Economy a major headache

Chennai: Unfortunately, the 100 days of the Modi 2.0 government is marked more by gloom than optimism on the economic front — both internal as well as external. The government is battling with a slew of challenges on the economic front — GDP hitting the slowest pace in more than six years, job losses, lower consumption, shrinking industrial production and exports and a falling rupee. The economic developments at the global front have made things worse.  

The NDA came back to power with a massive mandate and hence the market had expected some bold announcement in the Budget. By that yardstick, the first Budget by finance minister Nirmala Sitharaman was disappointing as it did not come up with any concrete measure to enhance job creation at a time when unemployment, as per the National Sample Survey Office (NSSO), had touched a 45-year high. Things only got worse on the employment front when massive job losses were reported from automobile, manufacturing and textile sectors in the past few weeks.

At 5 per cent, the economy in April-June quarter recorded the slowest growth in six and a half years. Manufacturing hit a 15-month low in August and exports are marginally down for the April-July period, raising serious doubts about whether India would become a $5 trillion economy in next five years.     

The credit crunch and the liquidity crisis at the NBFC level has been dragging down auto sales and has led to lakhs going jobless. In these 100 days and precisely in the past few weeks, the government has come out with several announcements for the banking sector. In the Budget, the government had announced infusion of `70,000 crore for recapitalisation of the PSU banks for the entire fiscal. Considering the worsening situation, on August 23, the government announced upfront infusion of this `70,000 crore to improve liquidity and to boost lending.

The Reserve Bank of India too approved the transfer `1.76 lakh crore dividend and surplus reserves to the government to stimulate the slowing economy without widening fiscal deficit. The government has not yet announced as to how it proposes to utilise this fund.

While the focus of the government should have been on short term measures to fix the credit issues, the finance minister announced a major decision to merge 10 state-owned banks to form four large banks. Analysts fear that the management of these banks may get occupied in the merger process and this would further slowdown credit flow in the economy. Further, the merger will require harmonisation of asset quality among the merging banks and could spike up the credit provisions.  

Markets are not happy with the turn of events on the economic front. The finance ministry recently rolled back the enhanced surcharge on long-and short-term capital gains for Foreign Portfolio Investors, which was announced in the Budget. However, markets have not seen a revival yet and the volatility still continues. The rupee too has fallen to 72 levels and is anticipated to further weaken in the coming months. The global economy too has made the situation worse with the trade war lowering the growth projections.

All eyes are now on the crucial next 100 days of the Modi government, which will hopefully see some positives on the economic front, especially since the government is fully alert to the challenges facing the economy.

Key decisions in 2nd term
The Narendra Modi government completed its first 100 days of the second term in office. We take a look at some of the major decisions of the Modi government in its second stint.

Article 370
In a dramatic series of events in the first week of August, the government moved to abrogate provisions of Article 370, which accorded special status of Jammu and Kashmir. The government also bifurcated the state by carving out Ladakh as a separate Union territory.

Anti-terror law
The government introduced the Unlawful Activities (Prevention) Amendment Bill, which was approved by the Parliament. The amended Act confers power upon the Central government to designate an individual as a terrorist and seize their property.

Triple talaq
In a big victory, the NDA government finally managed to successfully turn the Triple Talaq Bill into an Act. Scrapping of the practice had been one of the main planks of the BJP. The Modi government had promulgated a number of Ordinances after failing to get the legislation through the Rajya Sabha.

Seven foreign tours
The first 100 days of Narendra Modi government have seen hectic engagement with foreign leaders. The Prime Minister has visited 7 countries to strengthen bilateral relations. With the Neighbourhood First policy, PM Modi has visited Maldives, Sri Lanka, Bhutan, UAE, Bahrain, France and most recently Russia.

Merger of banks
The government announced the merger of 10 state-owned banks to form four large banks. The move was aimed at providing relief to banks from rising NPAs and better banking facilities to consumers.

Motor Vehicles Amendment Act
The Motor Vehicles Amendment Act, 2019, which contains 63 provisions that deal with penalties, licenses, registration and the National Transport Policy, will be implemented from  Sept 1. These are provisions which require no further amendments in the Motor Vehicles Rules of 1989.