Modi Govt. Report Card on Economy

As Modi government gets ready to present its 3rd budget, let’s take a look at the five key performance indicators of the economy.

1. GDP Growth

Indian economy grew by 7.2% in FY15 and average 7.2% in H1 FY16. In H1 FY16, India was the fastest growing economy in the world, surpassing China. The numbers look very impressive and global economists see India as a ray of hope in this gloomy economic environment.

This looks commendable compared to 4.5% and 4.7% growth registered in FY13 & FY14, last years of Manmohan Singh govt. However, the FY13 & FY14 numbers were revised upwards by c.13% to 5.1% for FY13 and c.50% to 6.9% for FY14 by NDA govt. due to change in base year from 2004-05 to 2011-12 and change in formula to calculate GDP.

So GDP growth increased by 0.3% under Modi rule in FY15 and 0.3% again in H1 FY16 vs last year of UPA-II. Opinion is divided whether this performance is better considering the challenging global environment or is it just a result of change in formula which analysts have failed to comprehend.


2. Exchange value (USD / INR)

Since Modi was announced as PM candidate on Sep. 9, 2013, rupee has appreciated vs the dollar from 62.37 levels to 58.23 levels on May 25, 2014 when Modi took oath as PM. BJP claimed credit for this appreciation (+6.6%) and linked it to Modi’s pro-investment and development image.

However, since Modi has taken over, rupee has been tumbling from 58.23 levels to 67.59 (-16%). Rupee has done well compared to other BRICS partners and even EUR / GBP vs dollar. So in a way good job by the govt.

However, the other BRICS partners except for S. Africa all have a trade surplus while India has a trade deficit, i.e., we import more than export and hence higher impact on India. This has been negated to some extent by the low crude prices (-70%) though.


3. Inflation 

India is witnessing negative inflation (WPI) since Jan. 2015. This is primarily because of lower crude oil prices. Average oil prices have tumbled from USD 100/bbl in FY14 to USD 81/bbl in FY15 and USD 49/bbl in FY16 (upto Dec. 15). For the month of January 2016 it averaged c.USD 30/bbl.

This has had a significant impact on WPI as fuel has a 14.91% weight-age in the index. WPI has tracked the crude price as seen below. However, worrying trend is that for the past four months it has been increasing while crude prices continue to decline. Modi has done well to contain inflation with a bit of help from lady luck!


4. Exports

On the exports front, there is bad news as exports have been falling for past 13 months continuously. Low commodity prices playing a part here. Our oil exports have declined from $5.7b in Oct. 2014 to $2.5b in Oct. 2015. Our non-oil exports have steadily declined as well from $20.b to $18.9b during the same period despite a 10% rupee depreciation.

Total Exports which were USD 310 billion in FY15 are expected to be USD 25-260 billion levels in FY16. Here again low import bill due to low oil prices has negated the impact to some extent.


5. Markets

Markets are a barometer of economic performance and sentiment. Stock markets received a big fillip when Modi (investor friendly image) was appointed as PM candidate of BJP. The markets grew by 25% in almost eight months upto his oath taking ceremony. Among other factors Modi factor was a big factor in pushing the markets into a tizzy.

A year after his announcement, markets improved further and breached 27,000 mark all set to break the 30-35,000 range forcasted by brokers. The markets inched further to 27,600 levels when he completed one year of office in May 2015. However, the markets have been under pressure lately partly due to global meltdown, low commodity prices and partly due to not so great news on domestic front. The markets are today at pre-Modi age as some analysts have pointed out.

Corporate profitability is under pressure and sentiment on the ground does not reflect the fastest growing economy of the world status. If the jump in markets was partly attributed to Modi factor, he and his FM can’t escape responsibility for the decline in markets.


To sum up, improvement in economic indicators have largely been a play of change in formula for calculation of GDP and low crude prices. Low crude prices have helped check inflation and trade deficits. It has also negated the impact of significant rupee devaluation.

People are getting impatient and want Jaitley to bring in a massive reforms which could help build up the confidence. The rumours of doubling expenditure on populist measures like Food Security allocation is not heartening. BJP needs to avoid mistakes of UPA I & II in thsi regard.

As somebody on my whatsapp group commented – what is happening to the markets of the fastest growing economy? Is the euphoria clearly over? Has the right of center govt. started to show left of center tendencies to prevent further setbacks in rural India in upcoming state elections. Wait for the budget.

Some good initiatives like Make in India, Digital India, strong push for national highways have been undertaken which will take time to materialize. Implementation is the key here though! So we should see effects of these schemes 18-24 months before next LS polls in April-May 2019.

Modi and Jaitley should ensure that kick to the economy on account of these schemes should start showing results sooner and earlier than in the last year (FY19) and not as it happened during Vajpayee rule (8% growth rate achieved in FY2004). Else there is a risk that the fruits of these efforts may be enjoyed by another govt. thereafter (as UPA I enjoyed during 2004-09).

Related Posts: Spare the common man, Mr. Jaitley!



  1. The thing will change when the government decision actually implemented on ground e.g GST, Make In India , Digital India etc. The key is implementation of the all things. Thanks for nice article.


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