ruling BJP party frequently talk about “Viksit Bharat 2047,” which translates as “Developed India 2047” — a pledge to make India a fully developed economy by its independence centenary.

Yet there is a variety of views and data around how the Indian economy has performed under Modi.

India heading for the global top three

Arvind Panagariya, professor of Indian political economy with Columbia University in New York, was recently appointed by Modi to chair India's influential Finance Commission. He told DW that the data suggests India will become the world's third largest economy “by 2026 or 2027.”

“There is a lot of optimism about India's economic growth and the fact that given the global environment, we are amongst the fastest growing economies in the world,” Shumita Deveshwar, chief India economist with GlobalData TSLombard, told DW.

India's strong growth makes it an outlier among major economies at the moment. Its GDP was up 8.4% in the final three months of 2023 compared with a year earlier, and almost 1% higher than the previous quarter. That puts it well ahead of other top 10 global economies.

Question marks over high unemployment

There are question marks though, and one particularly dogged problem is unemployment. It is particularly high among younger people and a major issue given the country's massive and fast-growing population. Unemployment is currently close to 10%.

Sushant Singh from the Center for Policy Research in India says there is “no plan” to deal with the problem. “The demographic dividend has completely become a demographic disaster,” he told DW.

He identifies other economic issues that have arisen under Modi and highlights India's relatively weak data on both manufacturing and foreign direct investment.

Net FDI into India is lower now than it was when Modi took over 10 years ago, according to data from HSBC. “Now that's serious,” says Singh, “because that means people are not investing in manufacturing or industry or corporates.”

While Modi has driven a domestic manufacturing agenda called “Make in India,” manufacturing still accounts for only around 12% of jobs in the country. “We went basically from a farm economy state to a service led economy with the manufacturing sector just stalling in between,” says Deveshwar.

India's economic reforms

Panagariya says Modi has introduced key reforms on taxation, bankruptcy law and real estate which have “made a major difference” to the economy.

Deveshwar says the record on economic reforms has been more mixed. “I don't think that we can get to where he's saying that we can get to without the kind of tough economic structural reforms that India has to do to achieve those lofty goals,” she says.

She says Modi's ruling National Democratic Alliance, of which his BJP is the biggest party, has failed to achieve annual targets around privatization of state-run firms. She also points to the three controversial farm laws which Modi's government introduced before repealing them in 2021 following mass protests.

Poverty and inequality

Yet Deveshwar believes Modi is popular as much for his ability to tap into public sentiment on economic matters, in evidence when he repealed the farm laws. ”To his credit, he really has his finger on the pulse of the nation. And if he feels that something is not going to go down well in India, he will step back,” she says.

That plays into another reason for Modi's appeal. India remains an extremely poor country across many measurements, yet World Bank data shows that the share of Indians living in extreme poverty has continued to fall during Modi's time in office.

Panagariya says the government has been especially active in terms of welfare schemes in rural India. The country's huge agrarian and rural population is seen as vital to Modi if he is to win a third term.

“Particularly in the rural areas, everybody is receiving something or the other from the central government,” Panagariya says. He points to rural housing schemes, toilet construction initiatives, cash transfers, food security legislation and the widespread distribution of cooking gas as evidence of how Modi has tried to distribute resources to the poorest parts of the country.

But there is a lot of disagreement on how India's poorest have fared under Modi. Sushant Singh says inequality has increased in the last 10 years.

“India has become more unequal,” he says, pointing to data from a recent report by the World Inequality Lab. “This inequality has really increased under Modi, both income inequality and wealth inequality.” 

 

“Per capita, India is the poorest country in the G20,” he adds, noting that both Sri Lanka and Bangladesh have surpassed India in per capita wealth terms. “Bangladesh was a basket case economy, but India is poorer than Bangladesh now in per capita terms,” he says.

Modi's infrastructure investment

One area where Modi's economic achievements are quite visible is infrastructure. The pre-election budget for 2024 pledged an increase of 11% on capital expenditure for roads, railways and airports, taking it to around $134 billion.

Modi has already invested heavily in infrastructure, both digital and physical, during his time in office. Panagariya says the investment is justified and vital if India is to achieve the kind of economic goals the prime minister speaks of.

Deveshwar agrees. “You can't really call it populist,” she says. “It is very necessary. One of the key problems that India has had for decades is its creaking infrastructure. And the policy direction now is very positive.”

It's one tangible area where India's journey towards developed economic status can perhaps be measured and part of several reasons why some economists, such as Panagariya, believe the election is already seen as a “done deal” for Modi.

Yet even if a third Modi election victory looks likely, focusing on lofty targets such as “Viksit Bharat 2047” looks more like campaigning than reality to some.

“It's feel-good talk and far enough out that no one will hold him accountable for 2047,” says Deveshwar.

Singh says Modi's 2047 talk is part of a long-established political playbook. “Glories of the past and possible glories of the future,” he says. “It's a dream, a vision that he's trying to sell to the people.”

With polls suggesting Modi's government are clearly on course for a third term in power, the people seem to be buying it.

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