Congress Slams Modi’s 3-Year Rule For Spending Rs 1500 Crore on propaganda

The Congress has launched a blistering attack on the BJP for spending money on propaganda, as the BJP is completing its third year in power on Friday.

New Delhi: Congress has launched a blistering attack on Prime Minister Narendra Modi, who completes three years at office on Friday (May 26) saying that NDA government has spent a whopping Rs 1500 crore for just propaganda on “government’s achievements.”

“It’s all public money… Mr Modi and his team has squandered it… People were misled and the publicity is totally false, and the claims were far from reality,” Congress spokesperson Anand Sharma told media.

“Mr Modi’s rule was full of distractions, propaganda, falsification of facts, intolerance, and betrayal, and we demand a White Paper on the economy” Sharma added.

The Congress said it would launch a nationwide campaign to inform people on how the union government has emptied the coffers for their false publicity.

It is a struggling and gasping economy, he said. Firstly, on the Gross Domestic Product numbers, they changed the old methodology and thus there is a difference of two per cent. There is no economic growth. It is a flat growth,” Sharma lambasted.

“We demand, and we challenge, Prime Minister Narendra Modi and Finance Minister Arun Jaitley — as they celebrate the looting of the treasury to build a personality cult around one man — to publish on Friday GDP numbers for the last 10 years, both as per the old and the new methodologies,” he challenged.

BJP in 2014 promised two crore jobs every year, he said. He asked where they were.

“Our security is under grave threat. Modi’s Pakistan policy has been a diplomatic disaster, and we have asked him to have a clear roadmap on Pakistan. But there is no roadmap,” said Sharma.

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What! we never said that…10 controversies and U-turns

By Upmanyu Trivedi, Kirtika Suneja and Saket Sundria

NEW DELHI: Narendra Modi-led Bharatiya Janata Party stormed to power last year with a high-decibel campaign that relied heavily on acerbic criticism of everything that the United Progressive Alliance government was doing. A year into power, the BJP government has its share of controversies and U-turns too.

While on its part, the government has tried to size up the Reserve Bank of India and refused to make public the list of illegal foreign account holders, many Sangh Parivar affiliates have stoked religious fervour with programmes such as ghar wapsi. Some of Modi’s ministers have also added fuel to fire by making discomforting comments about minorities.

Following are a few controversies and U-turns from Modi’s first year in power:

Black money

It was one of BJP’s key poll agenda. Promises were made to bring back India’s wealth stashed abroad within 100 days after it assumes power and to make public the names of people with illegal accounts abroad. A year later the government has not made much headway in bringing back any money and has also been unable to make the list of people with illegal accounts public.

Bangladesh land swap law

In 2011 and 2013, the BJP said it will not support any legislation with Bangladesh that will mean loss of territory for India. UPA’s every effort to get the law ratified failed. In power, the BJP became magnanimous. The NDA government got the bill passed this month, with no change. For a change BJP credited the Manmohan Singh government.

Netaji files

The BJP was very vocal in demanding declassification of files related to Netaji Subhas Chandra Bose’s disappearance 70 year ago. It even made it a poll plank citing “larger public interest”. In saddle, the BJP sees reason in not disclosing these files. The excuses even sound similar to UPA’s — hamper relations with other reasons…

Nuclear deal

In 2007, after the UPA government pushed through the civil nuclear treaty with the US, the BJP said it will renegotiate the deal if it comes to power. In power, the Modi government conveniently forgot the stand and went a step ahead and ratified an additional protocol under the pact allowing greater access to its civilian atomic facilities.

Sizing RBI

The Budget for 2015-16 had stumped many with proposal to set up the Public Debt Management Agency and remove the regulation of government securities market from RBI’s purview. The issue was not so much about merits of these proposals but about taking RBI into confidence on such far-reaching changes. The government later threw another surprise by abruptly withdrawing both the proposals at the last minute fuelling rumour mills again.

Modi’s suit that didn’t suit

Hosting US President Barack Obama in January, Modi sported a pinstripe suit monogrammed with his name and hell broke lose on social media. Critiques termed him as “narcissist and megalomaniac”. Soon, the suit was auctioned for over 40 mln rupees and money was to be used for welfare schemes. Critiques, still not happy, said auction was damage control exercise.

Taxing issue of mat on FIIs

“Tax terrorism,” a word coined by Arun Jaitley during his days in opposition came back to haunt him after he became the finance minister. Despite his repeated assurances on tax certainty and no new cases of retrospective taxation, Foreign Institutional Investors were left spooked when tax department raise minimum alternate tax demands retrospectively on foreign investors.

Religion and the State

Ghar Wapasi, Love Jihad, attacks on churches, prescriptions for number of children Hindu women should rear, beef bans and frequent calls from BJP politicians to go to Pakistan if anyone disagrees with their views, have also marked Modi government’s first year. What is even more intriguing is Modi’s silence on the statements, except for broader comments such as “sabka sath sabka vikas” have not helped allay the apprehensions of minorities.

