Hits and misses of Modi Govt. Series 1
As we head
into the elections of several states and general elections in 2019, we will virtually
be in a state/mood of elections starting this October and if rumors are to believed
general elections of 2019 could be called in early to co-inside with the state
elections. Which, normally be beneficial to the Govt. at center as they would
have higher chances of winning and also save time, money and resources. Many
would be wondering what has the Modi Govt. done in the last 4 years after getting
a thumping victory in 2014, its achievements, failures, work in progress and
missed opportunities. Today, I would like to start a series of articles on
performance of NDA, first starting with the state of economy, and with special
focus on middle and lower income class of people.
The masses
in India which mostly constitute the middle, lower middle class and people who
earn less than $5 who we can below poverty line population. These are the people
who are not very impressed or can be enticed by the sexy GDP numbers, fancy
graphs, FDI, Foreign reserves, or for that matter who own flipkart post it
being acquired by Walmart. All the matter to them is the feel good factor i.e.
cheaper fuel, food (includes vegetables, fruits, milk etc.), quality of
education, inflation, interest rates, roads, etc. mostly tangible things which we
are greatly dependent on day to day basis and on which majority of budget
focuses on. So let’s dive in and analyze what were the hits and misses for the
middle class.
1. Let me first start with income tax
slabs. FM Arun Jatley did a decent job as compared to his previous FM in adding
to the savings by the middle classes. Income exempt from income tax has been
raised to 2.5 lakh i.e. anyone earning up to 2.5 L per annum is exempt from any
kind of income tax, which is 50,000 more exempted compared to 2013-14 where it
was just 2 lakh. So the Modi Govt. gave a straight away exemption of 50k in the
very first year itself. Hence, people who are earning salary in the range of
2-3 lakh per annum made some decent savings of 2 lakhs in 4 years. People earning up to 5-10 lakh per annum. The
rates in 2013-14 were 10% for incomes up to 5 lakh and now in FY 2018-19 it’s
now 5% so there is another decent saving here as well. There have been no major
changes in the 10 lakh and above slabs. So here we can say it’s a decent job.
2. Inflation: This is where the Modi
Govt. has done good job. Keeping he inflation below 5%, food inflation which
was a major cause of concern for the country is been kept in check with decent
amount of pulses, sugar etc. being imported at the right time and now most of
the pulses cost less than 70 RS, Sugar less than 50 RS. Respectively (these are
the retail prices, and sold in lose quantity, not considered the branded or
package food).
With the introduction of Aadhar linked rationing of food to the poor and
lower middle class, has eliminated many fictional beneficiaries, and miss appropriation
of funds and the same subsidized food being sold in black. This is a major success
of the Modi Govt.
3. Fuel: This is going to be a very a
controversial and touchy topic as people are directly impacted by every single
paisa increase in the cost of fuel prices. Here, the audience would judge the
Govt. based on how they see the overall performance vs just the fuel prices. If
are wholly concentrating on how the price of fuel have risen from 71 RS in June
2014 to 56 RS being the least and now back to 75 RS. There are scores of people
who get affected by fuel prices and may forget all the good the govt. has done
and come blasting the moment there is a single paisa increase, quite natural to
expect from them.
However, looking at the larger picture the taxes collected on the fuel
has been used wisely used in these 4 years , from recapitalization of PSU
banks, building high quality Highways, State Discoms refinancing (most of them
where literally bankrupt) Railways, various social schemes like Ujwala, PMAY
etc. which have reached the last mile beneficiary. Hence, I leave this to the
people to judge based on how they feel.
4. Economic policies for the poor and
masses: This is one area where I think the Govt. has passed with distinction,
starting from Ujwala Yojna, PMAY, Crop insurance, Insurance for the poor masses
at 1 Rs per day and 300 annually, Toilets, sanitary pads available at
subsidized rates, opening 50 lakh Jan-dhan saving account, Sukanya Samrudhi
Yojan, Beti padhao-Beti bachao, Atal Pension Yojna , PM vridha pension vojna
etc these are great steps taken by the Govt. to provide social security to the masses
who were often left venerable in old age. Mudhra Yojna this is single biggest feather
in the cap of Modi Govt. This scheme is the single biggest booster/financial
support to encourage small and medium enterprise in big way. I have seen many
people from UP, Bihar coming to Bangalore to open chat shops with loans taken
in Mudra and repaying the entire loan in a period of 10 months and being self-sufficient,
these may not catch attention of the people who crib about the high fuel price
but they should take pride that there monies are being utilized and given to
the deserving people.
