How Modi-nomics trumps Manmohan-niti when it comes to the poor and middle class

Under the UPA, for ten long years, we had an economist, Dr Manmohan Singh, as the Prime Minister. Today, it has been a little more than 8.5 years of PM Modi leading India. On a day when the Economic Survey has been tabled and all discussions are centered around the budget and our economy, let’s analyze few parameters- namely ease of living, taxation, inflation control, growth, employment, investment and social welfare to assess who has proven to be a better bet for India.

Middle class, inflation and ease of living

Today, the often-neglected middle class of India, which by no means is one monolithic group, has found in PM Narendra Modi someone who understands their aspirations and desires. Until 2014, the approach towards the middle class was piecemeal. One rebate here, one sop there, one tweak in tax rate somewhere. It was never a consolidated approach aimed at improving the overall lives of people. When we talk about “ease of living”, it includes a whole gamut of access to quality education, health, transport, housing, simplified taxation process, etc.

Today, people earning incomes upto Rs 5 lakh have got a full tax rebate. For those slightly better off with an annual income of Rs 15 lakh, there has been a decline in effective tax rate from 12.7% in 2013 to 8.3% in 2022. That is a saving of Rs 66,000 per annum. Lower EMIs for home loans, car loans and educational loans translates into savings of lakhs of rupees. Post the introduction of GST, everyday items like hair oil, toothpaste, soap, etc are cheaper. Simplification of the filing process, early refunds, removal of archaic laws and compliances and steps like self-attestation, introduction of digital technology and faceless, seamless interface has contributed in I-T returns and tax collections increasing substantially.

Metro connectivity has expanded from 5 cities to 20 cities between 2014 and 2022. Length of metro went up from 248 kms to 777 kms in the same period. Internet data cost is down by 97% and thereby internet penetration is above 80% now. Number of airports now operational are 142 from a mere 74 in 2014. Speed of highway construction is up by over 200% and the budget for road and highway construction is up by 500%. Long journeys are completed in shorter times and time saved means money saved.

More than 220 crore vaccine doses were administered and most of this was done free of cost under the government’s largest vaccine drive to fight the Covid pandemic. 15 new AIIMS and 225 medical colleges are being added to enable citizens to access quality healthcare. It took previous governments 7 decades to establish 8 AIIMS and 387 medical colleges. 8700+ Jan Aushadi Kendras have been established that sell medicines at lower prices. Ayushman Bharat scheme provides healthcare cover to 50 cr Indians and almost 3.28 crore Indians availed hospitalization free of cost under this scheme. All of this put together saved needy families almost Rs 50000 cr per year.

Today, Modi government has added 7 new IITs, 7 new IIMs, 320 universities in 8 years.

Every conversation about price rise and its impact on the middle class is often reduced to petrol and gas cylinder prices by making a dishonest comparison. In the last 2 years even though the average price of Indian basket of crude oil increased by a whopping 102% , the retail prices of petrol and diesel increased by about 19% and 27% respectively. In the same period, the prices increased by 100% and 144% in USA, 80% and 138% in Canada, 41% and 52% in UK. Economies of countries like Pakistan and Sri Lanka have collapsed but the Opposition was often citing petrol and diesel rates from there. Many of the Opposition ruled states have the highest VAT rates which makes a litre of petrol much more expensive in their states and even though the Centre cut central excise duty twice and the BJP-governed states followed it up by reducing VAT rates, some of the opposition ruled states did not.

Gas cylinder prices are often quoted and one is misled to believe that a cylinder cost us Rs 400. Well the cost to the taxpayer (because ultimately the subsidy too is born by the taxpayer) for a 14.2kg cylinder in January was Rs 1241 and in July 2022 it was about Rs 1150. During the UPA tenure retail inflation was between 9-11% almost 9 times, between 2012 and 2014. The economic survey suggests that retail inflation in India will remain under 6% and IMF predicts that it will fall to 5% and 4% in 2023 and 2024.

In the pre-GST regime roti, parathas had a 20% tax, sanitary pads 13%, footwear was at 18% and today these are down to 5%, 0% and 5% respectively. Between 2004-14, rice prices grew at 149%, wheat at 176%, atta at 170%, sugar at 481%, milk at 122% and today the rise in prices of these is below 50% in the last 8 years.

Growth, economic indicators

As per the Economic Survey report, India’s GDP growth will remain strong, robust in 2023-2024. For FY23, GDP growth is pegged at 7%, for FY24, GDP growth rate will be 6-6.8%. Even the IMF report today acknowledges that India will be the fastest-growing largest economy this year and next year. From the fragile 11th position, today we are at the 5th position. Today India boasts of the highest exports in excess of $400 billion, highest FDI in excess of $83 billion and highest forex reserves which is in excess of $570 billion. Gross Fixed Capital formation is highest since FY15. Direct Tax collections are up from ₹5.4lakh cr in FY19 to ₹8.7 lakh cr in FY23 due to better compliance and simplification of taxation process. Average monthly GST collections are up from ₹0.9lakh cr in FY18 to ₹1.49lakh cr in FY23 indicating an uptick in economic activity. Hotel occupancy rate has doubled and housing sales have gained pre-pandemic levels. Auto sales are up whereas electronic exports almost 3x of FY19. The unemployment rate is at 4 year low. Net additions to EPFO are rising. Labour force participation rate, worker population ratio are also rising. PLFS data suggests that unemployment is down to pre-pandemic levels. ManpowerGroup Employment Outlook Survey suggested that in the coming months India’s hiring outlook remained strong with 54 per cent of companies planning to hire.

India’s stock market outperformed UK, Germany, China, Japan, US, South Korea, etc. Government debt to GDP growth was a mere 3% compared to Japan, US, UK, France, China etc which saw more than 50-60% growth.

Social welfare and leakage-free delivery

RBI data shows total social welfare and developmental expenditure incurred by Modi govt during 2014-2022 is ₹90.9 lakh crore. In contrast, only ₹49.2 lakh crore was spent on developmental projects by the Congress during 2004-2014. To increase financial inclusion 46 cr jandhan accounts have been opened. Using DBT, almost Rs 23 lakh crore under various schemes have been transferred to beneficiaries and almost Rs 2.2 lakh crore has been saved. 35 cr Mudra loans have been disbursed. 3 crore houses have been built for the poor under PM Awas Yojana. Almost 12 cr toilets have been built. All of these steps have ensured that poverty reduced at a faster rate under Modi govt – almost 11.9% annum as opposed to 8.1% under Manmohan Singh government. When the Covid pandemic struck, by distributing free foodgrains to 80 cr Indians for over 2 years, Modi government ensured that extreme poverty was kept below 1% as an IMF report.

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