IT is a new innings with a major victory.
So what will be the top priority of Prime Minister Narendra Modi? After winning the vote, it is said that the new name of the Republic of India is ‘Republic of Modi’. But the Republic of Modi knows that the importance of the country’s economy will be most important. When the Prime Minister came to power, he formed two special committees of the cabinet – for employment and investment-related issues – and he is the chairman of these two committees. Meanwhile, the Opposition has focused on unemployment, growth problems and the lack of foreign investment.
The Prime Minister won the vote for the second time. The most important issues related to finance. Before the start of the first cabinet meeting, the government took administrative decisions regarding financial assistance to farmers. That was his first signature on the first file of his second innings. Again, the Reserve Bank of India also reduced the repo rate. The RBI reduced this rate thrice in recent times. The road to further reduction has been kept open. It is believed that the exporters and small industries will be benefited.
New Finance Minister Nirmala Sitharaman will present the budget for the new government on July 5. Through this budget, the Prime Minister will also try to clarify the financial priorities of his government. Goods and services tax and Insolvency and Bankruptcy Code were launched by the previous Modi government but still there is a trend of decline in growth rates.
Overall, India’s growth rate is still faster than many other countries. But due to the drought situation, the picture of the agriculture sector is worrisome. Besides, there is lack of investment in new projects in the private sector and a downward trend in consumption.
So, Modi will first face the challenges of agriculture. He cannot control Varuna, the rain god, but it is a big challenge to eliminate the suffering of farmers. The market or so-called market forces will try to establish a direct link between farmers and the market. Farmers should be able to diversify crop cultivation by reducing dependence on grains in order to ensure proper use of water resources. An action plan will also be developed for employment generation as well as for agriculture. Labour-based industrial system will be developed.
Suresh Prabhu has been removed from the post of the minister of trade and the problem of shortage in the trade sector is still big. Modi realises there is uncertainty in the development of the economy. If the monsoon is not good, it will impact the country’s economy. So the government is now trying to change the main goalpost of job creation in place of growth.
In fact, India’s economy and politics have become so interconnected that it is not easy for Modi to go to the extreme rightist ideological line of the long-term financial solution, that is the road to very strict economic reforms. In all the countries before the vote, the ruling party has to walk in the popular streets, whom we call populism. Before elections, all governments became ‘data karna’ – benevolent king. Subsidies and charitable allowances became the rule so that the voter is not upset. When Modi won with a huge margin in 2014, economists like Jagdish Bhagwati or Arvind Panagariya thought that Modi would make BJP a chapter of the American Republican Party. But in reality, it was not. I was once told by former finance minister Arun Jaitley that editorial columns can incorporate such a hard line on reform, but it is not possible for the government to follow them. There is a welfare state of Indian economy – whether the thought is socialist or not.
I think Modi wants to pursue the middle path. That is, neither a strong right-wing extremist reform, nor like the left-wing leftist. There would be a problem if farmers do not get minimum price for their produce. On the other hand, there would be problems for the government if there is an increase in the prices of agricultural commodities. So the government has to ensure a balance. It is not a permanent solution to agricultural problems, all the political parties know that giving full waiver on credit to agricultural debt is disastrous for the economy.
However, during the elections, all parties spoke about farm debt waiver. But, raising farm productivity is more necessary. The government should walk along that line.
In short, while the government has made significant strides on foreign policy and national security the real challenge is the one concerning the financial situation.
This is the challenge of the Modi Republic.
After becoming prime minister, Jawaharlal Nehru gave importance to heavy industries in the country, but in the second year of the plan Nehru thought agriculture should get more priority. So they changed the direction. Since then, Indian economy has been very turbulent. The Modi government should ensure economic equilibrium. It is desirable that the Modi government does not follow the financial model of a particular country or a particular ideology. IANS