Politics of India has been evolving continuously since the Indus Valley civilization. Considering here the post-independence politics of India, it has further evolved essentially within the framework of the Indian Constitution that established India as a federal parliamentary democratic republic nation. Fundamentally, politics can be defined as activities related to governance of a country or area that primarily aim to improve life status of associated people through distribution of power over resources. With this fundamental idea of politics at the core and the Constitution as frame, Indian politics has been adjusting its model since independence to achieve welfare for its people and development for the nation as a whole.
Indian democracy is world’s largest democracy and hence the Indian government has always been required to meet the aspirations of the immensely varied society and diverse population. After independence till now, India has come over acute backwardness and is now one of the world’s fastest growing economies. With growth came more wealth and with wealth more corruption (Ghatak et al. 2014). The former incumbent government was accused of escalating corruption, and hence the democracy laid them off in the last general elections.
It is the incumbent ruling party in which the nation showed tremendous confidence and voted to power with an absolute majority. The leadership promised reforms and development. The Government thus formed has been relentlessly working on reforms that not only mean to pave way for the overall development of the nation, but also improving the lives of individuals and reducing inequalities. The efficacy of the ‘politics of reforms’ adhered to by the government can be known by the performance of Indian economy in the last fiscal 2014-15.
Let us consider the following indicators in this context for the last fiscal to evaluate the impact of the reforms brought by the incumbent government on the overall economic health of the nation.
The following is the data on indicators of economic performance of India for the fiscal year 2014-15:
1.1. Growth: The Annual growth rate of Gross Domestic Product (GDP) was seen to improve to 7.5 per cent in the last October-December quarter of 2014 (as per revised figures) as against 6.4 per cent in the October-December quarter of 2013 (as per revised rates). In contrast to this, the Chinese economy had grown 7.3 per cent in the same quarter. Further, the Indian growth rate is expected to be 7.4 per cent in the Jan-March quarter 2015.
The highest growth is reported for services including electricity, gas, water supply and other utilities (10.1 per cent) followed by trade, hotels, transport, communication and services (7.2 per cent). Thereafter, manufacturing sector has expanded 4.2 per cent, including mining and quarrying (2.9 per cent) and construction (1.7 per cent).
When the Economic Survey of India 2015 heads for more than 8 per cent growth rate in the next fiscal year (2015-16), soon it is also expected that the India’s expansion will outpace that of China, Japan and Germany combined as projected by International Monetary Fund (IMF) and Christine Lagarde (IMF chief) recently.
1.2. Inflation: Control on price rise continued and remarkable downfall in inflation was noted, with wholesale price index (WPI) falling at 5-yr low of 0.11 in December’2014 in contrast to 6.40 in December’2013. Further, data available towards for the January-March (Q4) 2015 till date shows the trend to be followed as WPI is -0.39 in January’2015 as compared to 5.03 in January’2014, and for February’2015 the index provisionally stood at -2.06 per cent, which is greater than the projection of -0.70 per cent for February’2015.
Food Inflation is reported to tremendously fall from 9.66 per cent around April’2014 to 4.78 per cent by December’2014. Retail inflation (CPI-Consumer Price Index) has also moderated. It declined to all time low of 5 per cent in Q3 of 2014-15 after having remained stubbornly stuck around at 9-10 percent for last 2-years. It is expected to be 5.19 per cent in January 2015 and 5.37 per cent in February’2015. A slight nudge further is expected in March too due to unseasonal rains that occurred recently.
1.3. Business Confidence: The Business confidence index has been continuously rising from 49.9 in Q4 of 2013-14 to 56.4 in Q4 of 2014-15 as reported by Confederation of Indian Industry (CII). The forecast expects the index to rise to 58.18 by 2016 and 59.35 by 2050. With this, it is also necessary to quote the manufacturing sector growth. The Manufacturing PMI reported by Markit Economics and conducted by HSBC every month, rose from 51.40 in the beginning of Q1 of 2014-15 to 52.10 by the end of Q4 of 2014-15. In between it even shot up to 54.5 in December 2014. The trends of Index of Industrial Production (IIP) have been positive, as it was -4.2 in October’2014 and rose to 2.60 in January’2015. The manufacturing production rose to 3.3 per cent and electricity production shot up to 2.7 per cent in the same period. Similarly, Services PMI reported by the same institutions every month, is reported to rise from 48.25 in April’2014 to 53.90 in February 2015.
