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Prime Minister Narendra Modi has been a great reformer of India in his tenure over the past eight years. The reforms enacted under his leadership have been extensive, and positively impacted the country’s large population.
A total of Rs 23 lakh-crore has been disbursed via DBT since 2014.
Physical infrastructure, too, has received a tremendous boost with investments in expressways, highways, ports, and railways. The GST system reduces India’s abnormally high supply chain costs by creating a unified platform, and eliminated 17 separate taxes. The substantial collection of Rs 1.68 lakh-crore in April demonstrates the benefit of GST. Demonetization put black money purveyors in their place, leading to a massive increase in tax collections.
These reforms have converged in the most significant step ever taken in Indian history by a Prime Minister in the social sector. No Prime Minister in India’s history has done as much for the poor as Narendra Modi has done in the last eight years. Once every Indian has access to basic necessities of life, the outlook shifts from survival to a growth mindset.
India’s real Gross Domestic Product (GDP) growth, a report card of how India’s overall economy has performed in the last eight years, has been a mixed bag. The Indian economy on an average was headed towards an upward trajectory from 2014 to 2016. However, GDP growth slipped in the next two years. Data indicated that growth rate slowed due to slow growth in India’s agriculture and manufacturing. There was a further slip in GDP rate to 3.7 per cent in 2019 due to the crisis in the NBFC sector, introduction of GST and demonetization
GDP growth
HIGHLIGHTS
- From May 26, 2014, around 491 stocks on the Sensex rose more than 500%
- Among all stocks, Sadhana NitroChem Ltd share price rose the most
- Inflation has become a global concern
The benchmark equity index Sensex rose a staggering nearly 120 per cent to 54,252.53 on May 26 from 24,716.88 on May 26, 2014. The Sensex had touched a record-high of 62,245.43 on October 19, 2021, according to a Business Today report.
Sensex, Nifty’s biggest intraday fall since May 26, 2014
The top five biggest market crashes, in terms of absolute points, happened in 2020 and are attributable to the news of the outbreak of Coronavirus. On March 23, 2020, Sensex witnessed its biggest intraday decline when it plummeted 4,035.13 points or a massive 12.71%. Nifty also saw the Biggest single-day fall in history that day as it fell by 1135.20 points or 13.0%. In these eight years, BSE Sensex’s market capitalization has gone up from Rs 85 lakh crore to Rs 248 lakh crore.
How NSE sectoral indices, broader markets have fared under Modi Govt
Nifty Auto index has risen 69%, while Metals and Pharma indices have rallied 61% and 69% respectively from 26 May 2014 till today. Bank Nifty index has surged 129% and the IT index has soared over 200% during this period.
How markets behaved in response to major announcements by Modi govt
GST Implementation: The Goods and Services Tax bill was passed in the Parliament on 29th March 2017, following which Nifty rose 1.5% in one week, while Sensex rose 1.2%. The Act came into effect on 1 July 2017, following which the Nifty index rose mere 0.5% in a week. Demonetization: On 8 November 2016, the Modi government announced the demonetization of all Rs 500 and Rs 1,000 banknotes of the Mahatma Gandhi Series. It also announced the issuance of new Rs 500 and Rs 2,000 banknotes in exchange for the demonetized banknotes. In one week following this move, Nifty tanked over 5%, while Sensex declined 4.2%. Lockdown: In order to control the spread of Coronavirus in the country, Prime Minister Narendra Modi on 24 March, 2020 announced a nationwide lockdown. The announcement came a day after Sensex and Nifty witnessed their biggest intraday decline, falling up to 13%. In the week following the lockdown announcement by the PM, markets recouped some of the losses as both Sensex and Nifty rose around 10%.
How markets reacted to Modi taking charge in 2014 and 2019
2014: Benchmark indices Sensex and Nifty had hit a record high on May 16, 2014 as investors celebrated the Lok Sabha election results which showed that Narendra Modi would become the Prime Minister with a landslide victory. On the counting date, May 16, 2014, the BSE Sensex surpassed the psychological level of 25,000 for the first time, surging 1,470 points in intra-day, to hit the then lifetime high of 25,375.63, after result showed that the BJP-led National Democratic Alliance (NDA) was all set to form the next government at the Centre. Meanwhile, the 50-share NSE Nifty breached 7,500-mark to hit an all-time intraday high of 7,563.50.
2019: The landslide victory for Narendra Modi led-National Democratic Alliance (NDA) infused a sense of euphoria on Dalal Street on 24 May 2019, sending the stocks nearly 2% higher as the back-to-back sweeping victory marked a first for the single-party majority since 1984. BSE Sensex had ended 623 points or 1.61 per cent higher, while NSE Nifty closed the day 187 points or 1.60% up. When Prime Minister Narendra Modi began his first day of second term on 31 May, Sensex touched an intraday high of 40,122.34, a few points away from its all-time high of 40,124.96 recorded during the Lok Sabha elections result day. Nifty touched an intraday high of 12,039-levels.
Going ahead, market experts believe that rising uncertainty over inflation will keep investors on their toes. However, Kotak Institutional Equities believes that the government’s recent measures to tackle inflationary pressures are a welcome response to the need for complementary fiscal and monetary policies to manage the adverse growth-inflation mix.
With a view to curb inflationary pressures, the central government recently announced excise duty cuts of Rs 8 per litre for petrol and Rs 6 litre for diesel (annualized revenue loss of around Rs 1 lakh crore with around 30 basis points of lower inflation). It further announced LPG subsidy of Rs 200 per cylinder, approved an additional expenditure of Rs 1.1 lakh crore for fertilizer subsidy and customs duty cuts for coking coal, naptha, ferro-nickel, propylene oxide, among others.
Economists and experts have indicated that even before the pandemic, demonetization, implementation of GST and bad loan problem started impacting India’s economic growth. Now with the Russia Ukraine war creating ripples on Indian shores as well as throughout the world, major challenges to sustain growth and create a trillion dollar economy remain.
The government is now running one of the largest fiscal deficits in India’s history. Wholesale inflation is at its worst in 30 years. Consumer inflation is well above tolerable limits, and is likely to stay there for many months. India’s foreign exchange reserves are dwindling.
It seems quite likely that remaining two years of the Narendra Modi government will be low growth and high inflation years. Even if one assumes growth of 7 percent a year, India’s GDP would grow at about 3.5 percent a year in Modi’s second five-year term. It will be the lowest growth performance of any government in many decades.
Sources: etnow, financial express, live mint, moneycontrol.
