New Delhi: The state of the economy dominated Prime Minister Narendra Modi‘s address to the nation on the occasion of India’s 73rd Independence Day on Thursday, 15 August. Whether it was urging the people to have small families to secure a better future of children, the appeal to shun plastic bags, the encouragement to wealth creators or noticing the transformation from the mission of ‘ease of doing business’ to the goal of ‘ease of living’, most points had a bearing on the economy.
Economy: Appreciating wealth generators
Standing up for the India Inc, and lamenting less about the ‘gareeb aadmi‘ which has done little for the poor, the prime minister on Thursday said wealth creators should not be eyed with suspicion and that they were the country’s wealth and should be respected. This was in sharp contrast to the acutely socialistic Budget presented by Finance Minister Nirmala Sitharaman a month ago, where she not only introduced cess on new goods and services but also imposed a sin tax for being rich, a throwback to Indira Gandhi’s era.
It may be recalled that in the 1990s when India was transforming from a poor to middle income country, the “trickle down effect” was tom-tommed in a bid to impress upon the poor that when a citizen gets rich, especially in the domain of business, he employs people, spends more and also creates avenues for other businesses, thus benefiting the poor as well. That theory was discredited in the following decade for being too patronising, as the poor got a negligible share of the increasing wealth of a few rich people. However, with business becoming easier increasingly, the population of poor who turned middle class swelled, thus uplifting the lot of a larger section of masses.
Since his previous term, Prime Minister Modi has been appreciating businessmen off and on from public platforms. He began with a bang in September 2014 by launching ‘Make in India’, but the private sector disappointed with inadequate investment, which, in some years, translated into a job crisis. While the opposition raised the issue by citing Labour Ministry data, the government defended itself by touting employees’ provident fund statistics where the number of accounts was on a constant rise. Nevertheless, a Budget that would unleash the animal spirit of the market never came by either under Arun Jaitley, his stopgap replacement Piyush Goyal or successor Sitharaman.
Economy again: Tourism, transport, data, infrastructure, export
Modi urged people to visit 15 domestic tourist destinations by 2022, trying to boost another sector of the economy. The prime minister urged people on Thursday to visit at least 15 tourist destinations within India by 2022, saying there was a “huge” scope to improve India’s tourism sector.
Modi said India had much to offer and if domestic tourism increases, international footfalls would increase as well. “I know people travel abroad for holidays but can we think of visiting at least 15 tourist destinations across India before 2022, when we mark 75 years of freedom,” Modi said.
The prime minister said people should visit Indian destinations even if there were no hotels or infrastructure there, as their visits would boost tourism in these areas and automatically lead to better facilities. “There is a huge scope to improve our tourism sector,” he said.
Dealing with yet another sector of the economy, the prime minister said that, earlier, people aspired to have a railway station in their area; now they expect the Vande Bharat Express to reach their place and then demand a local airport. He said the people had evolved from seeking good mobile phones to demanding more data and better speed.
Modi said the time had come to boost exports and each district of India has much to offer. “Let us make local products attractive. May more export hubs emerge. Our guiding principle is ‘Zero Defect, Zero Effect’,” he said.
The prime minister urged businessmen of villages and small towns to discourage payments in cash and press for digital payments. He said, “We see in shops everywhere signs that read, ‘aaj naqad, kal udhaar‘ (pay in cash today, talk credit tomorrow). We ought to move to ‘pay digitally, don’t pay in cash’.”
The prime minister said the world was eager to explore trade with India and the government was working to keep prices under check and increase development. “The fundamentals of our economy are strong,” he said.
‘Will invest Rs 100 lakh crore in infra, $ 5 trillion economy target achievable’
Continuing to repose faith in Keynesian economics where public funding is believed to energise the economy (in the absence of private investment), the prime minister said his government would invest a whopping Rs 100 lakh crore on developing modern infrastructure that would aid in nearly doubling the size of the Indian economy to $ 5 trillion in the next five years.
Modi said reforms would continue to be ushered in to help India break into top 50 countries on the ‘ease of doing business’ ranking.
“To some the target of nearly doubling the size of Indian economy to $ 5 trillion in five years may seem difficult. But when we have in five years (of BJP rule) added $ 1 trillion as compared to $ 2 trillion size achieved in 70 years of independence, then this target is achievable,” Modi said.
The prime minister said political stability through a massive mandate for his government, alongside predictable policy, provided a unique opportunity for India to grow. “The country shouldn’t lose this opportunity,” he said, claiming that his government had provided high growth while keeping inflation at low rate.
Modi referred to reforms such as the Goods and Services Tax (GST) and Insolvency and Bankruptcy Code (IBC) for aiding the growth process and said the government will invest Rs 100 lakh crore in building modern ports, highways, railways, airports, hospitals and educational institutions.