Domestic issues on Foreign Soil

Modi has come under criticism from opposition and foreign policy observers alike for breaching the informal protocol of not raising domestic political issues on foreign soil. On his trips to the US, Australia, Canada, Germany, Japan and recently Shanghai, Modi had an event planned for addressing non-resident Indians and his speeches appeared targeted more for domestic audience. He spoke of “mess left behind”, “work not done in past 30 years” and of scams in past. This evoked sharp criticism.

Social workers anti-national?

Unexplained urgency in arresting activist Teesta Seetalvad in alleged funds misappropriation case, Intelligence Bureau stopping Greenpeace activist from travelling abroad, choking foreign funds for several NGOs, and Modi himself calling public interest litigation lawyers as “five star activists” drew sharp criticism from several quarters in India and abroad. Commentators saw government’s paranoia from voices of dissent.

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Govt’s honeymoon period with mkts ends, reality check begins

By Pratigya Vajpayee

NEW DELHI: In financial markets, the first year of the Narendra Modi government would be remembered for the unprecedented capital flows, dizzying highs scaled by share indices, and a new, bulletproof image donned by the Indian rupee.

However, the fireworks should be viewed as a welcome that capital markets extended to a promising new regime, rather than applause for any work done by the government itself. Of course, much of the ovation was also for the slump in global crude oil prices, which gave India’s macroeconomic fundamentals a facelift, coincidentally in the same year.

Out of the various Indian asset classes, equities have had the most to benefit from the change of guard in New Delhi, as investors looked forward to the end of a stalemate on policymaking, often a feature of a pre-election year.

The carnival in the equity market began in September 2013 when Modi was named the Bharatiya Janata Party’s prime ministerial candidate for the Lok Sabha elections.

Later, BJP’s thumping mandate at the elections meant that the new government was equipped with the requisite political clout to push through key economic reforms, whose very discussion had made the United Progressive Alliance wobble.

The Nifty and the Sensex are up over 18% and 16%, respectively, since the 2014 election results were announced, and around 40% since September 2013.

The animal spirits were largely led by foreign portfolio investors, who have poured $31.5 bln into Indian equities since September 2013, of which $17.6 bln was May 2014 onwards.

What kept the overseas money streaming into the market all these months was the automatic improvement in macroeconomic fundamentals as global crude oil prices slipped over 20%.

With the drastic cut in India’s import bill, key economic variables such as inflation, balance of payments, and the government’s fiscal deficit all fell in line, egging on foreign investors to continue betting on the India story.

Loose monetary policies of major central banks across the globe meant that there was plenty of money flowing around, and it was no surprise that much of it made its way to India.

As far as the governance itself was concerned, there was not much basis for assessing the new regime, and investors were content as long as the government continued to send out the right signals.

The wakeup call came only in April, when the Income Tax Department slapped notices demanding 6 bln rupees as minimum alternate tax from foreign institutional investors. These investors had lost an appeal at the Authority for Advance Rulings against a levy of 20% minimum alternate tax on capital gains.

Between September 2013 and March 2015, the Nifty had gained over 70% to its record highs. However, since March, investors seem to have gotten more realistic and the euphoria gave way to ‘fundamental’ logic.

With earnings yet to see even a hint of recovery and most economic indicators not showing any positive trend consistently, Nifty has corrected more than 8% from its high of 9119.20 points in March.

The imbroglio over foreign portfolio investors subjected to minimum alternate tax further spooked overseas funds and equity investors.

Foreign investors have now sat up to take a long, hard look at the year that went by, and some have expressed their discontent about the pace of economic reforms in India.

“Cyclical macro parameters have improved sharply. However, corporate earnings remain weak, the investment environment is still lacklustre and the improvement in GDP growth has not been commensurate with the stimulus of low oil prices,” Barclays Research said in a report.

The uneasiness of foreign investors has also started manifesting in the form of outflows, which began in mid April, and continued into May. So far this month, foreign portfolio investors have net sold shares worth $876.22 mln, and seem set to make their biggest monthly net sale since August 2013.

Considering the massive scale of expectations that were pinned on Modi, the government did not really stand a strong chance to fulfil these in its very first year.

Even as it is too soon to pass the verdict on the Indian government’s ability and inclination towards economic reforms, one thing is certain that the honeymoon period is over.

Although the share market continues to entice foreign buyers at more attractive valuations, the scorching pace of inflows is unlikely to resume as investors worldwide are already overweight on Indian equities.

Unlike its first year in power, the government would have to earn the foreign inflows by ensuring a steady delivery of economic reforms.


It is ironical that on the day of the election results, government bonds ended in the red as the market dismissed Modi’s victory as an expected outcome. Only when foreign inflows came gushing in, did Indian debt markets realise the enormity of the mandate won by the BJP.

The year 2014 ended up being the first one since 2011 when foreign portfolio investments in debt exceeded that in equities, with a net inflow of$26.2 bln.

Since then, the 10-year benchmark government bond yield has declined around 100 basis points as the foreign demand bridged the demand-supply gap, while a sharp fall in inflation caused a downward turn of the interest rate cycle.

While much of the debt investment was in government securities, FIIs turned their attention to corporate bonds after running out of gilt investment limits in August.

