When Narendra Narendra Modi came to power, many of his corporate friends were ecstatic, because they thought the government would move away from the social welfare policies of the UPA. Their belief was strengthened in the 2015 Union Budget which saw Corporate Tax being reduced from 30% to 25%.
Today, the Congress party is silently smiling even though in these last 20 months, the Modi Government has systematically weakened UPA’s social sector schemes that were meant to help the poorest in India. As rural demand fell, it laid the foundation of the economic mess we are in.
However, the agitation by the Patidars – one of Gujarat’s prominent business communities, exposed the hollowness of the macro-economic data coming from Gujarat in the last 15 years. The growth had, clearly, not been transferred to the common man. The Indian stock market, which was jubilant when Modi came to power, is now on a downward trend.
Worryingly, new projects worth only Rs. 1 lakh crore were announced in the December 2015 quarter, down from Rs. 4 lakh crore in December 2014. This is the lowest in the past 5 quarters. On a year-on-year basis, this was lower by 74%. The value of abandoned projects also increased by 19% in 2015 compared to the same period in 2014. The transport infrastructure and storage sector accounted for 60% of these abandoned projects.
Project investments and proposals are the best gauge to understand economic activity of a nation. As the Mid-year economic review has shown, much of the credit to industry may have been to stressed sectors, leading many experts to believe that loans were provided for balance sheet purposes rather than to finance new activity.
Growth in capital-goods imports has fallen from 12% to nearly zero and our exports have been on a downward slide for the last 12 months, and have reached a situation not seen in over 40 years.