Modi 2.0 What lies ahead? (Part 2)

Modi 2.0 What lies ahead? (Part 2)

The BJP-led government has to confront a set of deep-rooted economic challenges. Nursing nation’s public sector bank and the economic slowdown will be their immediate priorities. Here are some of the major economic challenges for the Modi government:


Consumption deceleration:

BJP –led government has been able to maintain high GDP growth rate, but the demand in car sales, 2-wheeler sales, tractor sales, non – oil, non – gold, over the past four months has shrunken. Despite low inflation, consumption and investments have declined.


Protect brand India:

The major challenge for Modi 2.0 would be protecting Brand India from the antagonist that will hamper the country from within and outside. The Brand India campaign was initiated to increase the attractiveness of India as an emerging destination for business in various sectors. The PM will have to bridge the gap between expectations and reality for Brand India. 


PSBs and NBFCs:

Gross Non-Performing Assets (NPAs) of PSUs aggregated to Rs. 8.64 trillion (NPAs are those loans which were outstanding for more than 90 days), as of 31st December 2018. In the interim budget presented earlier this year, the government had allocated additional funds for the recapitalization of PSUs. A major challenge faced by the government is to control the bad loans.



In the poll manifesto of 2014, the Modi government promised 2 crores jobs coupled with the slogan of ‘ache din’. But twin – havoc caused by Goods and services tax (GST) and demonetization led to enormous loss of jobs. The after effect of demonetization and GST was loss of 1.1 crore jobs in 2018, according to the Center for Monitoring Indian Economy (CMIE) report. The unemployed crowd is a fast ticking time bomb which is bound to explode if a solution is not found soon enough.


Agricultural crisis:

The primary sector of the Indian economy employs nearly 55% of the total workforce in India. The short term reason for distress in the agrarian sector is due to a fall in food prices. Even though the NDA government had previously implemented the Minimum Selling Price (MSP) regime, the farmers were not able to earn profitable remuneration. Furthermore, the PM Kisan Yojana was launched to provide cash support of Rs.6,000 in three installments in a year to lessen the burden on the farmers (below 6 hectors of land).


The re-elected government has to face bigger issues in the farming sector, that is, to reallocate the farmers in other sectors.


Given the current economic scenario, the Modi government has to think out of the box solution to face these challenges.


Things that will help Modi government to provoke the Indian economy:


  • GST 2.0:

Modi’s poll manifesto spoke about simplifying the GST tax procedure. The current four tax slabs could merge into two slabs. Furthermore, BJP assures lower tax rates, better compliance and increase in the collection of tax.


  • Monetizing public assets:

The government can further look into monetizing the public assets comprising of roads, land, power units and ports.


  • Cities as Growth Engines:

In order to revitalize the smart city mission, the government is required to formulate the urban reforms agenda. Furthermore, BJP should address real estate issues, build new cities and redevelop older cities. 


  • Disinvestments:

The NDA government should plan a selloff programme. The priority should an exit strategy from loss-making PSUs and non-strategic PSUs.


  • A Few Big Banks:

Under Modi 2.0, the merger of major public sector banks into a few big banks could be materialized. For merging sizable banks, the government needs to capitalize on the banks and strengthen their balance sheet.


  • Empower the Kisan:

One way through which the Kisan (farmer) can be empowered is through initiating social welfare programmes, under “Antodaya” (upliftment of the poor). Further, governments can remove all restriction on selling farm products.




The Congress-ruled states Rajasthan, Madhya Pradesh, Chhattisgarh, Karnataka, West Bengal and Trinamool will be a challenge for Modi government. Central sponsored scheme like Ayushman Bharat, Ujwala, and agriculture reforms will run into hurdles with these states. If the schemes turn out to be successful the state leadership will claim credit, while failure in these schemes will be dumped on Modi.




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