1.4. Consumer Confidence: The Consumer confidence index reported by Nielson also shows positive signs. The index rose from 121 in Q4 of 2013-14 to 129 in Q3 of 2014-2015, which is a 4-year high. Then the Consumer Outlook index (COI) reported by ZyFin Research presents COI to be 46.6 in January’2015, which is 10.6 per cent higher than that in January’2014. These indices portray the sentiment of people regarding inflation, consumer welfare, spending, employment, etc.
In this regards, it is relevant to quote the trends of consumer spending reported by Ministry of Statistics and Programme Implementation (MoSPI). The figures have shot up from Rs14580.88 billion by June’2014 to Rs15338.82 billion by December’2014.
1.5. Investment, Markets and Banking: With all the above positive indicators, the Indian economy is becoming a favourable destination for investment. The Foreign Direct Investment data in India reflects the same, as it has increased from 2133 USD million by March’2014 to 5502 USD Million by January’2015. Further, there is expansion noticed in Indian Stock Market. The figures climbed from Rs 20k index points in February’2014 to Rs 27k index points towards the end of December’2014, and reaching ~29k index points in February’2015. The Rupee remained relatively stable, and the Current Account Deficit (CAD) is continuously shrinking from 2 per cent of GDP in Q4 of 2013-14 to 1.6 per cent in Q3 of 2014-15. CAD is expected to fall further in Q4 of 2014-15 to be slightly above 1 per cent of GDP, while the Finance Minister targets to maintain it at 1 per cent of GDP in the next fiscal. Also, there is remarkable expansion being witnessed in the Banking sector, while the issues pertaining to assets’ quality and earnings are expected to start declining (Standard and Poor’s ratings Services report).
Considering the above indicators on performance of the economy for the fiscal 2014-15, it is necessary to understand the initiatives or reforms brought by the incumbent Government of India (GOI), which are in form of policy initiatives or governance related initiatives. Some of them can be listed as follows:
2.1. Public Finance targets and reforms: The government targeted to contain the fiscal deficit at 4.1 per cent of GDP and fiscal consolidation, and could attain a fiscal deficit of 3.1 per cent of GDP. The focus is to boost the revenue receipts at a faster rate and they increased it by Rs.59840 crore from that in 2013-14 to 2014-15 (till December’2014). The measures included tactically increasing the excise duty, sale of stake in Public sector undertakings, etc. Efforts were made to make the fiscal consolidation measures more sustainable and therefore, the government focused to control the expenditure. Abolishing the GoMs/EGoMs was one way to reduce the burden on the exchequer. In order to combat the burden of Gold import on Balance of Payments, the govt has come up with Gold Monetization in Budget 2015.
2.2. Expenditure management commission and monetary policy framework: The GOI constituted an Expenditure Management Commission (EMC) through a resolution in September’2014 to look after various aspects of expenditure reforms to be undertaken by the government such as review of the institutional arrangements including budgeting process and Fiscal Responsibility and Budget Management (FRBM) rules, suggest ways to improve allocative efficiencies and other issues concerning the Public Expenditure management.
The monetary policy framework laid through the Budget presented by the Finance Minister of India recently reflects control over finances and more autonomy to states promoting bottom-up approach in issue based policy formulation. The Reserve Bank of India has also welcomed these reforms and brought two consecutive rate cuts to boost the money supply in the economy along with tactically controlling inflation. With government getting more vigilant towards managing funds efficiently, there is effective control over inflation.
2.3. JAM (Jan Dhan Yojana, Aadhar and Mobile) Trinity and Pahel DBTL: In order to lubricate capital formation channel domestically, mobilizing savings on a large scale is a must. The Pradhan Mantri Jan Dhan Yojna (PMJDY) is an effort to meet the same purpose and ensure enhanced financial inclusion by extending banking facilities to the last person. The scheme made opening account easier for individuals and extended insurance benefits also, along with Rupay Debit cards and overdraft facilities upto Rs5000 for active account holders.
Further, reaching out with benefits of subsidies on LPG gas cylinders through Aadhar linked bank accounts from January’2015 is another achievement. This will not only reduce the fuel subsidy bill but also prohibit leakages in the channel that come in form of ghost/fake beneficiaries or duplicity, etc.
In the Budget 2015-16, the government has even proposed Mobile Money through Aadhar-linked benefits transfer.
