Modinomics 2.0

Modi was reluctant to breach the fiscal deficit and open himself to the charge of fiscal profligacy and the economy to a ratings downgrade

NARENDRA MODI BEGAN HIS SECOND TERM as prime minister with a series of big-bang reforms. In quick succession, he took decisions on long-pending major issues, including ending the special status of Jammu and Kashmir under Article 370 of the Constitution, making massive cuts in the corporate tax rate to boost business and appointing a chief of defence staff to streamline the armed forces. In December, he rammed through the controversial Citizenship (Amendment) Act (CAA) in Parliament to enable non-Muslim minorities in three neighbouring Islamic countries to apply for Indian citizenship.

Modi was expected to keep up the momentum when it came to dealing with the debilitating slowdown in the economy. After all, his government was staring at an 11-year low in the growth of the country’s Gross Domestic Product (GDP). Budget 2020 was seen as the Modi government’s best chance to course-correct and bring the economy back on track before it began to irreversibly damage the government’s credibility. Yet, after Union finance minister Nirmala Sitharaman delivered her exhaustive (and exhausting) budget speech in Parliament on February 1, many specialists, including the Board), were clear that it came nowhere close to being a breakthrough budget. Instead, the conclusion was that while the budget had a clutch of promising initiatives across various sectors, collectively, it had fallen far short of expectations. Worse, serious doubts were raised about the government’s ability to fund its multifarious initiatives and incentives.