Jawaharlal Nehru, who was India’s Prime Minister from 1947 to 1964, unarguably presided over the most dismal period in India’s economic trajectory, in more ways than one. That is not surprising, given Nehru’s love for regressive socialist policies under the veneer of a supposedly progressive persona. Between 1947 and 1964, the CAGR for Japan’s GDP per capita was 7.9%, for the former USSR, it was 4.4%, and for India, it was an abysmal 1.68%. India’s record was not only poorer than communist countries like China, which in those days was a midget economically and nowhere close to being the economic giant that it is today, but even lower than much smaller countries like the Philippines and Malaysia. Even a nondescript nation like Burma (now Myanmar) clocked a CAGR of 3.16% between 1950 and 1964, much better than India’s 1.68%.
Apart from India’s average GDP growth of barely 4% from 1952 to 1964, even in terms of life expectancy at barely 32 years, India under Nehru, was worse off than even Sub-Saharan Africa, where life expectancy was 38 years. Clearly, the Mahalanobis model of “license raj,” one of Nehru’s poorest legacies, left India economically debilitated. What’s worse, even after his death, the failed Nehruvian model was propped up for over five decades by a morally bankrupt and politically short-sighted Congress at every given opportunity. But not any longer. The meteoric rise of Prime Minister Narendra Modi’s meritocratic and inclusive development model, better known as “Modinomics”, is here to stay for good.
The Indian economy grew at 6.7% under an inept Congress-led UPA-2, with emerging market economies growing by 6.43%, during that period. On the contrary, under Prime Minister Narendra Modi’s first term, Indian GDP grew at a superior rate of 7.4%, despite the emerging market countries growing by barely 4.52% in the said period. Before 2019, the world economy was marred by technical recession in Singapore, double dip recession in Brazil, and industrial recession in Germany, along with trade and tariff wars between the USA and China and the great “global auto slowdown”, due to the transition to BS-VI emission norms.
Post 2019, there have been two “Black Swan” events, namely the Covid pandemic and Ukraine-Russia conflict. Yet India surpassed the UK to become the 5th largest economy globally in terms of nominal GDP in 2022. It is slated to become the 4th largest by 2027, overtaking Germany and the 3rd largest overtaking Japan in 2028 or 2029, as per leading global brokerages and rating agencies.
Suffice to say, the UPA-2 was nothing more than an extension of outdated Nehruvian Socialism, which has no takers today.
What has unarguably been the worst legacy of Nehru’s Mahalanobis model is the NPA mess and the rampant crony capitalism that it festered. In sharp contrast, be it relaxation of FDI norms, big bang banking consolidation, Consumer Protection Act, amendments to the Chit Fund Act 1982, operationalising the Benami Transactions (Prohibition) Amendment Act, 2016, the Insolvency and Bankruptcy Code (IBC) or the Fugitive Economic Offenders Act, 2018—the Modi government has, in the last 8 years, brought sweeping economic reforms to uproot corrupt and wilful defaulters. The takeover of Essar Steel, by Arcelor Mittal, via the IBC, despite the Ruias trying every trick in the book to retain their flagship conglomerate, is a befitting ode to Modinomics.
For Nehruvian leftism, India’s economic interests were always secondary. It needs to be mentioned here that, passenger vehicle sales in India crossed the three million milestone for the first time in 2016-17. Maruti Suzuki took 37 years to sell 20 million vehicles in India, with the first 10 million vehicles taking 29 long years to sell. Interestingly, the last five million units were sold in barely three years, between 2016-17 and 2019. This is yet another instance of how a decrepit Nehruvian fascism, followed religiously by the Congress for decades, was India’s undoing. It took someone as tall a leader as Modi, with a determination that can move mountains, to put the nation’s “Make in India” initiative, onto the fast track, eventually. For instance, from being a net importer in March 2020, to becoming self reliant by producing over 1 crore PPE kits, by May 2020, in barely 3 months, India’s trailblazing journey in combating Covid, has been exemplary.
