4 Years of Modi Govt: Has Modinomics failed or passed?

On May 26, Prime Minister Narendra Modi will complete four years in office. A look at how the Indian economy has fared under him

Gross Domestic Product
The real GDP growth rate at constant prices fell from 6.6% in 2011-12 to 5.5% in 2012-13 and then rose to 6.4% in 2013-14. In the following fiscal year it surged to 7.5%, and fared even better to touch 8% in 2015-16. The economic growth slumped in the quarters following the government's demonetisation move. However, the momentum seems to be back, with the December quarter clocking 7.2% growth and India reclaiming the tag of the world's fastest-growing economy from China.

Inflation
The government succeeded in keeping farm support prices in check, which helped maintain lower inflation and inflationary expectations. The fall in global commodity prices also helped the cause.
But of late, rising crude oil prices have raised concerns over the government's achievement in taming inflation.
Besides, farm distress has led to a sharp rise in agrarian riots. This may prompt the government to announce a hike in farm support prices, which could further raise inflation.

Foreign Direct Investment
The Indian economy under Narendra Modi witnessed FDI equity inflows at a record average of $52.2 billion, annually, in the past four years. In comparison, FDI inflows were at $38.4 billion under the UPA II and $18.2 billion under UPA I. India has emerged as a top investment destination riding on a ratings upgrade by Moody's Investor Services in 2017.

Fiscal deficit
Fiscal deficit as a percentage of GDP was as high as 5.9% in 2011-12 and remained above 4.5% till 2014-15. For 2016-17 it met the 3.5% target set by the NDA government. The government, however, failed to meet its initial fiscal deficit target for 2017-18 at 3.2% of GDP, and had to revise to 3.5%.

Ease of Doing Business
The World Bank's Ease of Doing Business rankings show a spectacular rise in India's rankings in 2018. It was at 134 in 2014, to breach the top 100 list in 2018. Now, setting up a new venture in India is supposedly easier than ever. The government has also reduced corporate taxes from 30% to 25% for businesses with turnover of Rs 250 crore, or less, which has helped many small businesses.

Gross Fixed Capital Formation
Gross Fixed Capital Formation in India has increased to Rs 10.51 lakh crore in the fourth quarter of 2017 from about Rs 9.85 lakh crore in the third quarter of 2017. Gross Fixed Capital Formation averaged Rs 5.35 lakh crore from 2001 until 2017, reaching an all time high of Rs 10.52 lakh crore in Q42017. In the current fiscal year, it is expected to grow at an annual rate of 7.6%, compared 10.1% last year.

Sectoral growth
The average agriculture growth under the Modi government was just at 2.4 per cent, primarily due to two consecutive years of drought. It was around 4 per cent in the first four years of UPA II and UPA I.
Industrial growth was at 7.1 per cent, which was higher than the 6.4 per cent during UPA II, but much lower compared to the 10.3 per cent under UPA I.
The services sector had an average growth of 8.8 per cent in the last four years. In comparison, it was at 8.3 per cent and 9.9 per cent under UPA II and UPA I, respectively.

BSE Sensex
The BSE Sensex has delivered 11.67 per cent returns during the fourth year of the Modi government, compared with 17.67 per cent in the third year. In the past four years, the market cap of the BSE went up by a whopping 73% to Rs 145 lakh crore from Rs 84 lakh crore as of May 2014.

Exports
India failed to make any significant progress in the exports front. Export growth remained in single digits, and well below the growth witnessed in FY11 and FY12. India's exports grew 9.8 per cent in 2017-18, after recording 5.2 per cent in 2016-17. Imports grew further on account of rising demand for items such as oil, forcing India's trade deficit to widen further over the past four years.