Ever since he ascended power in 2014, we have been seeing a never ending litany of rubbish from the chatterati and their minions in the media. Apparently, nothing good has happened in India. Dalits are being lynched, Muslims are being lynched and demonetisation has driven out jobs. GST is one more disaster as per the same liberandus.
Here is what Narendra Modi is fighting against: –
- Assorted parties of a mahaghatbandhan
- Naxals plotting to kill him
- Foreign powers operating through Pakistanis with Indian passports
- Some would even say the judiciary
- Inefficient ministers headed by Jaitley
Quite a coven of modern day witches! However, slowly but surely, Modi has repelled the attacks back and has gone about quietly doing all he can to push India towards modernity.
If you have been reading the papers or watching news programmes, you would be fed with news of huge discontent about rising petrol prices, unhappiness with the rising Dollar and several other points of displeasure of the common folk that haunt the streets and are found by TV camera crew.
The reality is that most middle class folk work in companies where fuel is reimbursible, and is quite often doled out in litres of fuel, not in Rupees. Such people are unaffected. Yes, there are people like me, ostensibly self employed, but in reality, living off a pension, who are affected. For a person like me who prefers to use an autorickshaw or an Uber cab, to avoid the hassle of finding parking space or parking charges in a mall, the actual petrol consumed is around 25 litres in a month. That means a princely sum of Rs 250 gets shaved off my monthly expenses on other things. Just a fleabite! In my first bank job in SBI, which I left in 2000, the fuel available to me was 45 litres. This is now 150 litres, for those in service. About fuel prices, there is a reason why they are high, quite apart from the actual input costs. This I shall touch upon a little later in this post.
Consider the cost of living. Every commodity such as rice, pulses, vegetables and fruits have stayed steady, price wise. Am a vegetarian, but am sure that even meat prices must be steady. There is very little to crib about for the common man.
Funnily enough, competition has ensured that airfares have been slashed and the gap between cost of rail travel and air travel has reduced. The other phenomenon that media never touches upon is the routes that have been opened up. To have a direct flight from, say Bengaluru to Bhubaneswar means a lot to the middle class person from Bhubaneswar who had earlier to pay exorbitant fares and take a flight via Calcutta, or spend two days on a train and arrive tired and dirty. Now a two hour flight and he or she is there!
This is a phenomenon that people do not perceive and only those who remember the (bad) old days and have experienced the difference understand the positive transformation that has been wrought in their lives by this Government. For instance see this report from Livemint: –
Highway construction has been going much faster. All credit to Nitin Gadkari for that.
Recently, a new airport was inaugurated in Sikkim. This has provided connectivity by air to Sikkim. What this will do to Sikkim tourism is very positive. Hitherto, going to Gangtok from anywhere , the capital of the state was through serpentine roads, though very picturesque. With the airport and flights to Sikkim in place, the number of tourists should multiply manifold.
Sikkim is not the only state to benefit. The states of the Northeast, hitherto neglected, are benefiting hugely. Roads, bridges, railway lines have all come up. For the first time a railway line has been laid in Arunachal Pradesh. The state came into existence in 1991. There has never been a railway line in that part of the country until now.
Okay, let us see what else is new. For the first time USA will drive Mercedes cars made in India
Here is a list of things that the Modi Government has done
- Jandhan scheme, the biggest financial inclusion programme where over 325 million accounts have been opened and more than half of these have been opened by women
- Direct benefit transfer that has allowed transfer of subsidies for the poorest of poor directly to their accounts
- Ujwala scheme that has provided cooking gas connections to poor women, and this has been financed mostly by subsidy voluntarily given up by well to do people
- Neem coating of urea that has prevented diversion of subsidized urea, meant for the use of farmers, for manufacture of other purposes.
