Modi exclusive interview: It is time 'reformist' PM got past tale of inherited mess

Prime Minister Narendra Modi wasn’t his usual guarded self like he is during his rare face-to-face encounters with the press, throughout the interview to Rahul Joshi, Group Editor of Network 18 aired on Friday night. The PM, a taskmaster from his Gujarat days, didn’t mince words or shield himself with clichés when he spoke on the criticism and hardships he faced after inheriting a fragile, rather broken economy from the Congress-led UPA in May 2014.

Watch the full interview here or catch it on CNN-News18 today at 2 pm and 9 pm.

PM Modi. Reuters

PM Modi. Reuters

Modi said, in hindsight, he even thought of presenting a white paper on the prevailing economic situation before announcing the first budget of his government. "This thought had come to me. I had two paths. Politics told me that I should put out all the details (of economic situation). But the nation's interest told me that this information would increase the hopelessness, the markets would be badly hit, it would be big blow to the economy. I chose to stay silent at the risk of political damage in the national interest," Modi said.

He said the reason he finally decided against it was to not inflict any further damage on the already shaken investor psyche.

Yet again, Modi didn’t forget to indirectly point fingers at the Congress-led UPA government for the economic mess passed on to him and explained how he has been trying to fix the problems of the past since then whose result's of are beginning to show now. “I chose the tough path,” the PM said in the more than an hour-long interview in the interview.

In a broader context, Modi is right on the state of the economy and the mood of investors in 2013-2014. A prolonged period of policy paralysis at the centre, stagnant reforms and corruption cases had severely battered the investor confidence in the idea of India as an investment destination. Modi, as PM, hard sold the India story to foreigners, both here and abroad.

The UPA mess

Besides the legacy issues left behind by the UPA-regime, the new government had to solve the structural issues in the economy too when Modi snatched the baton from the UPA-regime. Consumer inflation was hovering near double digits hurting the aam aadmi, which has been brought down to near 6 percent levels now. Also, in the two years of Modi’s rule, the foreign direct investment to the country has totaled over $100 billion compared with $190 billion in UPA-II’s five years. Fiscal deficit, which is a key indicator of the government’s finance stability, has improved from 4.4 percent in fiscal year 2014 to 3.9 per cent in fiscal year 2015 and is projected to fall further to 3.5 per cent in the current fiscal year.

To a considerable extent, Modi’s personal charm and NDA's upper hand in the Lok Sabha, helped to restore the lost confidence of foreign investors in the India story. There has been an unmistakable Modi wave that took shape in late 2013 and continued through 2014 till 2015 before beginning to fade as reality on the ground began to manifest and reform proposals started hitting the Rajya Sabha hurdle till recently. But, not even his political enemies will dispute the fact that PM Modi put an end to the profound negativity surrounded the economy, even though his achievements on the reform-front and the progress on the ground are subjects of debate. Also, in the two and half years of his term, PM Modi has faced criticism on rolling out old UPA schemes, after repackaging them with catchy slogans, besides the chest-thumping on the high GDP numbers that are largely aided by the crashing commodity and crude oil prices in 2014-15.

Questions remain

During the interview, PM Modi seemed quite impressed with the high GDP growth the economy has achieved under his term. “The entire world says that at seven percent growth, we are the fastest growing economy. Whether it is the World Bank, IMF, credit agencies, even UN agencies, they all say India growing rapidly,” Modi said.

“So those policies which are helping growth has been emphasised. All obstructions are being removed with policies. All this has resulted in speeding up the economy,” the PM said.

But, the high growth portrayed by the 7 percent plus GDP growth (the fastest among major economies) is seen with skepticism by economists, given the continuing stress on the export-front, banking sector, muted corporate earnings and lackluster growth in the manufacturing sector. As Firstpost noted in this article, the kind of GDP growth figures we see now is primarily on account of government consumption, not fresh private investments that are critical for the long-term sustainable growth of the economy. This, in a way, takes away the sheen of high GDP numbers. Also, the significant chunk of bad loans present on the books of state-run banks and resultant capital implications are still a riddle for the Modi government.

There aren’t many fans for the jobless economic growth the country if facing. This website has long argued that unless private sector take the lead and new factories are built, employment generation will continue to be a problematic area for the country. In the past, experts have raised alarm bells on years of high growth with no new jobs being created in the country. The Modi government doesn’t have immediate answers to the question on how it will accommodate millions of young people joining the workforce.

Modi, in the interview, spoke on the success his government has achieved on subsidy reforms and passage of Goods and Service Tax (GST), but was silent on other key, politically sensitive reform hurdles such as labour and land acquisition by industries. The fate of many of his pet initiatives -- Start Up India, Swachh Bharat and Digital India -- are all work in progress.

Alongwith the implementation of the steps already taken, these are unfinished tasks for his government that enters the crucial third year. Indeed, the economy is in a much better shape than the UPA-days. But, the point here is that there are persisting cocerns in the India growth story which Modi government hasn't addressed yet, among which the biggest challenges are reviving the private investment cycle and daring to take the much-needed, but unpopular reform measures (labour, privatization) that can offer major impetus to growth on the ground and create jobs.

(Data support from Kishor Kadam)

Watch the full interview here or catch it on CNN-News18 today at 2 pm and 9 pm.

Updated Date: Sep 03, 2016 10:17 AM

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