When it was raining foreign portfolio investments, there is no way the Indian rupee could not have fallen behind.

The rupee is largely unchanged from its levels in September 2013, but is now widely acknowledged as a far more resilient currency than it was before. Over this period, the rupee has traded in a 58.34-64.27 per dollar band.

Although persistent intervention by the Reserve Bank of India in the foreign exchange market kept the rupee’s gains in check, the accretion to the central bank’s reserves gave the currency an image makeover.

Over the past one year, the RBI has added around $40 bln to its currency reserves, strengthening its ability to defend the currency in times of crisis.

Also, considering that a country’s currency is considered a mirror of its macroeconomic fundamentals, it is hardly a surprise that the rupee now shows a much prettier picture.

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“This is just the beginning,” PM Modi on economic reforms

NEW DELHI: Though a lot has been done, there are high expectations and much more needs to be done, said Prime Minister Narendra Modi while detailing the government’s achievements on economic reforms in its first year.

“A lot has been achieved. However, this is just the beginning. There is much more to be done and I know your expectations are high,” he said, in a letter to the people of India.

“Economic growth has been revived, and is amongst the fastest in the world. Inflation is substantially down. Fiscal prudence has been restored. Confidence is up. Foreign investments have increased,” he said, adding that the achievements have been endorsed by major ratings agencies and international institutions across the world.

International ratings agency Moody’s has raised India’s rating outlook from stable to positive, while reaffirming the country’s credit rating at Baa3.

Modi also mentioned the deregulation of diesel prices, transfer of cooking gas subsidies directly to the beneficiaries, hike in foreign direct investment limits in various sectors as some of the major steps taken by the government.

Also, he stated that the Goods and Services Tax is slated to be introduced next year and that the government is pushing job growth through its flagship policy of Make in India.

“A year ago I gave you my word that while I might perhaps commit errors, I would always act with pure intentions and spend every available moment working for a better India,” he said, in his letter.

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Reforms push – with or without numbers, the intent is clear

By Dhirendra Tripathi

NEW DELHI: Judgement on the pace and quality of economic reforms of a government is often an outcome of perceptions, expectations, hopes, one’s own affiliations and hopeless comparisons. Objectivity is a natural casualty in most such cases.

But as the Narendra Modi government completes one year in office, skeptics can have their moment too. After all, the hype and the hope surrounding Modi’s victory in the May elections last year was unprecedented.

What blurred the line between hopes and fantasies was the 282-seat majority the Bharatiya Janata Party got in the elections. A majority government, one coming after five years of a regime that came to be known for its policy paralysis, was expected to start firing from Day 1.

The man who could do no wrong had to have the panacea of all the ills. One year on, the music from Raisina Hills may sound a bit jarring but it’s no gainsaying that the government, despite not having a majority in the Upper House, has managed to get key laws passed.

Critics have accused the Narendra Modi government of governing by executive action, having taken the ordinance route as many as 11 times in its very first year. This included two re-promulgations. The government on its part has accused the opposition, particularly the Congress, of positioning itself against growth.

The government does not want to be cowed down by its minority status in the Upper House and believes ordinances are only a reflection of its resolve to push key reforms through.

And it has employed all the legerdemain at its disposal to achieve this – splitting Opposition ranks, smoking peace pipe with smaller regional parties, showing them the benefits of voting for the Bills and so on.

Undoubtedly, last one year has been most productive as far as conduct of key legislative business is concerned with several bills, pending for last many years, getting Parliament’s approval.

In a country still obsessed with Leftist-Nehruvian idea of a welfare state, a sector being opened to foreign direct investment is called a reform. Be that as it may, the Modi government’s first reform was raising of FDI cap in insurance to 49% from 26%.

It required deft floor management and political acumen to win some adversaries over to get the insurance amendment bill, pending Parliament’s approval for more than 10 years, passed in the Rajya Sabha.

The government is now also inviting 100% FDI in railway infrastructure. Up to 49% FDI in defence manufacturing, in line with Modi’s ‘Make-in-India’ initiative, has also been permitted.

Not entirely government’s credit since they came out of Supreme Court judgements, but the government also managed to get two key bills on auction of coal mines and minerals passed.

The result was that the government got bids worth more than 2 trln rupees via auction of 29 coal blocks. Auction of many more blocks is to follow. Monday, the mines ministry also issued the final rules for auction of minerals in various states.

The political hot potato of labour laws has also been touched but much work needs to happen there. The labour ministry plans to consolidate 44 laws broadly into five legislations. It is also working on allowing women to work in night shifts, showing its sensitivity to changing social and economic structure of the country.

Another proposal is to let small factories comply with just one labour law instead of 14. It has also proposed to exempt the entertainment industry and family enterprises from laws barring employment of children below 14 years of age.

The original child labour law banned employment of such children in 18 hazardous industries. All the labour laws still need Parliament’s ratification with trade unions already threatening to go on strike in September.

In line with its objective of making it easier to do business in India, the government got Parliament to clear 14 amendments to the Companies Act, 2014, in the Budget Session. One such clause now makes it possible for companies to carry out related-party transactions with an ordinary majority.

