Fact-Check: PM Modi’s Claims In The Wall Street Journal Interview
From disinvestment to financial inclusion, NDA govt’s achievements are merely boastful claims, writes Amitabh Dubey.
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Prime Minister Narendra Modi gave a wide-ranging interview to the Wall Street Journal to mark the second anniversary of his government. Modi argued that he had restored confidence to India and put an end to the “sense of policy paralysis, bad economic conditions and corruption” of 2012 and 2013.
As usual, there was a grain of truth, and also the exaggeration and sleight-of-hand that we have come to expect from him (see here for a check of other claims by Modi).
Consider Modi’s highlighting of the Pradhan Mantri Jan Dhan Yojana (PMJDY) as an instance of how his leadership had ended “a sense of negativity and a sense of deep inertia in the government machinery”:
Does the Credit Go to the Modi Effect?
Certainly, the PMJDY has accelerated the spread of basic savings bank deposit accounts (BSBDA), and increased their usefulness by adding overdraft facilities and life and accident insurance. But the truth is that the entire architecture of financial inclusion (basic savings bank deposit accounts, Aadhaar, electronic payments, RuPay cards) was created and implemented long before Modi took office.
Modi often talks as if he single-handedly brought the poor into the financial system, but the facts show that India’s “financial inclusion” programme was already established and growing rapidly.
In the two years before Modi, the UPA opened 44 and 61 million BSBDAs respectively, which under Modi jumped to 147 million in 2014-15 and 67 million in 2015-16 (see table below). If we conservatively assume that another government would have opened 61 million BSBDAs per year (as the UPA did in 2013-14), then the Modi effect looks something like this:
Claims on Financial Inclusion
Modi’s mobilisation of government machinery did have a positive effect: we can quantify it at around 92 million accounts, or 20% of the 457 million accounts opened (as of 30 March 2016). Impressive, yes, but the “policy paralysed” UPA also brought millions of poor households into the financial system.
Indeed, there was a downside to Modi’s big 2014-15 push: the number of accounts with zero balance was 45% one year after PMJDY began, although it had declined to 26% by 26 May 2016. The growth in account openings consequently slowed in 2015-16.
If Modi did end “negativity” and “inertia” in the government, the PMJDY is definitely the wrong story to pick.
Modi went on to say:
Auction of Coal Blocks
There is little doubt that the coal and 2G controversies damaged the UPA and helped Modi’s election victory. Indeed, the Modi government has overseen a spate of auctions to allocate natural resources since he took office. But this is not new: the UPA auctioned the 3G and 4G spectrum in 2010, and the 2G spectrum in 2012 after the Supreme Court cancelled the flawed January 2008 allocations in February 2012.
What Modi deserves credit for is the passage of the 2015 Mines and Minerals (Development and Regulation) Amendment Bill that requires mining rights to bauxite, iron ore and other minerals to be auctioned. The UPA sat on a similar bill for six years before the Modi government succeeded in passing it.
In defence of his economic policymaking record, Modi also stated the following:
Claims On FDI In Defence Sector
Now, it’s entirely true that the Modi government succeeded in doing what the UPA had failed do for many years: to raise the FDI cap in insurance from 26% to 49%. It also passed a comprehensive Insolvency and Bankruptcy Code this year that should help clean up Indian banks’ balance sheets. And FDI is now permitted in railway infrastructure (though not in rail operations) whereas previously it was allowed only in metro rail.
But the claim regarding defence FDI is simply wrong. Consider the UPA’s July 2013 policy on FDI in defence:
The new policy is certainly more liberal than the older one, but it is misleading for Modi to say “today I have allowed it to 100%”. Just as it does today, the government had the power in July 2013 to approve defence investments with 100% FDI if it had wanted.
And the reality? No 100% FDI proposals have so far been approved. Here’s what Defence Minister Manohar Parrikar told parliament in April 2016: “From August 2014 to February 2016, a total amount of Rs 112.35 lakh (Rs 1.12 crore) has come into the country as FDI in the defence sector”. Damp squib.
Finally, Modi stated that:
Claims on Disinvestment
An odd formulation, considering that disinvestment began in 1991-92, but Modi is, at first cut, correct. The Rs 48,234 crore raised through disinvestment in 2014-16 is somewhat higher than the Rs 45,697 raised by the UPA in 2009-11.
But that’s too simple: if you’re comparing long periods like “the entire post-independence phase of the country”, you need to account for inflation: the value of a rupee raised in 2004-05 is not the same as in 2014-15. A proper comparison requires us to deflate the value raised from disinvestment with an appropriate, consistent index, in this case the Wholesale Price Index (base 2004-05).
We find that the volume of disinvestment by the Modi government (in constant 2004-05 rupees) at Rs 26,671 crore is dwarfed by the Rs 33,464 crore the UPA-2 raised in its first two years. Even in 2012-13, under the “policy-paralysed” UPA, the value of equity divested was greater than in either of the Modi government’s two years in office.
But the cold reality is that disinvestment has been an embarrassment under both the Singh and Modi governments, and basically reduced to a fiscal deficit padding sham in which a third to a half of funds have come from the state-owned Life Insurance Corporation. The following chart (sources here, here and here) says it all:
It could be that the NITI Aayog or the Bank Board Bureau proposes a genuine transformation of the public sector in the coming months. But until that happens, Modi would be well advised to avoid flaunting what is a policy embarrassment from every perspective.
(The writer is a political analyst. The article appeared originally here as a blog on chunauti.org.)
(This is a personal blog and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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