Indian Economy After Emergence Of Modi Government

Introduction:

The Indian Economy has been under tremendous pressure. The global downturn of 2008 had an impact. However, what hurt more was a leadership which was indecisive and lacked the courage to follow through on its claims.  The year 2014 saw Indian leadership get a new face amongst much anticipation and expectation. While the exact verdict on the performance of by Mr. Modi is still inconclusive, there are marks that the GDP numbers are slightly better.

Expectations:
 

  • The 2014 fiscal saw a hike in GDP growth rate to 6.9% from 4.5% in 2013 as a result of a base year change. The expectation was that India was now expected to surpass the growth band wagon of the likes of china.
  • The tax system is expected to undergo an over haul. The Direct tax code and Goods and services tax will be expected to do just that with respect to both direct and indirect taxes.
  • 2015 expectations for GDP growth is expected to be 6% plus and hence the economy is definitely set to grow.
  • The maintenance of CPI inflation index while maintaining fiscal targets will still prove a challenge.


Effect of Change:

 

  • The fall in crude oil prices could not have come at a better time for the new government. The MODI government has saved big on its import bill since almost two thirds of the country’s oil is imported.
  • Productivity has grown at a lower than expected rate. This has been due to a lack of recovery in the private sector capital expenditure.
  • The fiscal deficit looks to be in a situation where it is more contained. There are a number of systematic and unsystematic factors which have led to inflation for the time being under control.
  • The long term view taken by the Modi administration has led to the belief that the smaller more achievable steps are going to have a more constructive impact on the structural economic deficiencies of the economy at macro level and micro.
  • The FDI proposals have been cleared by the union cabinet at break neck speed and project an image of favour to international investors.
  • The manufacturing sector is also experiencing growth.
  • The government however has not delivered on its promise of minimum support prices for farmers.
  • There have also been labour market reforms with a view to not forego the needs of the workers.
  • Spread of  the digital advantage to rural areas is also expected to see positive changes through to the economy.

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