by Shiv Ganesh Sankara Bagam, Class of 2020, FT MBA and Anant Bansal, Class of 2020, FT MBA
The 2019 Indian elections are upon us: pitting the ruling BJP against the opposition Congress party. The BJP stormed to power in 2014 after a ten-year Congress regime ran out of steam. The previous Congress rule was marked by economic stagnation, high inflation and myriad corruption scandals that conservatively totaled $300bn, and one of them, the Telecoms scandal was recognized by TIME as the second-worst abuse of power. Against this backdrop, Narendra Modi led the BJP to power, promising corruption-free, good governance. After nearly five years, we find that his government has stayed true to most of his core promises.
On the economic front, the government instituted a series of structural economic reforms, chief among which were the Goods and Services Tax and the Insolvency and Bankruptcy Code. The former streamlined India’s complicated taxation system and created a single market for goods and services, while the latter created a bankruptcy framework to protect banks and minority shareholders from India’s notorious ‘promoters’.
Further, the BJP government prioritized infrastructure investment, with an eye on sustainability. For example, alongside investments in power generation and electrifying India’s villages, the government has been internationally recognized for leading solar power initiatives (overtaking the US to become the world’s second largest solar energy producer). The construction of roads has been another priority for the government, building 20,730 miles of roads in 4.5 years (2014–18) against the Congress’ tally of 20,530 miles over 7 years (2008–14).
Unsurprisingly, these efforts have translated into significant improvements in India’s macro-economic indicators, yielding high real GDP growth (see Figure 1). India’s score in the World Bank’s Ease of Doing Business Index also rose from 52 in 2014 to 67 in 2019 (US has a score of 83 for reference). Impressively, all of this has been achieved while reducing India’s fiscal deficit from 4.5% in 2013 to 3.4% in 2018.
We are also encouraged by the government’s initiatives to improve human capital and alleviate poverty. Key policies in this domain include: (i) its push towards complete financial inclusion—the World Bank’s Global Findex data finds that the proportion of adults with bank accounts increased by 27% percentage points between 2014–17 to 80%; (ii) providing 30 million poor households with cleaner cooking fuels to reduce the nearly 100,000 people that died annually from smoke from biomass-fired stoves; (iii) introducing legislation to improve customer protection in the housing market; and (iv) rolling out a landmark National Health Insurance Scheme providing medical cover to the poorest.
Given this record, its opponents turn instead to its secular credentials, alleging a rise in violence against religious minorities under the BJP. We find this critique to be fueled by perceptions, but unsupported by evidence. Data on communal incidents shows that violence against minorities has been in line with the previous governments, instead of the rise purported (see Figure 2).
The balance of evidence thus suggests that the BJP has outperformed the Congress on multiple fronts. Undoubtedly, it has had some missteps—such as the ill-thought demonetization policy—and needs to spend greater effort in translating economic growth to employment growth and better managing the implications of controlling inflation on farmers’ incomes. However, we are encouraged by the policies conceptualized by the government in relation to these issues (for example, minimum food prices for farmers and income support), and remain of the view that this government deserves another 5-year term.