Modinomics at Four

By Arvind Panagariya

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When Prime Minister Narendra Modi took office in May 2014, India faced major economic challenges. Growth had plummeted to 5.9 percent during the last two years of the outgoing government, down from a nine-year average of 8.2 percent. During the same two years, inflation had averaged 9.7 percent. Meanwhile, the government was in the grip of paralysis, unable to rein in corruption or complete large projects and in need of key structural reforms.

Four years later, the Modi government has largely succeeded in addressing these problems. On average, inflation has come down to 4.3 percent and growth has climbed to 7.3 percent over the last four years. Bold steps such as the demonetization program in November 2016 have been effective in curbing corruption. And the government has introduced numerous efficiency-enhancing initiatives, such as the replacement of a complex set of central- and state-level taxes with a single goods and services tax (GST). Taken together, these policies put India on the path to long-term growth and prosperity.

BOOSTING EFFICIENCY

One of Modi’s main points of focus since taking office has been improving governance and efficiency. The last two years of the outgoing government under Prime Minister Manmohan Singh had been characterized by deep paralysis. Large projects had been stalled due to a lack of coordination among different ministries and inordinate delays in environmental clearance. Upon taking office, Modi directly intervened to speed up clearances and decision-making. He instituted a process whereby he himself regularly presides over meetings of senior staff members of ministries relevant to making decisions on specific projects and policy issues.

Early in its tenure, the government also made a major effort at the level of the states to simplify and digitize various clearances for businesses. That effort led to the unprecedented jump in India’s position in the World Bank Ease of Doing Business rankings from 140to 100 between 2014 and 2018. In parallel, the government has also taken steps to simplify citizens’ lives. In the past, job and school applicants had to go through a cumbersome process