INDIA AFTER MODI: A QUICK SNAPSHOT - Neharika Vohra Professor OB IIM Ahmedabad

INDIA AFTER MODI: A QUICK
SNAPSHOT

                       Neharika Vohra
                       Professor OB
                       IIM Ahmedabad

Narendra Modi: PM of India since May
2014
   Modi representing the Bharatiya Janata Party was
    elected in May 2014
     India   has 6 major parties with pan-national presence
   The BJP had been in the opposition for two terms of
    5 years each
   The UPA (lead by Dr. Manmohan Singh of Congress
    Party) knew that they would loose the election
    because of dismal economic performance and social
    growth

Guj
arat

Narendra Modi
   Narendra Modi as the Chief Minister of Gujarat for a little
    over two full terms of five years each rose to prominence for
    good governance in Gujarat
   When Modi came to power he was discredited by large
    sections of the Indian society for playing an active role in
    victimization of Muslims in a landmark riot
   Modi governed Gujarat with the motto of development for
    all
   In the ensuing ten years he was able to gain support and
    accolades from most sections of the society
   With the fast clearance for Tata to set up its Nano plant
    while West Bengal dragged its feet Modi and Gujarat
    caught the imagination of businesses across the country

Narendra Modi
   Ford and Maruti Suzuki have set up two large
    manufacturing plants in Gujarat
   He ran two internationally acclaimed campaigns-
    Vibrant Gujarat where industries from across the
    world were invited to experience Gujarat and also
    a high profile tourism campaign attracting visitors
    from across the country and the world
   Modi also provided many facilities to farmers and
    other agricultural communities of Gujarat for their
    growth and welfare

Narendra Modi
   The image of Narendra Modi in Gujarat was clean and pro
    development
   In the run up to the five year election in 2014 Modi ran a
    very effective campaign which spoke about development
    and growth of the country
   He was able to attract youth and intelligentsia and
    businesses to join in the campaign
   That he won was not a surprise but he won by a large
    margin was. BJP continued to win in the many states of India
    that went into state elections in the subsequent months.
   Thus the expectation from Modi’s tenure as a PM are very
    high.

Perceptions of Industry about NaMo in
June 2015
    9
    8
    7
    6
    5
    4
    3
    2                                  India Inc
    1                                  Midcap
    0
                                       SME

                               Survey on 287 industries
                               reported in
                               Business World
                               June 2015

The good
   Good Governance is the focus
     Bureaucracy   is mandated to work and deliver
   On the four macro economic goals India has done
    well under the leadership of Narendra Modi
     Raisingeconomic growth
     Taming inflation

     Lowering internal fiscal deficits

     Lowering external fiscal deficits

Gross Domestic Product (GDP) Growth

   GDP is estimated to have shot up from under 5
    percent to 7.4 percent
   Growth in services sector (49.6 % share) grew 10.6
    percent
   Growth of industry (31.7 %) rose 5.9 percent
   Growth in agriculture (18.7% share) was 1.1
    percent
     INDIA-BHARAT   Divide

Economic Performance of India

                       Percentage returns in local currency
FTSE Bursa Malaysia KLCI
  KOSPI Composite Index
       ASX All Ordinaries
         Hang Seng Index
  FTSE Straits Times Index
              Taiwan TAIEX
         TOPIX 1st Section                             Percentage returns in local
                 MSCI USA                              currency
               Thailand SET
  Indonesia SE Composite…
       Phillipines PSE PSEi
       India S&P BSE 100                                      Source: J. P. Morgan Asset
     Shanghai Se A Share…                                     Management Report

                 -20      0    20    40    60    80

Fiscal Deficits and Inflation
   The Index of Industrial Production is 5.2 percent highest in the last
    three years
   Fiscal deficit is low (4.1 percent)
       Used drop in fuel price to tuck away Rs 20,000 crore by way of four
        excise hikes
       Current account deficit as a percentage of GDP has come down from
        4.7 t 1.3
   Foreign exchange reserves are now $350 bn (compared to $309 bn
    in 2014 in May)
   Inflation has been controlled (from 12% in 2013 to 5.5% in 2015)
       Control of minimum support prices
       Changes in APMC Acts
       Release of excess food grains in the market

Foreign Direct Investment (FDI)
   FDI has increased to $350 bn
     Liberalization   of FDI limits in various sectors and
      industries
     Cleared FDI in insurance which had been pending for
      long
     In the defence sector FDI has been increased from 26
      to 49 percent

Good governance
   The allocation of coal mines through transparent
    auctions giving fiscal resources to states in which
    mines reside
    2   lakh crore raised from auction of 29 coal blocks
   Open auction of spectrum is expected to boost
    telecom industries

Investments in Growth
   It has been declared that Indian government will
    spend an additional $ 11.35 bn to kickstart
    investments in infrastructure projects
   Banks have been asked to make concerted efforts
    towards restructuring of distressed assets so that
    funds can be unlocked for future growth