Deregulation of diesel prices, an issue that the previous government had nudged was seen through by Modi despite its economic and political ramifications.

Direct cash transfer for better targeting of subsidies — a scheme initiated by the United Progressive Alliance regime but slowed down in the last few months of the government — was also resumed by the Modi government. The government de-linked it from the unique Aadhar ID — an aspect that had not gone well with the masses during UPA time and hence got the axe.

There are two key legislations now that await Parliament approval and point out to Modi government’s resolve to push reforms, the opposition inside Parliament and outside notwithstanding.

The first is the Goods and Services Tax that seeks to replace a multitude of central taxes like excise duty and service tax and state levies such as octroi, sales, value-added, entertainment and purchase taxes. Dubbed the most important legislative tax reform in India since independence, implementation of GST is expected to improve India’s GDP by 1%-2%. The constitutional amendment bill has now been referred to a Rajya Sabha panel.

After passing the Constitution amendment bill, three other legislations — the Central law, the state law and Integrated GST — have to be passed before GST can be rolled out in the country and the government seems determined to get this done in July.

The second and seemingly the most important piece of legislation – since the government almost seems to be basing its prestige on it — it promulgated and re-promulgated the Bill — is the land acquisition Bill.

Called The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, the Lok Sabha has referred the land acquisition Bill to a joint Parliament panel.

Dubbed as ‘pro-corporate and anti-farmer’, the government is keen to implement the Bill that it thinks is key to resolving issues holding back infrastructure development in the country.

How serious is the government about getting it passed this time – the joint panel has been instructed to give its reports to the House on the first day of the next session.

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Reforms through law – 10 key legislations in the pipeline

By Upmanyu Trivedi

NEW DELHI: The Narendra Modi-led National Democratic Alliance stormed to power a year go with a thumping majority in the Lok Sabha after United Progressive Alliance-II became a symbol of policy paralysis and dysfunctional Parliament.

The productivity of Parliament has certainly increased, but the Rajya Sabha still remains tricky for the Modi government as it lacks majority in the upper house. There were legislations it managed to get passed with support from some opposition parties, still many were sent to joint committees.  Also, there are few in the draft stage.

Following is a list of 10 important legislations that are in the pipeline:


With “broad political consensus”, implementation roadmap and most states on board, the government is keen to get the Goods and Services Tax bill through. The constitutional amendment bill for GST was passed in the Lok Sabha, but referred to a select committee of the Rajya Sabha, where the government lacks numbers. Panel has to submit its report by last day of the first week of the Monsoon Session.


The new government identified bankruptcy laws reforms as “key priority” area for ease of doing business as they provide legal certainty for entrepreneurs as well as lenders. In August, a committee was set up for suggesting changes in bankruptcy laws. On Mar 1, Finance Minister Arun Jaitley assured that the government will unveil a comprehensive Bankruptcy Code in the current fiscal year.


Jaitley’s February Budget added a new dimension to the government-RBI face off with a proposal for the Public Debt Management Agency of India Bill. Jaitley had to later climb down and the proposal to curtail RBI’s powers on regulation and management of government securities was put on hold at least for this year. Jaitley later said the government would prepare a detailed roadmap for the proposal in consultation with the RBI.


Easily the most controversial bill in the past year was the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015. The Modi government found itself on the defensive to shrug off the “suit boot ki sarkar” tag and had to refer the bill to a joint Parliament panel, which will give its reports on the first day of the next session. The land ordinance will be re-promulgated in the meanwhile.


The opposition blocked the Real Estate (Regulation and Development) Bill, 2013 in the Budget Session labelling it as pro-builders and against homebuyers. The government earlier this month decided to refer the crucial bill for real estate sector to a select committee of the Rajya Sabha that is required to submit its report by the last day of the first week of the monsoon session.


The National Waterways Bill, 2015 is aimed at regulating and developing waterways for shipping and navigation. The Lok Sabha this month referred it to a standing committee. The bill seeks to declare 101 waterways across the country as national waterways, up from five at present.


The Cabinet has cleared the Child Labour (Prohibition and Regulation) Amendment Bill, 2012 for being tabled in the Monsoon Session. Provided their school education is not hampered, the bill allows below 14 years to work in non-hazardous family enterprises and audio-visual entertainment industry, except in circuses. The proposed changes to the bill have come under severe criticism from child right activists.


The government intends to push a slew of changes in labour laws. In the Monsoon Session, the government is likely to push Code on Industrial Relations Bill, Small Factories Bill, and amendments to Employees’ Provident Fund law. Most trade union are opposed these changes. Reportedly the government plans to reduce 44 labour laws to five to make it easier for companies to do business.


Compensatory Afforestation Fund Bill seeks to provide a legal framework in absence of which over 380 bln rupees, nearly 0.8% of FY15’s fiscal deficit, wrested with an adhoc committee being supervised by the Supreme Court since over a decade. Once the bill is passed, states and centre will be free to use the fund, made up of compensation deposited by project proponents for diversion of forests. The bill is now with a Parliamentary standing committee.