The prime minister said the era of policy paralysis had long ended and his government was giving policy-based governance that has helped catapult the country from 142nd place among 190 nations on the World Bank’s ease of doing business ranking in 2014 to 77th position this year.
Reforms will continue and procedures would be further eased to make it easier for companies to do business in the country, the prime minister said adding that efforts are on to increase the size of the economy to $ 5 trillion. “The target is to break into top 50 nations,” he said.
India was ranked 142nd among 190 nations when the Narendra Modi’s government took office in 2014. Four years of reform pushed up India’s rank to 100th in the World Bank’s ‘Doing Business’ 2018 report. It was 130th in 2017 when India was ranked lower than Iran and Uganda.
In its annual ‘Doing Business’ 2019 report, India secured 77th position. New Zealand tops the list, followed by Singapore, Denmark and Hong Kong. The United States is placed at 8th and China ranked 46th. Neighbouring Pakistan is placed at 136.
India has improved its ranking by 53 positions in the last two years and 65 places in four years since 2014.
The World Bank ranks 190 countries based on 10 parameters, including starting a business, construction permits, getting electricity, getting credit, paying taxes, trade across borders, enforcing contracts, and resolving insolvency.
Riddle: Carrot or stick?
There were two aspects of the prime minister’s speech where he did not state explicitly whether he would inventivise the people who shared his vision or punish those who did not comply, or both.
One, the prime minister urged the people to go for family planning to limit the size of the country’s population. He said people who had small families were patriots as they were putting less burden on the economy. This is a clear departure from Modi 1.0 where he used to shy away from critiquing the burgeoning population while he sought pride in India being the “youngest country in the world” with 65% of its people being in the age group of sub-35 years and also look for a “demographic dividend” from the “125 crore Indians”. This could be a tacit admission of the allegation that his government has failed to generate an environment of massive job creation to cater to the people’s need of livelihood.
Here, it was not clear whether the Modi government would follow the Chinese model. The ‘Make in India’ programme was clearly inspired by the fact that the economy of China grew in leaps and bounds by becoming the manufacturing hub of the world. Inspired by China again, will Modi enforce a one-child policy? If the manufacturing-focussed model had a flaw, the population model has a pitfall, too.
In 2015, questioning the ‘Make in India’ excitement, Swaminathan A Aiyar had written in The Times of India, “When Apple started selling smartphones for $ 300, China’s share from assembly was just $ 7. Apple got $ 150 of the value through innovation, marketing and profits. The remaining value was split among component suppliers, transporters, and other minor partners. If Apple gets $ 150 of a phone’s value and China gets only $ 7, is the phone really made in China? No…”
Likewise, China’s population policy drove its families to a peculiar and precarious situation referred to as the “four-two-one problem”. The one-child policy made one earning member of a family fend for two parents and four grandparents. Knowing that, would Modi still go ahead with a forced or incentivised family planning programme?
Two, the prime minister said: “I want to request the farmers today, this land is our mother. But have we really thought about our motherland’s health? The way we are using chemical fertilisers, pesticides… we are ruining our land. As a farmer, I don’t have the right to ruin or hurt our motherland. Can we reduce the use of chemical fertilisers by 10%, 20% or 25% or, if possible, do away with it completely? It will be a great service to our country. We have to save our land. And I have faith in our people that our farmers will listen to me and do what is needed.”
Along with the urge to shopkeepers to not package the commodities in bags made of single-use plastic, this appeal to farmers could either indicate the Modi government would introduce punitive measures against farmers and small-scale businessmen for not sharing his goal, or it could mean the administration would motivate conformists by offering incentives for organic farming, naturally occurring fertilisers like cowdung manure and shops that package goods in cloth bags.
Creation of Chief of Defence Staff
In a major decision, Prime Minister Narendra Modi on Thursday announced the creation of a chief of defence staff (CDS) as head of the tri-services. Modi said the CDS would ensure synergy among the three services and provide effective leadership to them.
“Our government has decided to have a Chief of Defence Staff, CDS,” Modi said.
A high-level committee set up to examine the gaps in the country’s security system in the wake of the Kargil War in 1999 had called for appointment of a CDS as a single-point military adviser to the defence minister.
A group of ministers analysing required reforms in the national security system had favoured appointing a chief of defence staff, too.
In 2012, the Naresh Chandra Task Force had recommended creating the post of a permanent chairman of the Chiefs of Staff Committee.
The CoSC comprises chiefs of the Army, Navy and the Air Force and the senior-most among them acts as its chairman as per existing norm.
With inputs from agencies