Modinomics of the Budget

International Monetary Fund (IMF) Deputy Managing Director Antoinette Sayeh on January 6 called India a relative "bright spot" in the world economy, growing at rates "significantly above" its peer average. This is despite the OECD's Global Economic Outlook in November, which projected major headwinds that would slowdown global growth at 3.1% in 2022 and 2.2% in 2023.

"Global GDP growth is projected to be 3.1% in 2022, around half the pace seen in 2021 during the rebound from the pandemic, and to slow further to 2.2% in 2023, well below the rate foreseen prior to the war," said the outlook. It is, however, bullish for India despite the country also facing headwinds of adverse geopolitical developments such as the Ukraine war. Even as it trimmed India's growth projection from 6.6% in 2022-23 to 5.7% in 2023-24, it expected the economy to rebound to 6.9% in 2024-25 – far ahead of the global average.

The latest edition of EY Economy Watch sums it up well: "Amid these darkening economic clouds, India is shining as a bright spot, with its growth projected to be higher than that of other major economies." This is also corroborated by the latest official data. The first advance estimates for 2022-23 released by the National Statistical Office (NSO) on Friday estimated Gross Domestic Product (GDP) growth at 7%, which is higher than 6.8% estimated by the Reserve Bank of India (RBI) last month.

The other crucial factor working in favour of India is that inflation is under control. The Narendra Modi government's agile, nimble and calibrated policy interventions brought inflation under control at a time when most of the world, including major advanced economies, were unable to tame it and, in some places, it was 40-year high. India managed it to 5.88% in November, which is below the upper tolerance limit of 6% in about nine months. The peak was at 7.8% in the month of April 2022, highest monthly inflation since May 2014 or during the Modi government.

But this peak has been lower than the economy faced previously. Union finance minister Nirmala Sitharaman used the historical data to corner the Opposition in the Lok Sabha on December 14, 2022. "It is a bit difficult when Parties which saw double-digit inflation during their period raise a question on inflation. That is not something which I am imagining. I would just like to say that the inflation data in November of 2013 was at 19.93 per cent and in the earlier month, in October, it was 18.19 per cent," she told the house.

Thanks to the Modi government's inflation management that didn't hit India the way it devastated some economies, particularly the US and advanced countries of Europe. India's carefully measured stimulus packages helped in keeping inflation under control while accelerating the economic growth in contrast to huge demand-side largesse of some advanced economies that escalated prices of essential commodities to multi-year high, Sitharaman said while replying questions on inflation during the Budget discussion in the Rajya Sabha in February last year.

Data don't lie. While the two macroeconomic indicators mentioned above prove the point that India has been able to manage its economic affairs better than most of the countries (including advanced economies), other high frequency data also state the same. Barring "compulsive contrarian" (a term used by former finance minister Arun Jaitley), all, including major multilateral agencies, acknowledge skilful management of the economy by the Modi government.

A month ago the World Bank revised India's 2022-23 GDP growth forecast upward to 6.9% from 6.5% estimated in October after factoring in "a strong outturn" in the second quarter of the current financial year. HT reported it on December 7. The World Bank's India Development Update report — Navigating the Storm — upgraded the country's growth prediction on the basis of its September quarter performance "driven by strong private consumption and investment" that saw 6.3% growth in its GDP. With 13.5% growth in the first quarter of 2022-23, H1 growth has been a robust 9.7%.

Modinomics is, however, not about just growth. It seeks to create a just economy – equitable growth. PM's 'sabka saath, sabka vikas' is not just a slogan but a mantra for policymakers to create prosperity with equity.

This mission was spelled out by the then finance minister Jaitley in Modi government's first full-year Budget in 2015-16. On February 28, 2015, in his Budget speech, Jaitley articulated the 13-point "vision":

(i) A roof for each family in India. The call given for 'Housing for all' by 2022 would require Team India to complete 2 crore houses in urban areas and 4 crore houses in rural areas.

(ii) Each house in the country should have basic facilities of 24-hour power supply, clean drinking water, a toilet, and be connected to a road.

(iii) At least one member from each family should have access to the means for livelihood and, employment or economic opportunity, to improve his or her lot.

(iv) Substantial reduction of poverty. All our schemes should focus on and centre around the poor. Each of us has to commit ourselves to this task of eliminating absolute poverty.

(v) Electrification, by 2020, of the remaining 20,000 villages in the country, including by off-grid solar power generation.

(vi) Connecting each of the 1,78,000 unconnected habitations by all-weather roads. This will require completing 1,00,000 km of roads currently under construction plus sanctioning and building another 1,00,000 km of road.

(vii) Good health is a necessity for both quality of life, and a person's productivity and ability to support his or her family. Providing medical services in each village and city is absolutely essential.

(viii) Educating and skilling our youth to enable them to get employment is the altar before which we must all bow. To ensure that there is a senior secondary school within 5 km reach of each child, we need to upgrade over 80,000 secondary schools and add or upgrade 75,000 junior/middle, to the senior secondary level. We also have to ensure that education improves in terms of quality and learning outcomes.

(ix) Increase in agricultural productivity and realization of reasonable prices for agricultural production is essential for the welfare of rural areas. We should commit to increasing the irrigated area, improving the efficiency of existing irrigation systems, promoting agro-based industry for value addition and increasing farm incomes, and reasonable prices for farm produce.

(x) In terms of communication, the rural and urban divide should no longer be acceptable to us. We have to ensure connectivity to all the villages without it.

(xi) Two-thirds of our population is below 35. To ensure that our young get proper jobs, we have to aim to make India the manufacturing hub of the world. The Skill India and the Make in India programmes are aimed at doing this.

(xii) We also have to encourage and grow the spirit of entrepreneurship in India and support new start-ups. Thus can our youth turn from being job-seekers to job-creators.

(xiii) The Eastern and North Eastern regions of our country are lagging behind in development on many fronts. We need to ensure that they are on par with the rest of the country.

The guiding principles set by the Modi government have become the backbone of the Modinomics which emphasises on economic development rather than just growth. Each element of this talisman is real – either accomplished or in the process. They have been following Budget after Budget, year after year. If one goes beyond compulsive contrarians, one would see them happening in terms of health benefits to the poor, food security for the underprivileged, fertiliser subsidy for farmers, drinking water mission, innovations, skilling, education and so on. Even this coming Budget will maintain the continuity as the relentless Modi government is committed -- reach to every citizen, even in the remotest part of the country.