Proposed changes in Prevention of Corruption Act, and the Whistle blowers Protection law are also pending. Amendment in penal law on corruption, cleared by the Cabinet calls for time-bound trial and harsher punishment but mandates prior government sanction for prosecution of even retired government employees. Changes in law to protect whistle blowers, passed by the Lok Sabha and pending in the Rajya Sabha, limits the protection only for those who disclose information obtained through Right to Information.

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NaMo’s 10 contributions to Indian lexicon

By Upmanyu Trivedi

NEW DELHI: Prime Minister Narendra Modi penchant for coining catchy abbreviations and terms was noticed during his election campaign with many of them capturing the public imagination as well – RSVP for Rahul, Sonia, Vadra, Priyanka, and ABCD for Adarsh, Bofors, Coal Scam, Daamad.

This knack of Modi continued well into his first year in office so much so that one wonders if he coins the abbreviations first and expands them as per his need.

As his government continues to turn simple ideas into catchy slogans, here are 10 pithy abbreviations that Modi government coined and used during the first year in government:


First Develop India was Modi’s style of launching Make in India. He gave the mantra saying it was an opportunity for the world and also a responsibility for the people of India.


Trinity of JAM–Jan Dhan Yojana, Aadhar number and, Mobile–was Modi government’s answer to leakage of subsidies. First used by Economic Survey of India, later used by the government leaders, who said it would be a “game changing reform”.

3 Ss

Modi called upon the youth to develop 3 Ss–skill, scale and speed—to compete with China. He used another set of 3 Ss–Samaveshak (inclusive), Savadeshak (for all country), Sarvaparshi (touching all)–to describe government’s first budget.


Strict but sensitive, modern and mobile, alert and accountable, reliable and responsive and tech-savvy and trained–This was Modi’s moto to policemen when he spoke at a gathering of senior police officers in Guwahati in December.


Visiting Nepal, Modi must be looking for a hit formula to rebuild trust between Kathmandu and New Delhi. He came up with exactly that, HIT–Highways, Informationways, and Transmissionways. Modi also used iWays acronym for promoting Digital India.


Modi in December, called upon the bureaucrats to chuck the ABCD–Avoid, Bypass, Confuse, Delay–culture of governance and hit the ROAD–Responsibility, Ownership, Accountability, Discipline–to move from red tape to red carpet for Making in India.


This came from Modi’s first foreign visit–Bharat to Bhutan. If B2B was not enough, Modi had a divine calling when he said, “B for B, Bharat for Bhutan and Bhutan for Bharat. I said it just like that but later I realized that it must be a sign from God that I said this”.

INCH towards MILES

Hindi-Chini Bhai Bhai is a passe. Modi government coined INCH towards MILES for ‘India-China towards Millennium of Exceptional Synergy’ to welcome Chinese President Xi Jinping in September.


In another pep talk by Modi to bureaucrats, he taught them about the ART of good governance, literally. Accountability, Responsibility and Transparency– was what Modi talked about.

3 Ds

Starting from Madison Square in the US, Modi invited investors throughout the year saying India has 3Ds–Demographic Dividend, Democracy, Demand. “Democracy, the demographic dividend and strong demand are important factors (for investment opportunity), and India has all three,” Modi said.


If Modi spoke in acronyms, the opposition, though a bit late in the day, also tried to catch up. Congress Leader Jairam Ramesh tried hands on the changing political lingo in January by re-phrasing NAMO–No Action, Message Only, and MODI–Murder of Democratic India.

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MODI@1: Economy report card shows many as and Bs, courtesy lady luck

By Pratigya Vajpayee and Shivani Karmarkar

NEW DELHI: The ghosts haunting the Indian economy for long seem to have been mostly exorcised, with the Narendra Modi-led government having had the devil’s luck on its side.

India’s macroeconomic scorecard does read a lot better now than it did a year ago. While there is a major improvement in indicators of inflation and the external sector, the much-needed signs of “achchhe din” or good days promised by the government have not yet played out completely in indicators of economic activity.

While giving due credit to the quality of the government’s policy making over the past year, one has to acknowledge its run of favourable luck, and the strong helping hand from a fall in global commodity prices.

“I think bringing down inflation is a result of good luck and good policies,” CRISIL Chief Economist D.K. Joshi said.

As the Modi regime completes a year, Consumer Price Index-based inflation rate is lower by over 350 basis points from a year ago, while that based on the Wholesale Price Index is firmly pinned in the negative territory.

Undoubtedly, the global fall in commodity prices, especially crude oil, was the largest factor that helped cool off the chronic high inflation in India, given the share of crude oil in India’s import bill.

India’s crude oil basket averaged at $84.16 per barrel in 2014-15 (Apr-Mar), down over 20% from $105.52 a barrel in the previous financial year.

Moreover, food inflation remained well behaved despite an errant monsoon last year.

Food inflation remained in check, again largely owing to a drop in global commodity prices, which hindered export of Indian food items, clamping down domestic prices.

The government also seems to have proactively released stocks of food grains into the market in order to prevent prices from heating up.