2.4. FDI reforms and Make in India: Boosting Foreign Direct Investment (FDI) was necessary to revamp the slow-down in the economy and to accelerate the gloomy growth in the industrial output and manufacturing sector. Hence, it started with increasing the FDI cap in defence production up to 49 per cent, 100 per cent in railway infrastructure and proposing to raise the cap in insurance sector also from 26 per cent to 49 per cent by way of Insurance Laws (amendment) bill 2015 which has been lately passed by both the Houses of the Parliament.
When FDI in defence manufacturing will not only curtail the import bills but also expand the manufacturing base in India, then FDI in railways has led to drastic technological advancements in recent few months in Indian railways and more infrastructural developments are in pipeline. FDI in insurance is expected to pool $10 billion investments and create thousands of employment opportunities.
Make in India launched by the GOI has been envisioned to channelize the urge in the manufacturing sector in India and create numerous employment opportunities in order to maximize the demographic dividend. To promote the small business units, GOI has come up with Micro units’ development and re-finance agency (MUDRA) as a sole regulator for all micro finance institutions in order to bring uniformity of regulations in this context.
2.5. Skilled India and Innovations: The government that has been actively bringing reforms to boost the economic activity to create massive employment opportunities for the country that is in better-off in terms of being world’s youngest nation, has also realized that merely creating jobs is of no use if hands doesn’t know how to do them. To meet the dearth of skills in India, GOI has been seriously focusing on Skill development and innovations. It started at first by creating a separate Ministry for Skill Development and Entrepreneurship, made for bringing all the scattered skill development initiatives across several ministries under one canvass. Then the GOI has been formulating new skill development policy for the country.
The National Skills Mission is also been launched in the Budget 2015. Also, the Bank of Ideas and Innovations which is a platform to bring together, evaluate and promote innovations that improve quality of life of rural poor, has been working under Ministry of rural development, Ministry of drinking water and sanitation and Ministry of Panchayati Raj for National Rural Livelihoods Mission (NRLM). The mission includes specialized skill program for rural India as Deen Dayal Upadhyay Grameen Kaushal Yojana.
Apart from this, the GOI is keen to bring education reforms as well in order to make a sustainable system for skilling the generations. Henceforth, the New Education policy is under formulation, with 33-defined themes identified for consideration.
2.6. Fast track diplomacy and Foreign Policy: The incumbent government has put Indian foreign policy on fast track by expanding its relations with every part of the world tactfully. The foreign policy of India can be prominently characterized as ‘relationship on our terms’. It started from the invite extended to leaders of neighbouring nations on the oath taking ceremony, landmark visits to Nepal and Bhutan and BRICS summit to successful visits of Chinese President to India and presence of US President as Chief Guest on Republic Day. There has been a paradigm shift in India’s Look East policy to Act East policy now. This has been really instrumental in boosting confidence towards the economy on the global platform.
2.7. Simplified governance: There have been numerable reforms brought to simplify the governance in order to make services more user-friendly. For instance, regarding environment clearance the GOI has shown more rational and priority based approach than creating unnecessary delays in developmental projects with this essential tool. Whether it is environmental clearance for defence related projects in border areas (within 5kms of international border) where environment ministry has simplified the process by giving the mandate for clearance to respective state governments or be it when the Union Ministry for Environment, Forest and Climate Change asks states to submit list of inactive mines due to pending environmental clearances, in order to revamp the mining activity for energy production.
The government has also been promoting e-governance, like DIPP has initiated online applications for industrial licenses and the advent of e-auctioning, e-tendering, e-toll, etc. Then the government has authorized self-attestation of documents. It is also backing the Goods and Services Tax and has introduced the Constitutional Amendment (122nd) Bill in the Lok Sabha to go-on with it.
2.8. Legislative Reforms: In order to boost infrastructural development activities in India and eliminate the hurdles in the legislative framework the GOI is active to bring reforms, whether it is by simplifying the land acquisition for development projects through RFCT-LARR amendment bill, or by Coal Mines (Amendment) bill, Mines and minerals Amendment bill, Motor vehicles (amendment) bill, etc. Then new legislations like Road Transport and Safety Bill have also come up ensuring public welfare. The Government is
also putting all the best efforts to make these legislations pass in this Budget session and not delay those reforms so that the incentives to the economic activity do not lose their vigour.
Even the changes to NREGA can be seen adding rationality to the welfare programme of such kind. The GOI has restructured it on grounds of asset-linking and convergence. Afterall, it is more sustainable to spent money on providing jobs along with creating scope for livelihood security as well.