5. Interest Rates: While buying and
owning homes is a biggest dream for a middle class family who save money for
years so that they can afford to buy/build a small home for themselves before
they retire. In 2014 when the Modi Govt. took over the home loan interest rates
were hovering at 12% which was very expensive, driving away builders to build
small and affordable homes, people who already availed loans were in a very
tight spot killing most of their savings. Thanks to the Modi. Govt effective
handling of inflation the interest rates have fallen to 5% and the interest
rates brought down to 8% which is saving
of 4% straight in 4 years! This is saving of 2k to14k (depending on loan
amount) which is huge! The savings made in one EMI is in fact more than the
increment in fuel price! And with the introduction of PMAY it has proved to be
a boon for the people who live in small cities, they get a subsidy of 2% on the
interest! This comes as additional saving to the above!
6. Demonetization: Yet another controversial
policy decision. While I analyze the benefits and losses of this policy one
biggest benefit of this policy is it has made many people who do not even know
E of Economics turn into economist and SMEs overnight, all of them giving fancy
numbers of benefits to bad news of people losing jobs, loss to GDP etc. It was
a very comic to see some of the journalist coming every day out of the studios
and trying to instigate people to speak something against the Modi Govt. and
they can use that to cane the Govt. but were surprised to learn that people
were in convinced but were cooperating! Stood in long liens but did not riot on
the roads! Remember in Venezuela there were riots and the Govt. had to recall
the decision of demon. Within 48 hours!
Let’s analyze the success or failure of the policy; there are scores of
people who held unaccounted cash who were surely panicking, and were begging there
domestic helps, drivers etc. to get the cash converted for them, this was a
first time that the poor actually felt that the rich (who gained wealth
illegally) are suffering and poor though are not benefiting directly are happy
to see them suffer. Post demon, most of the cash is claimed to be brought back
into the banking system which has improved the liquidity, and got the address
of the people who owned these monies till now. Higher direct tax payers, new
tax payers have been growing steadily since then which is a good sign, however
insufficient. All the informal business was now brought under the formal
economy, increase in digital payment system which would reduce the use of cash.
Etc. there are many benefits of this policy. Where it failed is rich and crooks
got away by bribing the bankers by paying them a good commission on converting
the old notes to new one, so the controls were clearly missing, ATM were not
put in place to dispense new notes, scores of daily wagers where unemployed
form some days, some even going back to home towns, GDP did take a hit in Q2-Q3
of 2017. But in the long term the Govt. coming in future are going to benefit immensely
by concentrating on driving digitization, reducing the cash economy and
eventually tackling black economy or tax evasion. If you see the poor, middle
class, had nothing to lose here since they hardly have anything to hide, since everything
is earned and spent in white. The only people who are cribbing and complaining are
the ones who are now forced to explain these income sources. Hence I would
ignore all those doomsday predictions written in newspapers by the ex-FM, so
called journalist etc. is all rubbish and humbug.
7. GST: This is clearly a work in
progress, where the GST council is meeting every month to discuss the rates,
procedures, way bills etc. This is surly the biggest and largest indirect tax
reform done by any Govt. in independent India. While there are scores of
teething issues in the beginning, it has more or less eased; people are not
getting used to the system and will eventually stop complaining and comply
fully in paying taxes honestly. In the month of April the Govt has already
collected 1 lakh crore of GST which is quite an achievement considering its
implementation issues.
These were the major economic policies where taken by Modi Govt and
influenced the masses. In the next series, I will continue to discuss various
hits and misses of this govt.
Thanks for patient reading, please feel free to give your suggestions
and feedback.