“…the government did show restraint as far as MSPs (minimum support price) are concerned and they did show proclivity to push food stock into the market and also check hoarding…which actually becomes rampant when there is food shortage,” Joshi said.

The government has also backed up its actions with the right noises, taming inflationary expectations.

Last June, which is usually a bad month in terms of inflation expectations, the government, soon after taking charge, went out of its way to assure masses that food prices would not get out of hand.

On one occasion, a post by Finance Minister Arun Jaitley on the social networking website Facebook led to a sharp fall in farm commodity futures, as traders were spooked by his warning against alleged hoarding of food products.

The inflation targeting framework pact signed between the Reserve Bank of India and the government also shows commitment towards a low inflation regime.

External sector is the other front where the fall in crude oil prices has come as a blessing for India.

The country’s current account deficit has shrunk to 1.7% of gross domestic product during Apr-Dec from 2.3% in the corresponding period a year ago. Portfolio flows in 2014 were nearly fourfold of those recorded a year ago.

The government’s contribution here was relaxation of foreign direct investment limits in various sectors such as railways, insurance and defence, while ensuring that the broad direction of policies was encouraging for investors.


Even several months after the government assumed charge, and its policies were unfolding, a key question continued to puzzle investors – how would the centre manage to clean up its finances, and at the same time deliver its promise of turning around the economy?

However, with global commodity prices dropping, major pieces of the puzzle fell in place.

Provisional estimates released this week showed that the government achieved a fiscal deficit of 4.0% of GDP in 2014-15 (Apr-Mar), slightly improving on its target of 4.1%.

Buying some more room in the 2015-16 Union Budget, the government redrew its fiscal consolidation roadmap, delaying its medium-term goal of 3% fiscal deficit by a year, in a bid to revive growth.

While many say that the end would justify the means, it is premature to judge whether the government’s fiscal leeway would be worth the while.

The quality of expenditure seems to have improved, with subsidy payouts declining significantly, which is just another piece of good fortune that the government owes to decline in oil prices.

Jaitley, who often criticised the previous government for slashing plan expenditure in its fiscal deficit chase, does not seem to have done a whole lot better. Plan expenditure in 2014-15 stood at 4.54 trln rupees, only marginally higher than 4.53 trln rupees the year before, and is lower than the revised Budget estimate of 4.68 trln rupees.

However, the one parameter which was widely expected to be swept by Modi’s magic wand was the pace of economic growth, which has not lived up to expectations.

Notwithstanding the rosy picture painted by the new series of GDP, other indicators of economic activity suggest only a slight uptick at best.

Although GDP growth is estimated to have risen to 7.4% in 2014-15 from 6.9% a year ago, indicators such as index of industrial production, core sector, and credit growth reveal a gradual pace of recovery.

Still, it is too soon for the verdict on growth to be out.

“On growth, the actions the government has taken–FDI allowed in insurance, defence, railway infrastructure, mining related laws, the Smart Cities initiative, various operating environment changes under Make in India will only show up in economic indicators over the next two to three years, rather than the next two to three quarters,” said Atsi Sheth, senior vice president at Moody’s Investors Service.

“From our perspective, resisting the urge to quickly stimulate the economy is positive because although it would have revived growth in the near term, it would have also added to inflationary, current account and fiscal pressures over the medium term,” she added.

There is other work that the government has done to uplift the economy, but does not show immediate results in economic parameters. This includes legislative steps to end stalemate on long pending issues such as allocation of coalmines, and goods and service tax.

The economy has had more ups than downs over the past year, but in coming years, the government would need to rely on more than just the assistance of lady luck.

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MODI@1: Rule by ordinance – nine in a year of Modi’s rule

NEW DELHI: Critics have accused the Narendra Modi government of governing by executive action, having taken the ordinance route 11 times in its first year, including two re-promulgations.

It is also likely that ordinance on land acquisition may be re-promulgated for a second time.

The ordinance Raj resulted from many key legislations failing to pass in the Rajya Sabha where the ruling Bharatiya Janata Party lacks majority.

While critics allege the ordinances are a way to bypass Parliament, the government blames the Opposition for disrupting passage of legislations over various issues.

Below is a timeline of ordinances promulgated under the National Democratic Alliance government since it took charge on May 26, 2014:

Apr 3, 2015: The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Ordinance, 2015 promulgated for the second time.

Jan 12, 2015: The Mines and Minerals (Development and Regulation) Amendment Ordinance, 2015, which mandated allotment of mining lease on auction basis. It also allows Centre to raise the area for mining leases.

Jan 07, 2015: The Motor Vehicles (Amendment) Ordinance, 2015, to amend the Motor Vehicles Act, 1988, and to allow e-rickshaws to carry four passengers and not more than 40 kg of luggage.

Jan 06, 2015: Ordinance to amend the Indian Citizen Act, 1955, to merge the Person of Indian Origin and Overseas Citizenship of India schemes.

Dec 31, 2014: The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Ordinance, 2014, scraps the consent and social impact assessment clauses for some projects.