Speaking of tough but desired decisions, by opting for demonetisation and not, rampant deficit financing like the US or Japan for that matter, Prime Minister, Narendra Modi, in one fell sweep, averted the liquidity trap. Deficit spending certainly increases money supply, but may or may not increase growth, as was evident in Japan’s lost decades. Demonetisation, on the other hand, increases velocity of money, which means, money exchanges hands more frequently, within the formal channels. Thanks to demonetisation, UPI transactions in India surged 7.7% to 730 crore transactions with a total value at over Rs 12.11 lakh crore in October 2022, from 678 crore transactions worth Rs 11.16 lakh crore in September 2022. Fear mongering about efficacy of goods and services tax (GST), is also incorrect, as GST has strengthened tax compliance, with the indirect tax-to-GDP ratio going up to 5.4% post-GST, from 4.4% in 2014. Effective peak rates came down from almost 31% under a lethargic Congress led UPA-2, to less than 18% and lower, with Modi at the helm.
The utterly incompetent Manmohan Singh, who floundered between wanting to be a good economist and an astute politician, but ended up being neither. That Sonia’s “kitchen cabinet” ruled the roost, riding roughshod over Dr Singh, is yet another testimony to how the dynastic, Nehruvian economic model, was built on the immoral premise of “family over country.” Allowing private sector in commercial coal mining on a revenue-sharing basis with no end use restrictions, 100% FDI via the automatic route in defence manufacturing, single brand retail & real estate broking services, privatisation of power distribution companies (DISCOMs) in union territories (UTs) and the production linked incentive (PLI) scheme, underpin the essence of Modinomics 2.0, which has consummately blended free market economics, with the concept of a welfare State.
In his second term, Modi’s landmark steps have been many-the decision to implement Rs 102 lakh crore worth of infrastructure projects via the national infrastructure pipeline (NIP) , lowering employees’ state insurance act (ESIC) contribution from 6.5% to 4%, Rs 3 lakh crore of collateral free loans to micro, small, and medium enterprises (MSMEs) during the lockdown, making definition of MSMEs both investment and turnover based, removing distinction between manufacturing and service oriented MSMEs, removing exports from the purview of turnover for MSMEs, Rs 2 lakh crore concessional credit for farmers and fishermen via Kisan Credit cards, throwing open 6 new airports for privatisation via the public-private partnership (PPP) route, allowing private sector in space exploration and of course, decriminalising certain offences under the Companies Act, have all been commendable steps.
The Modi government’s “Swayam Prabha”, free-to-air education channels, which consists of a group of 32 DTH channels that provide educational content, to those who do not have access to the internet, is democratising access to online education. The other component in the “PM eVIDYA” package is the “DIKSHA” portal (One Nation, One Digital Platform), which again, provides quality educational content to researchers and students. Contrary to the irresponsible, Nehruvian brand of Machiavellian politics that was wrapped in obfuscation, the transparent distribution of free food grains every month to 80 crore people all through the pandemic, under the “PM Garib Kalyan Anna Yojana” (PMGKAY), has been unprecedented.
Global growth, as per the IMF, is forecast to slow to 3.2% in 2022 and 2.7% in 2023. This is the weakest global growth profile since 2001, except for the global financial crisis and the acute phase of the Covid-19 pandemic.
Global inflation in the US, Europe, UK and Germany is at 40 or 50 year highs and is forecast to rise to 8.8% in 2022 and 6.5% in 2023. While the US ran out of baby food supply during Covid, the UK ran out of fuel and France saw angry protests as petrol pumps ran dry, India remained an oasis of financial stability amidst the global mayhem, due to the decisive and compassionate leadership of PM Modi. While US, Germany and China are slated to grow at only 1.6%, 1.5% and 3.2% respectively in 2022, India will grow at 6.8% in 2022, as per IMF. After the robust 8.7% GDP growth last year, India is set to be world’s fastest growing economy this year too, for the 2nd year in a row.
Sixty-nine years after it was nationalised in 1953 by Nehru, Air India returned to its founder, the Tata Group, in January 2022. The airline reported total accumulated losses of Rs 83,916 crore as of March 2021, in a stark reminder of how Nehru and the Congress ecosystem thereafter for decades, crippled India’s economy, due to a dangerous combination of criminal apathy and poor vision. Air India’s privatisation by the Modi government on the other hand,is in sync with PM Modi’s approach of “Minimum government, Maximum governance”. While Nehru’s Fabian socialism bled India dry, Modi’s Welfare capitalism has turned India into an economic powerhouse.
Sanju Verma is an Economist, National Spokesperson of the BJP and the Bestselling Author of ‘The Modi Gambit’.