2.9. Digital India: The digital India programme for broadband Internet connectivity for all gram panchayats has been rolled out. Moreover, in order to bring digital revolution in India and ensure participative governance, the GOI has come up MyGov web portal that pools ideas from citizens across the nation on several issues and guidelines for the government on policy formulation. Government has been promoting technology enabled services also. Even transparency in governance has been brought through innovative techniques like Aadhar based Bio-metric attendance system in govt offices.
2.10. Swachch Bharat and impetus to Tourism: When the Prime Minister called for swachch bharat to promote cleanliness in the country, it envisioned promoting tourism, control the expenditure on maintenance and reduce open defecation thereby. While also improving the nation’s image on the global platform. And the call was answered as tourism in India is expected to rise by 133 per cent in 2015 and revenues thereby. With this certainly there will more employment opportunities and even the government has promoted tourism by other supporting ways like visa-on-arrival facility being extended, innovative program of HRIDAY (heritage city development and augmentation yojana), etc.
2.11. NITI and Cooperative federalism: The government has replaced the Planning commission with NITI (National Institution for Transforming India). The later led to ‘one-size fits all’ approach towards policy making, while the former has come up envisioning more rational policy formulation base. NITI is the new policy think tank of the government. The biggest landmark achievement through NITI is that the body has more participation from the state, thereby enhancing cooperative federalism.
Another applaudable step of GOI has come up for cooperative federalism is devolving share of 42 per cent of the divisible pool of taxes to the states from 32 per cent abiding the recommendations of the 14th Finance Commission. This will reduce the states’ dependency on centre for funds and also help them formulate state-centric policies.
2.12. Renewable Energy revolution: The government is actively promoting renewable energy in the country by way of financing the roof top solar PV through home loans/home improvement loans, scaling up programme solar pumps wherein 1-lac pumps have been allocated, etc.
The Indo-US bilateral trade agreement has also been a landmark in this respect, wherein $2 billion has been leveraged for financing renewable energy investments in India. All this envisions improving the air quality of the country and control diseases therefrom and also create sustainable resources of energy in the country.
Indian Economy has certainly overcome the state of slow-pace-growth that it was in towards the end of last fiscal 2013-14. The new government that came to power also was aware of the fact and had huge expectations from the stakeholders all over.
It had to live up their promises, the promise of reforms and development. In vibrant democracies like India, the idea of promises been kept should be reflected soon for the governments coming to power. Therefore, considering all these, the GOI has been rigorously and tactfully bringing multi-dimensional reforms.
The Prime Minister says ‘sabka saath sabka vikas’ and the policies/reforms being introduced in this fiscal (2014-15) reflects the same essence of development and welfare of the people.
The best examples of these are the direct benefit transfers (as mentioned above), pension benefits extended in form of Varishtha Pension Bima Yojana (VPBY), ‘one rank-one pension’ scheme for armed forces and Mahatma Gandhi Pravasi Suraksha Yojana (MGPSY), and Beti bachao-Beti padhao scheme, Sukanya Samridhi Savings Scheme, Soil health card scheme for empowering farmers with technology, etc.
The government has shown its integrity and commitment through these several measures as mentioned above and also those like creating synergy between ministries for speedy decision-making, and extending convenience to people. All this yielded the positive trends in the indicators as already presented before in this document, and more is expected in near future.
The Indian economy showed considerable resilience to the euro-zone crisis. Further, it is expected to be world’s fastest growing economy outpacing China soon. With this, it can be said that the ‘politics of reforms’ is definitely grounding base for accelerated overall development in India, and the incumbent government can be seen to exert importance on the same. Certainly, if the government continues with this kind of ‘politics of reforms’, India will not only develop but also set an example for the world on success of democratic power. After all, in democracies the efficacy of ‘politics of reforms’ will depend on the nature, extent and type of leadership voted to power that forms the government.
Khyati Srivastava is Research Fellow at Public Policy Research Centre, New Delhi. Her research focus is primarily on Education & Employability issues also extending to other ‘Macro-economic’ issues. She has done her Masters in Economics and is certified in Governance from MIT-School of Government (in association with TISS), Pune.
Her interest in social welfare and politics has engaged her as Chief Secretary of Lakshya Incarnated Foundation (Lucknow based society) and also amateur writer/thinker on Political Advocacy.