Dec 26, 2014: A second ordinance on the e-auction of 204 coal mines, whose allotments were cancelled by the Supreme Court. The original Coal Mines (Special Provisions) Ordinance, 2014, was promulgated on Oct 21, 2014.

Dec 26, 2014: The Insurance Laws (Amendment) Ordinance, 2014, to hike foreign direct investment cap in insurance sector to 49% from 26%, as the Insurance Laws Amendment Bill, 2008, could not be discussed in Rajya Sabha.

Oct 24, 2014: The Textile Undertakings (Nationalisation) Laws (Amendment and Validation) Ordinance, 2014, in order to continue with the lease-hold rights vested in the National Textile Corp on completion of the lease-hold tenure.

May 29, 2014: The Andhra Pradesh Reorganisation (Amendment) Ordinance, 2014, enabling the transfer of a cluster of mandals and villages in Khammam district to the successor state of Andhra Pradesh.

May 29, 2014: The NDA government’s first ordinance, seeking changes to the

TRAI Act to pave the way for the appointment of its erstwhile chief Nripendra Misra as Prime Minister Modi’s principal secretary.

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Modi@1 : Raghuram Rajan takes Round 1 on points as RBI-govt bout continues

By Siddharth Upasani

MUMBAI: Despite all their public pronouncements of a “cordial” relationship, the government and the Reserve Bank of India, for one reason or another have been in opposite corners of the ring during the Narendra Modi government’s first year in power.

Much like the build-up to the Floyd Mayweather-Manny Pacquiao ‘fight of the century’ that took place earlier in May, the months preceding the Modi government’s coronation were littered with ‘trash talk’ from both sides.

Senior Bharatiya Janata Party leaders criticised the manner in which Governor Raghuram Rajan was handling inflation. Rajan too, on his part, said in early May 2014 that the government could “fire” him if it wanted to, but the monetary policy would be set by him.

“The government can fire me, but the government doesn’t set monetary policy… I am happy to talk to the government, I am happy to listen to the government, but ultimately the interest rate that is set is set by me,” Rajan said at 44th St. Gallen Symposium in Switzerland.

And just like the Mayweather-Pacquiao clash, the last one year has seen the government and the RBI sizing each other up, throwing light jabs at moments considered opportune, but not culminating into the legendary ninth round slug-fest between Arturo Gatti and Micky Ward, which celebrated its 13th anniversary on Monday.


The start to the government’s term could not have been better. The government distanced itself from the pre-election Raghuram Rajan criticisms, and the governor welcomed the strong mandate garnered by the National Democratic Alliance.

At the 2014-15 (Apr-Mar) Budget in July, Finance Minister Arun Jaitley said the government, in close consultation with the RBI, would put in place a “modern” monetary policy framework. This was welcomed too, especially in light of the Urjit Patel committee report that recommended the creation of a monetary policy committee and a flexible inflation targeting framework.

But as headline retail inflation, the RBI’s nominal policy anchor, receded from near-double-digit levels in early 2014, the pressure on Rajan was steadily raised to reduce the “cost of capital”. In November, days before the RBI detailed its monetary policy, Jaitley pitched for a rate cut, saying the cost of capital must come down for reviving the economy.

However, Raghuram Rajan stayed pat on the repo rate until mid-January.


Raghuram Rajan’s Jan 15 off-policy rate cut conditioned further easing on “sustained high quality fiscal consolidation”, among other factors. However, in the lead up to the 2015-16 Budget, such high quality consolidation did not seem forthcoming after reports emerged of growing talks within the finance ministry of redrawing the fiscal consolidation roadmap to boost public investment.

But despite the government pushing forward the reduction in the fiscal deficit to 3% of gross domestic product by one year to 2017-18, the RBI announced another off-policy rate cut on Mar 4.

The RBI’s Mar 4 rate cut has been described in two ways. The first saw it as a necessary step following its Jan 15 call for high quality fiscal consolidation. Had a rate cut not followed the Budget, it could have been interpreted as a thumbs-down from the RBI.

The second explanation for the March rate cut saw it as a trade-off after the government approved the Patel committee’s suggestion of a flexible inflation targeting model.

While the government may have got the rate cuts it wanted — and the RBI its inflation targeting framework — the Budget also threw open several other contentious issues.


The first of these was the creation of a public debt management agency, something which the RBI is in favour of too. While both the government and the central bank have reiterated that they are on the same page as far as the debt management agency is concerned, the retraction of the concerned clauses from the Finance Bill, 2015 prior to its voting has raised questions.

A closer look at the Finance Bill shows that the public debt management agency would operate under the “general superintendence of the Central Government”. On the other hand, while the RBI has repeatedly said that it favours the creation of the said agency, it wants it to be “suitably independent” and away from influences.

The second, and far more controversial, proposal of the Finance Bill was the removal of the RBI’s control over state and central government securities. The amendment was not even mentioned by Jaitley in his Budget speech on Feb 28, and even caught Rajan off-guard.

The fact that Jaitley went on to retract both the proposals from the Finance Bill before its passage can be seen as two wins for Rajan. However, in the long-term, the die has been cast. A debt management agency roadmap is set to be discussed, while the removal of gilts from the RBI’s purview was suggested several years ago by Rajan himself, albeit with some degree of co-ordination given that the central bank may have an “ongoing legitimate interest in determining who participates in these markets”.

