Prime Minister Narendra Modi and BJP President Amit Shah, in New Delhi, on March 25, 2019. (Photographer: Kamal Kishore/PTI)

Modi Report Card Part Two: Ten Economic Stats To Surgically Erase


The prequel to this article analyses the four economic reforms that this writer is willing to acknowledge under Modi 1.0; towards the end, the article lists three other data points—on foreign direct investment, bond and equity issuances—that Prime Minister Narendra Modi has been spinning at business summits to fortify his ‘economic dynamism’. I humbly disagree with the Hon’ble PM. His number juggling is cute.

Modi Report Card Part Two: Ten Economic Stats To Surgically Erase

But since Modiji loves to bandy stats, I will play by his rules in this sequel highlighting his big economic missteps. I shall rattle off a barrage of data points, rat-a-tat-tat, like 10 Israeli smart bombs that surgically strike and destroy their target. So here goes.

Modi Report Card Part Two: Ten Economic Stats To Surgically Erase

1. Real Interest Rates

These have consistently touched astronomical highs since 2014. Contrasted against the healthy sub-five percent mark during almost the entire UPA decade, real interest rates have flashed a bloody red, soaring above the 9-11 percent range, under Modi. This has happened despite a benign inflation situation, which simply proves how this government has chomped insatiably at the nation’s dwindling savings, keeping interest rates unsustainably high and crowding out private investment.

2. Weak Consumer Demand

It’s no surprise that high-interest rates have virtually killed consumer demand. Retail auto sales declined 8 percent in February over last year.

  • Maruti, the overwhelming market leader, cut production by 27 percent in March.
  • Even two-wheeler manufacturers scaled back by 15 percent, year on year.
  • Tractor and truck sales have plummeted, the latter by over 20 percent.

Domestic air passengers have shrunk by double digits in January. Exports have struggled since 2014; surprisingly, only in its fifth year, the Modi regime is on track to book $330 billion to nose ahead of the $314 billion record set by the UPA in FY14.

Also read: The Economy Under Modi: Gains, Self-Inflicted Pains, And A Dash Of Luck

3. Weak Core-Sector Growth

Eight key industries—electricity, steel, refinery products, crude oil, coal, cement, natural gas, and fertiliser—have hit an 18-month low.

4. Slowest Profit Growth For Corporates In 5 Quarters

Analysts cut their earnings per share forecast for 151 out of 253 listed companies after the December quarter results. The graphic, below, tells it starkly. Under the UPA, EPS growth got a negative shock in the post-Lehman crisis year of 2008-9; but otherwise, growth was robust, hitting above the 20 percent mark in several years. Under Modi, however, EPS growth was negative over two consecutive years, and only marginally in double digits in other years.

5. Ravaged Banks

To its credit, the Modi regime allowed the Reserve Bank of India to undertake a transparent asset quality review in 2015, which unearthed a shocking mess of bad loans, that quadrupled under Modi’s watch to over Rs 10.6 lakh crore or 11.6 percent of aggregate bank assets. Even after Rs 3.4 lakh crore have been written off, the gross NPAs will hit 10.3 percent this month. Non-food credit is lower than what it was in 2015. The government has dithered, infusing equity in installments. That has allowed the problem to linger and recur.

If only Modi had repaired the balance sheets in one mighty heave in his first year, a lot of India’s economic problems would have gotten solved.
Prime Minister  Narendra Modi attending the ‘Gyan Sangam’ with bank CEOs, in Pune on Jan. 3, 2015. (Photograph: PIB)<a href=""><i><br></i></a>
Prime Minister Narendra Modi attending the ‘Gyan Sangam’ with bank CEOs, in Pune on Jan. 3, 2015. (Photograph: PIB)

Also read: Ruchir Sharma On Elections 2019, Narendra Modi And The Indian Economy

6. Denuded Public Sector Companies

The Modi regime literally forced central public sector enterprises to aggressively buy back their shares so that cash on their balance sheets could be transferred to the government. Unfortunately, this has resulted in a massive erosion of wealth, with all such shares quoting well below their buyback price by an eye-watering 17-54 percent.

Over the last two years, the BSE PSU Index is down 13 percent in market value even as the overall stock market is up 21 percent.
Modi Report Card Part Two: Ten Economic Stats To Surgically Erase

Worse, the government has raided their cash surpluses, which are down almost 40 percent, by over Rs 1 lakh crore, since Modi took power. The ultimate, tragic, unprecedented irony occurred when a ‘navratna’ company like BSNL delayed salaries this year. Even MTNL had to beg for Rs 171 crore from the government to meet its wage bill. And Hindustan Aeronautics Ltd. had to borrow Rs 1,000 crore from banks to save itself the blushes. The failed sale of the bankrupt Air India simply illustrates how one CPSE after another is being rushed into the intensive care unit.

7. Anaemic Stock Markets

Before the current short burst, India’s stock markets were in the doldrums. Two-third of the 364 equity mutual fund schemes were in the red; 78 schemes had mauled their investors by over 10 percent in one year. Inflows into pure equity schemes had dropped to their lowest levels in 25 months.

In a real blow to the Modi narrative, the Nifty grew by nearly 29.6 percent per-annum in UPA-I and 20.7 percent per annum in UPA-II, but an anaemic 11.6 percent every year from 2014-18. Ouch!

8. Lagging Foreign Direct Investment

Now this one will hurt too. While the Modi regime goes ballistic on its pro-FDI policies, the UPA scored a 10.7 percent annual growth over its decade, a good two percentage points higher than the 8.7 percent annual growth logged by Modi.

FDI, as a share of GDP, has plummeted from a high of 3.4 percent in FY09 to 2.3 percent in FY19.

In fact, for all the fancy talk, FDI has contracted by 7 percent in the current financial year. While services continue to lead, manufacturing, despite ‘Make in India’, is a dud. Pharma got less than $1 billion each in FY16 and FY17, lower than $1.5 billion in FY15. FDI into the auto sector also shrank from $2.6 billion in FY16 to $1.6 bn in FY17. God bless the $8 bn that poured into e-commerce. Otherwise, we had nowhere to hide!

Modi Report Card Part Two: Ten Economic Stats To Surgically Erase

9. Agriculture Distress

This phrase has become a painful cliché’ under Modi. Growth hit 2.7 percent, the lowest in 11 quarters. Worse, since food prices are in deflation, the actual income farmers earned, in rupees and paise, grew only at 2.04 percent, the worst in 14 years! Compared to UPA-II’s annual average growth of 4.3 percent, Modi has notched a meagre 2.9 percent.

10. Finally, Jobs!

This has been hotly contested by Modi, but that’s tilting at windmills. The numbers are scary, even if they are massaged down in an ‘honest’ review: nearly 2 crore male workers have gotten so disheartened that they have dropped out of the workforce; and the unemployment rate has gone up to 6.1 percent, the highest in 45 years. Ouch-ouch-ouch!

Also read: Budget 2019 BQView: The Economy Under Modi - Big Ideas, Small Successes

Okay, I am going to stop twisting the knife any further. I will not mention that GDP growth has slipped to a six-quarter low. That we are less healthy than Nepal, Sri Lanka and Bangladesh. That we have fallen on the happiness index … bas bas. Stop.

Raghav Bahl is the co-founder and chairman of Quintillion Media, including BloombergQuint. He is the author of two books, viz ‘Superpower?: The Amazing Race Between China’s Hare and India’s Tortoise’, and ‘Super Economies: America, India, China & The Future Of The World’.