The bright spots of economic administration in the past seven years

Till the early 1990s India was known in the world as a land of snake charmers. Now the country is known as a software powerhouse and for its equity markets that offer some of the best returns in the world attracting investors from all over the world.

The reforms of the past 30 years in general and past seven years in particular have changed the nation so fundamentally that even the crippling pandemic could not eclipse some of the shining aspects of the economy and the expanding welfare arm of the state.

From a buoyant stock market to historic high forex reserves, from rising foreign direct investment even during the Covid-crippled year to a record surge in financial inclusion and the rolling out of the world’s biggest health insurance scheme, there have been several achievements that the western media have often ignored for reasons best known to them. As the BBC’s recent report on the past seven years of the economy under the present government showed, many positives go unnoticed.

Perfection in any society is just a concept and India has its own share of problems – take unemployment, exacerbated by Covid – just as any other economy.

At the end of the seven years of the current regime, here is a look at nine different sectors that worked well.

Till a few years ago, India had a huge section of the population that was not serviced by any bank. To end this shame the government launched a financial inclusion drive that opened bank accounts for as many as 42.50 crore people – 128% the entire population of the US and 628% that of the UK.

The acceleration can be gauged from the fact that the number of Indian adults who have a bank account jumped from 53% in 2014 to 80% in 2017.

The Jan-Dhan Yojana targets the bottom-of-the-pyramid citizens with a basic savings bank account and debit-cum-ATM cards going a step ahead of simple financial inclusion by empowering them for digital transactions.

The beneficiaries are also covered with personal accident and life insurance schemes of Rs 2 lakh which the family members get in case of death of the account holder in an accident.

Governments transfer all cash assistance under any scheme directly into the accounts, a practice that has promoted transparency and cleanliness in distribution of doles.

While financial inclusion has benefitted the rural population immensely, farmers have returned the gesture with a glittering performance that stood even during the pandemic-led gloom, recording a positive growth rate in all the quarters of FY21, a year that witnessed a 7.3% contraction of the GDP.

 Agriculture recorded growth rates of 3.5%, 3.0%, 4.5% and 3.1% in gross value added in Q1, Q2, Q3 and Q4 respectively.

No other sector of the economy could boast of consistent growths in all quarters. Significantly, agriculture contributed 20% to the nation’s GDP after a gap of 17 years, recording bumper production of food grains.

While the farmers have helped the government ensure basic nutrition to 80 crore people – well over the entire population of Europe – the government took up the world’s largest health insurance scheme in September 2018.

It offers cashless coverage of Rs 5 lakh for each family each year for secondary and tertiary care treatment in hospitals both state-run and private sector.

The beneficiaries, who number about 50 crore form the bottom 40% of the population and are far bigger than the combined population of the US and the UK, don’t have to pay anything from their pocket.

The Pradhan Mantri Jan Arogya Yojana was earlier known as the National Health Protection Scheme and it subsumed the existing Rashtriya Swasthya Bima Yojana launched in 2008.

The number of beneficiaries under this programme is about 9.5 crore.

Extending the care from the field to the kitchen, the government launched Pradhan Mantri Ujjwala Yojana to provide 5 crore deposit-free LPG connections. The target was later revised to 8 crore after the initial target was achieved in September 2019.

This scheme raised LPG coverage from 61.9 % as on April 2016 to 99.5% on the first day of 2021 with the Union finance minister announcing earlier this year that 1 crore more LPG connections would be distributed under this scheme.

Extending the frontiers of the welfare state was not the only effort of the government.

Indian stock markets that have yielded some of the best returns in the emerging markets, have become a toast for a large number of global investors. What’s perhaps most significant is that retail investors have participated in huge numbers, edging out the institutional investors as the dominant player.

The average daily turnover in the Indian stock market was Rs 6,431 crore in January 2014, Rs 5,708 crore in February and reached a peak of Rs 12,475 crore in June that year. The average daily turnover in the retail segment was around Rs 9,524 crore in 2014 calendar year.

In 2021, the average daily turnover in the market is around Rs 70,000 crore and about half is accounted for by retail investors, which works out to a 3.5-time rise in seven years.

In FY21, as many as 1.42 crore individual investors entered the stock market. Mutual funds, too, recorded a big leap in the number of investors. In FY21 it added over 81 lakh investors taking the total number to 9.78 crore.

Forex Reserves

In the week ended on June 4, the foreign exchange reserves in the country crossed the $600 billion mark for the first time.

Helped by the foreign portfolio investments and more stable foreign direct investments, this reserve is sufficient to pay for 15 months of imports of the country.

In 1991 when the forex reserves could account for imports for three weeks.

Investment on the ground has not lagged behind either. Even in the Covid-hit FY21, foreign direct investment (FDI) – the best measure of confidence of foreign investors in a country and its government – rose 23% compared to FY20.

A report by UNCTAD in January this year said in the developed countries FDI plummeted by 69%. Flow to North America declined by 46% — cross border mergers dropped by 43%, greenfield projects crashed by 29% and project financial deals fell by 2%. The US suffered a 49% drop in FDI and the UK witnessed a crash in FDI to zero.

Bold Reforms

The reform efforts of the government took a comprehensive approach when it tried to initiate changes in the labour market, agriculture and bankruptcy laws, the first two being politically sensitive constituencies.

The Bankruptcy Act has been described as a success with quicker turnaround for bankrupt firms. It is supposed to ensure better utilisation and less wastage of assets created with funds from banks, financial institutions and the public. It also creates a climate for quicker resolution of the NPA management of banks.

In order to leverage the fundamental strength of agriculture, the government has braved opposition from some quarters to put forward farm laws that aim at transforming agriculture from a rural livelihood exercise to a sector for corporate value addition.

Since the economic liberalisation of the 1990s, industrialists have strongly advocated labour reforms that have remained one of the most politically sensitive subjects that has successive governments have tried to postpone.

The labour ministry has drawn up four labour codes – Code on Wages 2019, Code on Social Security 2020, Industrial Relations Code 2020 and Occupational Safety, Health and Working Conditions Code 2020 – that would subsume as many as 44 central labour laws creating a complex web of legislations often intimidating an investor.

Like a batsman whose mettle is often tested on a turning pitch, the ability of a government to respond to crisis is a marker of performance.

From delivering free foodgrains to 80 crore people to creating infrastructure – about 36 km a day compared to 8-11 km in the earlier era – infusing life into the equity markets to financial inclusion and generation of clean energy, the expanse of the efforts are clearly visible.