- Electrification of all villages of the country, a project that could not be completed for 70 years, and was taken up in right earnest by the Modi government
- Surgical strikes against Pakistan who were using the Indian border for target practice
- Prevention of terrorist attacks by Pakistan on Indian soil
- Digital India that is rapidly bringing people online and allowing use of mobiles to access the internet. It is also allowing poor to do transactions through a Universal Payments Interface or UPI application
- Use of the Aadhar or biometric identification to ensure that genuine people are given subsidies. This has been linked mandatorily to PAN or Income Tax IDs to avoid benami accounts.
- More than 200000 shell companies have been closed striking a big blow to creation of black money
- The bankruptcy code has ensured that those who bid for companies that have put up for sale have a clean record making many companies come forward to close their sticky accounts
The above list is only illustrative and not exhaustive. Behind all this is a larger trend that only some may have noticed.
The country is moving away from what was derisively termed as a Mai Baap sarkar or a Government that acted like parents of children. The Government is slowly coming out of public sector enterprises run by it and disinvesting in such companies that have been a drain on the economy.
Certain clear trends emerge. There is an attempt to provide something to everyone.
- For the poor, the Jan Dhan initiative and the Direct Benefit transfer or DBT has been done to remove any intervention by bureaucrats or the Government personnel in paying subsidies
- The new medical scheme or what is called Ayushman Bharat provides free medical care to the not so well to do
- The Goods and Services Tax has ensured a uniform rate of taxation in the entire country. The movement of goods is now much freer as tax is paid by the seller and trucks need not stop at every state border for checking. Surely, this must rank as one of the boldest and biggest initiatives of the Modi government.
- Income tax slabs have been brought down and the middle class has benefited greatly
- Interest rates have been brought down and this has benefited everyone, whether it involves payment of EMI on home loans, car loans or business loans
Be that as it may, there are a few teething troubles or growing pangs in moving from a culture of subsidies to a system without subsidies.
The country has not got used to the idea of upward movement of the USD against the Indian rupee. It has also found that petrol prices have been steadily rising and the middle class claims that it is hurting them. I have covered the actual impact of the petrol and diesel price increases in a previous paragraph. This has actually been miniscule.
Let me work out the impact of petrol prices at various levels of consumption
|Petrol Consumption in Litres per month||Current Cost per litre||Monthly Cost||Earlier Cost per litre||Monthly cost||Difference|
If someone is consuming 100 litres of petrol, that person probably owns an expensive car and can afford to pay Rs 1000, without it pinching his or her pocket substantially.
More importantly though, a blow has been struck for removing subsidies for petroleum products, excepting kerosene, which also has seen reduced consumption as the country moves towards cooking gas or methane supplied through pipes.
The effect of higher petrol prices is a reduction in consumption that translates into reduced imports of petroleum and saving of foreign exchange. Moreover, the consumption of indigenously produced methane gas supplied through pipes and metered to the last ml will also reduce dependence on the GCC for oil.
To keep the rupee up against the US dollar, the RBI used to sell dollars in the domestic markets. This ensured a steady supply of USD and effectively was creating another subsidy as the Rupee was kept artificially high. However, with a high rate of inflation, this was a tax on the people. Currently, the thinking appears to be to help the rupee find its own level and to also assist exporters who struggle to stay afloat when the Rupee is high, as the sales they make are in foreign currency. With the Dollar higher against the Rupee, exporters will gain and can bring in more foreign exchange increasing supply of Dollars in the market in a natural way. The Rupee will gradually strengthen The Modi government has been able to remove the subsidy on the Rupee because the prices of commodities have been low, mainly due to prevention of hoarding of these items.
As you may well surmise, the idea of this Government is to gradually wean away people from subsidies and to do it gradually, without inconveniencing those who need them due to low income levels. I am quite confident that in the second term, a lot more people will come out of poverty. Donald Trump has praised India for bringing people out of poverty. I strongly believe that we may well see a substantial reduction in income tax and even in GST slabs, within this year.
As I said in my previous blog post, ignore the rudalis!