Investments in Growth
   Setting up of MUDRA bank for funding of small and
    medium businesses
     There are 57 million unfunded enterprises
     Technology upgradation of even a third of these would
      increase their productivity

Financial Inclusion
   Jan Dhan Yojana opened 14 crore new accounts
     No  frill bank accounts for financial deepening in rural
      India.
     Bank accounts linked to providing life and accident
      insurance
     Innovative ways to reach rural India by mobile banking

   Welfare and subsidy payments linked to bank
    accounts to reduce leakages

Economic Reforms
   Two minor but significant labour reform bills have
    been passed
     Establishments with fewer than 40 employees do not
      have to maintain registers or furnish returns
     Factories can hire apprentices and trainees

   Corporate tax has been lowered from 30 to 25
    percent (implementation over four years).

Taking India forward
   Digital India ($ 16 trillion project)
       Two key pillars to truly transforming the country in terms of
        digital inclusion of majority are
         Jan Dhan Adhar Mobile
         Cloud computing
         Unified Digital Identity
         Digital Locker
         Public cloud

   Platforms for improving governance
     E-Kranti National Governance Plan
     PRAGATI

Policy Reforms
   Niti Aayog-policy think tank of the Modi
    government-will involve participatory role from
    states
   States will also be given a larger share of economic
    resources to them
   A Ministry of Skill Development and
    Entrepreneurship has been charged with coming up
    with a national policy on skill development

Policy Reforms
   Serious investment and determination to put in place
    railway reforms
     Increased  passenger and freight fares
     Allocated resources to improve and add to the current
      infrastructure

Plans for Sustaining Growth
   Campaigns like ‘Make in India’: Make it a global
    manufacturing hub have been started
     Goal   is to make India among the top 50 in global
      “Ease of Doing Business” . Current rank is 142.
     Increasing export competitiveness
     Skill upgradation of Indian youth
     Higher capital absorptive capacity
     Simplification of approval processes to set up
      manufacturing
     Faster and easier environmental clearance

Narendra Modi surprises Indians by his
foreign policy initiatives
   Invites all neighboring countries including Pakistan to
    the swearing in ceremony signalling that he is not
    just going to be an inward focussed leader
   Nepal and Sri-lanka were visited by an Indian
    prime minister in 17 and 28 years and his visits to
    Australia, Fiji, Seychelles after 28, 33, 34 years
    respectively.

Narendra Modi surprises Indians by his
foreign policy initiatives
   He has been the first one to visit Mongolia which
    has always viewed India as its extended
    neighbourhood
   The 41 year old pending India-Bangaldesh Land
    Boundary Agreement signifies speed
   Three helicopters were delivered to Afghanistan
    and agreement reached with Iran on
    operationalising the Chahbahar port-both had
    remained in pipeline for half a dozen years.

•   Myanmar: set goal to grow India ASEAN trade to $100 bn
             •   Nepal: $ 1 bn credit extended
Neigh        •   Mauritius: $500 mn credit extended for civil infrastructure projects
             •   Sri Lanka: $318 mn credit line extended for its railway sector
bours        •   Bhutan: Lays foundation stone for a 600 MW hydel power project

        •        Japan
Making •         Seychelles: Launches the coastal surveillance radar project
Friends •        Fiji: $78 mn the credit line for a power project
        •        Mongolia: friendship reciprocated

             • Brazil: Set up New Development Bank with India getting presidency. Initial capital
               of $100 bn for the bank invested
 BRIC        • China: A visit has been planned

             • Canada: visit after 42 years
 Nations     • Australia: Cooperation in defence as well as fields such as mining, infrastructure
with Large
 Indian      • USA: help secured agreement to develop three smart cities
Diaspora

       • Germany: Secures assistance for 175 GW of renewable energy projects
Europe • France: Seals purchase of 32 Rafael Jets

Global focus back to India
   It is said that by leveraging the 5Ts of Brand India
       Talent
       Trade
       Tradition
       Tourism
       Technology
   and highlighting the 3Ds of Indian economy
       Demography
       Demand
       Democracy
   Mr. Modi has been able to bring the positive focus on India

Worry lines
   Runs too tight a ship
   Several of his ministers are very weak and do not
    seem to be able to question him
   Will some of his policies really deepen the divide
    between the rich and poor
   Would he be able to keep the fundamentalist parts
    of his party at bay?
   Would he be able to manage the opposition
    effectively

Governing India is challenging
   India has 1.3 billion plus people today
   It is a very diverse country-language, religions,
    socio-economic status, preferences for food etc.
   It will be one of the youngest nation in the world
   It has to invest in skill development of its youth to be
    able to realize its demographic dividend

Thank you
   Questions and comments please...