Indian Growth Model – PM Modi’s ache din in the making By Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran

May 26, 2015 | Posted by bobbysrinivasan << back to blog

It looks as though yesterday. Modi took over office as the Prime Minister of India and now a year has passed. It is time to take stock of his achievement. Before rushing to any conclusion and judgement, let us carefully look at some of his achievements.

Let us start with the inflation rate. There has been a remarkable achievement. The Consumer Price Index (CPI) which was hovering around 8.3% in May 14; is now at 4.9% in May ’15. The wholesale price index has done even better from a level of 6.2% in May 14 and it has come down to negative 2.7%.

To help the industries, RBI brought down the repo rate from 8% to 7.5%. This is very positive news for borrowers. Given the present low inflation scenario further cuts are in the offing. Going forward this augurs well for our future economic growth.

The current account deficit which was threatening our economy by staying stubbornly about 4% of GDP during the UPA government is now around 1.6%. This has brought in relative stability to our currency.

The value of rupee which was threatening to reach to Rs to a dollar (it hit a high of 68.85) is now very nicely trading in a range of 62 to 64 to a dollar. When compared this with the Russian ruble, Brazilian Cui zero and South African Rand, one will notice that the Indian rupee has remained rock solid. Our reserves have gone up to touch 350 billion US dollars. Needless to say that Modi’s new initiatives in the areas of FDI will bring in more foreign funds to our shores.

The budget deficit has been kept under a tight control. The last year’s deficit of 4.1% of GDP is likely to come down to 4% or below. This is a big achievement. The budget without being contractionary is achieving the desired results. The initial estimates available for our GDP FY 15-16 stands between 7.5 and 8%. It augurs well and is the first step towards achieving double digit growth.

First of all we must recognize that the change of government took place after 10 years and one cannot expect miracles to happen. First of all the GST which has been in the making for long time is likely to come to fruition in the next couple of weeks. The land acquisition bill is likely to be passed soon and the new labour laws will sooner or later will be passed.

PM Modi’s major challenge in the near future is the creation of jobs and to attract as much foreign investment as possible to speed up our economic growth. Every year 1.2 crore cohorts are entering the job market and it is not going to be easy to create jobs for them. The new jobs must come from both service and manufacturing sector. This will certainly happen when foreign institutions set up their bases in India for both production and service. The country is anxious and feels that the time is running out. But we should put in all efforts to bring and to create jobs. There is a saying that Rome was not built in a single day. It aptly fits India. Let us look forward to greater and rapid economic growth in the years to come. We have much to achieve and given Modi’s current performance. It will certainly become a reality.

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