“…it is imperative that the regulators work out respective responsibilities so that the functioning of the markets is not impeded,” the Raghuram Rajan-led committee on financial sector reforms had said in 2009.


The new financial year began on solid note for the government-RBI partnership, with Modi singing Rajan’s praises unabashedly on Apr 2, and Rajan supporting the government in New York on Tuesday, remarking that expectations from the Modi government were “probably unrealistic”.

With the end of Modi’s first year at the helm, it can be argued that Rajan and the RBI have edged it. However, the government’s parries can be evaded only for so long.

New challenges, in addition to those yet to be completed, lie ahead. Foremost of them is the creation of a monetary policy committee. While both the government and the RBI seem to be in its favour, the devil again is in the details, namely, the composition of the committee.

While they will insist that they are on the same side, the nature of the government and RBI’s operations mean that they will be at crossroads at some point or the other.

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Modi@1 : The fat farm fumble – reaping a harvest of distrust

By Stuti Chawla

NEW DELHI : In a country where rising prices of onion can topple governments, the Narendra Modi-led Bharatiya Janata Party government has achieved no mean feat in keeping food prices under control, as it grappled with a drought in its first year.

Prices of most farm commodities remained benign for most of the year, though food grain output took a 5% hit due to unfavourable weather.

There was a spike in vegetable prices, but that too was quickly brought under control, and inflationary expectations are largely in check though another poor monsoon has been forecast.

This seemingly seamless food management that contributed to a low food and retail inflation environment would be an ideal breeding ground for the much-awaited rate cuts that would boost lending to the corporate sector and spur economic growth.

But in the quest of low food price regime, the Modi government appears to have given a raw deal to farmers, most of whom are at the bottom of the economic pyramid.

Farmers have undoubtedly had a tough year. Poor monsoon rains in the kharif season lowered crop yields. The minimum support price hike for most crops was tepid at best, wholesale prices were subdued, and exports of most farm commodities were non-existent due to the bear grip on world commodity prices.

With the government cracking the whip on food prices, farmers found it difficult to recover even their input costs for some crops.

Unseasonal rains at the end of the rabi harvest made things tougher. The farm ministry has estimated damage of over 30% of the rabi area this year due to inclement weather.

Amid the piling gloom, there were many reports of farmer suicides this year.

There were long discussions on the agrarian crisis in Parliament in the second half of the just-concluded Budget Session. The government eased the crop loss compensation norms to help farmers in distress, but left it to states to dole out the compensation from the state disaster response fund.

The compensation claims were, however, far higher than the relief doled out, and that has not gone down well with the farmers.

Adding salt to the injury was the land acquisition bill that eases norms for private as well as government enterprises to acquire farm land—a pre-requisite for building infrastructure for the government’s ambitious ‘Make in India’ and smart cities’ plans.

The land buy bill, which cemented the Modi government’s pro-business stance, also reinforced its anti-farmer image, as it fails to protect the rights of small and marginal farmers.

Sensing the murmurs of discontent, the prime minister attempted to explain the government’s stance in his radio chat ‘Mann ki Baat’ in March, repeatedly asking farmers to trust the government’s intentions.

The move did little to plug the trust deficit that is fast taking root in rural India.

A farm minister who talks more about the welfare of cows and ‘pashu dhan’, than farmers’ distress has only added fuel to the fire.

Agriculture seems to be figuring low on the government’s agenda in a year when it particularly needed more focus.

The government lowered the allocation to agriculture in this year’s Union Budget, and is yet to announce any major scheme to revive growth in the sector.

The much-touted new crop insurance scheme that was supposed to make insurance worthwhile to farmers is still on the drawing board, and progress on issuing soil health cards to farmers is painfully slow.

A renewed thrust on irrigation schemes that could have been a balm for poor monsoon years is conspicuous by its absence.

On year on the job, and many of the government’s pre-poll promises remain promises. The national common agriculture market is yet to see the light of day and there is no effort to promote area-specific crops and vegetables, or disseminate real-time prices, production and trade data to farmers.

Yes, it has been only a year, only one-fifth of the term. But expectations run high. And there’s none other than Modi who’s responsible. After all, the flurry was for the promised “achche din” for all.

Lack of focus on the farm sector, which is crying for attention in the government’s reform juggernaut, could cost the government dear in the coming years.

Though the farm sector contributes just 16% to the country’s gross domestic product, nearly two-thirds of the country’s populace directly or indirectly depends on it, and that is too large a vote bank to ignore.

The Opposition has been quick to cash in on rural India’s growing trust deficit.

The revitalised Congress scion, Rahul Gandhi, has stepped up the rhetoric on the government’s alleged anti-farmer and pro-corporate policies, describing the regime as “suit boot ki sarkar”.

Agree with Gandhi or disagree, but one can’t ignore the allegation. Serious rethink and hard action from the government is the need of the hour. The farmer is feeling ignored in the big scheme of things. And patience may not last forever.

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