Open Forum

Modi must address important concerns over the next year

Institutions of good governance are crumbling due to pressure from the Modi government - this is another concern which Modi must address, writes Sudip Bhattacharyya  for South Asia Monitor
Jun 28, 2018
By Sudip Bhattacharyya
Prime Minister Narendra Modi has claimed to work to restore honesty in public life and administration, weed out black money and corruption, and hasten economic development through demonetisation and GST as two major policy reforms.Demonetization forced companies and individuals to use less cash and pay their taxes while GST enabled fewer tax compliances, faster transportation of goods and lending by the banks with credible cash flow captured in GST books instead of collateral. 
However, demonetization and GST cut both ways. In the short run, they froze credit and commerce and also squeezed profits to the extent of GST paid, in the informal sector. Banks are now more unwilling to lend, steeped as they are in losses that will take time to recoup.This has been the principal criticism against Modi in economic and political discourses.
The non-performing asset (NPA) issue facing banks has dominated headlines for several months now. At 10 per cent, India is in the ‘unsatisfactory’ group of nations with high NPAs. The present trend of resolving large NPA cases under the IBC indicate a likely easing of the pain for Indian lenders by writing back about Rs one lakh crore of NPAs.
Simultaneously, banks have started cracking the whip on Indian companies for repayment of loans, with the result that the biggest ever fire sale of Indian corporate assets has begun, to tide over the bad loans crisis. Efforts in this direction must be monitored to ensure they stay on course.
Nearly 85 % of Indian farms are small (18%) or marginal (67%) with limited scope for increasing productivity. Consolidation of land holdings and shifting of agricultural labour and owners of small and marginal landholdings to industry and infrastructure could have been a solution. Making land and farm related policies state-centric instead of centre-centric and freeing the agricultural marketplace could largely alleviate the situation. However, little could have been done in this area because of political obstacles.
Another area of concern is job creation. According to Trading Economics, the unemployment rate in India increased to 3.52 percent in 2017 from 3.51 percent in 2016. It averaged 4.11 percent from 1983 until 2017, reaching an all-time high of 8.30 percent in 1983 and a record low of 3.41 percent in 2014. The most important task however, would be to improve the employability of youth and, for this, the need is of skilling (including upgrading existing skillsets) 500 million more individuals by 2022. There are differing perceptions about the success of various government schemes for entrepreneurial and skill development and no robust data is available, particularly in the informal sector, to reach a definite conclusion in this regard.
The Indian economy is more resilient today to withstand an oil shock because of policy actions taken when prices were benign yet the inclusion of petroleum products in GST has faced considerable opposition. Most forecasters expect crude prices to soften in 2019 and beyond, led by easing demand conditions, a structural shift towards alternatives like electric vehicles, and continued increase in supplies from the US. Hence the current crude price spike could well be transitory, unless geopolitical tensions continue to play spoilsport. This remains a principal area of concern.
Institutions of good governance are crumbling due to pressure from the Modi government - this is another concern which Modi must address.    Indian democracy has repeatedly baffled rational analysts. The demise of order, with chaos reigning supreme, was the predicted fate of India in the wake of the British leaving the country.  With hopeless diversities of languages, faiths, innumerable ‘warring’ social groups and ethnicities, India was expected to break down into a number of small independent states.
While more homogeneously created states have been replacing democracy with despotic dispensations, Indian democracy, with manifest corruption in all echelons of power and defective or emaciated institutions, has been lumbering on. Indian democracy has withstood all assaults, including a call for a committed bureaucracy and even the Emergency of 1975.
An additional factor in today’s scenario is Modi, whose name polarises perceptions, particularly among intellectuals; while some are allergic to him, some others refuse to entertain any criticism of him. Surely, Indian democracy, one can assert, will withstand this too.
Yet, eternal vigilance has to be maintained to preserve the independence and excellence of all institutions of governance and Modi must be seen to pursue this untiringly.
(The writer is an author and a commentator. He can be contacted at

Leave a Reply

Your email address will not be published. Required fields are marked *

Tweets about SAMonitor
SAM Facebook