“Religious communalism in the country may have increased, but economic and infrastructure development have been better in the Narendra Modi tenure,” remarked a large foreign investor to me in a recent meeting. This is an oft-repeated refrain of investors and elites when assessing Prime Minister Modi’s decade-long performance. The notion that the Modi government has compensated more than adequately for its communal sins by its vastly improved economic performance—as if the two are comparable—has been drilled into the subconscious of the privileged who are unscathed by religious bigotry. Yet, this is a fallacy.
Let us start with the basics. The economic white paper released recently by the finance minister claimed that the average Indian’s income has grown from roughly $4,000 in 2014 to $6,000 in Modi’s tenure. But the average Indian’s income grew faster between 2004 and 2014 at 6 percent, versus 4 percent between 2014 and 2024. To put it simply, Indians enjoyed greater increases in their incomes under Manmohan Singh than under Modi, and this was the case even before Covid. Not just incomes, but overall economic activity measured either as nominal or real GDP growth was also higher in Manmohan Singh’s decade than in Modi’s, something that even most watchful commentators seem oblivious to.
Incomes did not rise as rapidly during the Modi era because good quality jobs, usually provided by the private sector, were fewer. Jobs were fewer because the corporate sector did not invest as much as they did in the previous decade. Despite the hymns of praise that the corporate honchos may have sung for Modi, private sector investment fell from 26 percent of GDP during Manmohan Singh’s regime to 22 percent during Modi’s. For all the sloganeering, manufacturing as a share of economic activity declined from 17 percent during UPA to 14 percent under NDA. Because the private sector did not demonstrate confidence through increased investments, India’s exports also fell sharply from 17 percent of GDP (UPA) to 13 percent (NDA). Exports is one of the most important engines of job creation and hence it is little wonder that jobs and incomes grew much slower under Modi.
It turns out that even foreign investors were not as enamoured with the Modi government. Net foreign direct investment into India dropped from 1.2 percent of GDP (UPA) to 0.8 percent (NDA). So, for all the hugging of world leaders and `1,310 crore of public money spent on hosting a lavish G20 summit, foreign investors did not exactly kiss our land with investment dollars. Consequently, India’s foreign exchange reserves only doubled under Modi while it nearly tripled under Singh. Surprising as it may sound, even India’s stock markets seemed to have preferred the dour Singh (15 percent annual Sensex returns) to the bombastic Modi (12 percent).
Over the last decade, Indians have been bombarded with visuals of Modi inaugurating new highways, bridges, flyovers and airports with a subtext that there is breakneck infrastructure development during his tenure. It is true that the Modi government was forced to rely excessively on government spending to keep the economy afloat with capital expenditure. But contrary to perception, overall infrastructure development was not multiple times faster under Modi than in the previous decade except in a few areas. The Modi government built just 20 percent more highways than the Singh government, while both constructed roughly the same 3.5 lakh km of rural roads in 10 years. Creditably, the Modi government built three times more airports and electrified four times more rail routes than the Singh government. And for all the hullabaloo about Swachh Bharat, the Modi government built only 20 percent more toilets, not 200 percent. In short, the Modi government continued the infrastructure development laid by the UPA at the expected pace and not at some orbital velocity, as it is made out to be.
Neither did the Modi government outperform the Singh government in core areas of health, education and defence. The UPA left office with 4.6 percent of total expenditure on education which was cut significantly to 3 percent by this government. Despite the pandemic, health expenditure has been maintained at 1.7 percent, while defence expenditure has been lowered to 14 percent from 16 percent of the total expenditure. In terms of livelihood improvements for rural poor, access to cooking fuel, sanitation and water has improved significantly under Modi, while access to electricity grew faster under Singh. Subsidies for the poor were cut drastically from 16 percent in Singh’s time to 9 percent by Modi.
Investors tend to focus on two important macroeconomic indicators—fiscal discipline and inflation. Even on this, the scorecard is balanced. Singh’s government had a lower fiscal and revenue deficit than Modi’s. While inflation has been reined in under Modi, it was helped largely by low global crude oil prices.
Overall, it is a complete myth that the Modi government has managed the economy better, built more infrastructure and attracted greater investment, as shown in the government’s own data. The rhetoric about growth in infrastructure, GDP, forex reserves and so on blared everyday have instilled this false sense of superiority of the Modi government’s economic performance in even numbers-savvy investors. But it is like claiming that a 10-year-old has turned 20 after a decade, which is an inevitability, regardless of whether Modi or actor Akshay Kumar was the prime minister.
At the same time, it is indisputable that social divisions, religious bigotry and communal hatred plague our society far more now. We do not live in an economy; we live in a society. Dividing people along religious lines and disrupting India’s social equilibrium alone should be reason enough for most, and certainly the liberal elites, to abhor this government. To boot, contrary to perception, they do not even deliver far superior economic performance. Social harmony with solid economic performance or communal unrest with similar economic performance—the choice should be obvious, isn’t it?
Praveen Chakravarty
Chairman, All India Professionals’ Congress and a former political economy scholar
(Views are personal)