Since its inception in 1951-52, the sheer size and scale of the Indian General Elections has rendered it the biggest display of the democratic and electoral process. But BJP’s second consecutive victory has made the 17th Lok Sabha elections truly historic in nature. While 2014consolidated BJP’s foothold in the Hindi heartlands, diminishing the stature of the Congress,the mammoth victory of the BJP in 2019 established the party’s hegemony. In addition to retaining its traditional bastion, the party has also made significant strides in states such as West Bengal, Orissa, Telangana and Karnataka.
The stellar mandate reflects the endorsement and acceptance of the Indian voters, for Modi’s government and performance across multiple sectors. However, in order for the development of the country to be truly inclusive, as reiterated by Prime Minister Modi himself, significant changes need to be brought about, across various domains, including on the economic front.
The current economic scenario is such that the country is facing headwinds in multiple forms: slowdown in consumer demands across rural and urban areas, liquidity crunch in the non-bank lending sector, falling investments due to lack of investor confidence as well as the need to boost exports in the face of global economic turbulence.
If the stock market is assumed to be a barometer for gauging the mood of the country, then the markets were definitely euphoric, post the results, which signify continuity in reform and stability. But, once the euphoria is settled, a prime challenge for the Modi government will be the consolidation of his economic team. With the credibility and independence of institutions like the RBI and the Central Statistics Office under attack, it is imperative that the government takes the requisite steps to strengthen their institutional integrity.
Importantly, despite the projection of a strong economic outlook with 7.5% growth in the first quarter of FY 2019, as per a World Bank report released in January 2019, a recent report by the UN’s Economic Analysis and Policy Division estimates a moderation of economic growth, both worldwide and in India, pegged at 7.1% for the latter. This can be attributed to slumps in consumption and investments across multiple sectors.
This downward revision of the GDP figures could majorly be attributed to a combination of factors such as a consumption slump and distress noticeably across the sectors. An illustration of this is the drastic fall in the sales of automobiles to 16%, for the first time in eight years. The consumption slowdown has been accompanied by an investment slump in the private sector, adding to the government’s policy woes and challenges to accelerated economic growth.
A critical component of economic growth is jobs creation, a crisis of scale which was presumed to dethrone the government, due to recent reports of India facing the highest rates of unemployment. According to The Business Standard release, the leaked NSSO report stated that unemployment hit the roof for the first time in 45 years , touching 6.1% in 2017.The creation of well-paid jobs is integral for any inclusive economic transformation. So, the government, during its second tenure, must implement measures and reforms across the Indian economy, to address this burgeoning crisis. Some of these include the encouragement of private investments, establishment of multi-stakeholder consultations etc.
Thus, the 2019 General Electionsmark a critical inflection for India owing to multiple socio-political reasons. Given the large-scale mandate that Modi has been given by the Indian electorate, a feat previously achieved by the erstwhile Prime Minister, Indira Gandhi, with the figurative decimation of her opposition, now is the time for the Modi government to push ahead with muscular changes in the Indian economy, in order to build a strong and inclusive polity.
India Outbound
May 28, 2019
source https://indiaoutbound.org/the-economic-challenges-facing-modi-2-0/
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