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5 key Modi government policies that impacted Indian economy

Last Updated: 22-12-2017

Certainly, good economics does pay in the long run. Most importantly, the Narendra Modi-led National Democratic Alliance government made an earnest attempt to bring greater transparency in implementation of government schemes in the last 12 months. As the year draws to a close, the moot question is, how will the economy perform in 2018? 

Prime Minister Narendra Modi promised many radical structural economic reforms including ease of doing business, inflation control, fiscal deficit, job creation and revival of manufacturing sector - that seems to have been delivered with the exception of job creation on which India has, so far, failed to perform as expected.

India has begun work on an $87 billion scheme to connect some of the country’s biggest rivers as Prime Minister Narendra Modi bets on the ambitious project to end deadly floods and droughts. The Modi-led government is touting the linking of rivers as a panacea to the floods and droughts that plague India every year, killing hundreds of poor people and withering crops.

 

At present, the Gujarat verdict throws light on some key economic policy challenges for the Modi government, in the final stretch before the general elections in 2019. 

Many analysts say the year started with the economy reeling under demonetisation, hitting small businesses, besides bringing down infrastructure, including real estate, to its knees. While Modi’s drive to unearth unaccounted wealth did not deliver the desired result, it hurt consumer demand in a country where most people are paid in, and buy what they need with, cash.

India’s economy lost further steam in the quarter to June as growth slid to 5.7 per cent, its lowest level in more than three years. India's economy rebounded from a three-year low to grow at 6.3 per cent in the three months ended September 30. "The impact of the demonetisation and the GST is well behind us," finance minister Arun Jaitley had said after the numbers were announced.

1) GST: One nation one tax rate 

The launch of a new nationwide Goods and Services Tax (GST) in July transformed India’s 29 states into one market with one tax rate. Last month, the GST Council slashed rates across the board, including for a range of daily items of consumption, relaxed penalties and tweaked rules to make it easier for businesses, especially small and medium enterprises, to comply. All goods and services are taxed at one of five rates: 28 per cent, 18 per cent, 12 per cent, 5 per cent or zero.

Prime Minister Modi exuded confidence that India's ranking on the World Bank’s ease-of-doing-business scale will further improve next year when the impact of the GST is taken into account. Modi pointed out that India has jumped 42 places in three years to break into top 100 countries in the ranking.

The latest Ease of Doing Business Ranking takes into account reforms initiated only till May-end and does not reflect the impact of the GST, which was implemented from July 1, he added.

Recently, the US-based Moody’s upgraded India’s sovereign rating after a gap of 13 years to Baa2, with “stable” outlook, from Baa3 earlier, citing improved growth prospects driven by economic and institutional reforms.

2) Bank recapitalisation

Last month, the government had unveiled a massive Rs 2.11-lakh crore two-year road map to strengthen NPA-hit public sector banks (PSBs), which includes recapitalisation bonds, budgetary support and equity dilution. In the last three-and-a-half years, the government has pumped in more than Rs 51,000 crore capital in public sector banks.

Exhorting state-owned lenders to go in for reforms, financial services secretary Rajiv Kumar had said the banks were not going to get easy money as part of the Rs 2.11-lakh crore recapitalisation plan of the government.

 

The finance ministry has urged PSU banks to improve their performance, resolve stressed assets and lower their dependence on the government for capital. Gross NPAs in public sector banks rose from 5.43 per cent (Rs 2,78,466 crore) in March 2015 to 13.69 per cent (Rs 7,33,137 crore) as of June 2017.

3)  Air India privatisation

In June, the government formally approved the privatisation of national airline Air India Ltd and five of its subsidiaries. Air India is surviving on taxpayers’ money under the bailout package extended by the previous UPA government in 2012. 

Air India was promised Rs 50,000 crore in equity infusion until 2032 by the erstwhile UPA dispensation to bail out the airline, which is burdened with accumulated losses and debt to the tune of over Rs 52,000 crore. Of this, it has already received Rs 24,000 crore but the government is unlikely to infuse capital into the carrier any more following the divestment decision.

4) Rera & affordable housing

In May this year, the new Real Estate (Regulation and Development) Act took effect. In November, the Union Cabinet gave its nod for an increase in the carpet area of the affordable houses eligible for interest subsidy under the Credit Linked Subsidy Scheme (CLSS) for the Middle Income Group (MIG) under the Pradhan Mantri AwasYojana (Urban).

 

5) Crackdown on shell firms 

Intensifying its crackdown on black money, the government has collated information about 5,800 shell companies whose near zero-balance accounts saw nearly Rs 4,574 crore of deposits post note ban and Rs 4,552 crore withdrawal thereafter.

"Vital information has been received from 13 banks regarding the bank account operations and post-demonetisation transactions of some of the 2,09,032 suspicious companies that had been struck off the Register of Companies earlier this year," the government said in a statement.

 

Souce:Times Now News

 

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