At the end of Prime Minister Narendra Modi’s five-year term, he leaves the Indian economy more or less where he found it: on the slow lane.

Joblessness continues to be a thorn in the flesh of the country, even as overall growth has slowed down. Foreign portfolio investors are pulling out, and the Indian rupee is on a weak footing. On the flip side, the government has managed to rein in both inflation and the country’s fiscal deficit.

The election results, to be declared on May 23, will determine whether good economics matters for good politics. In the meantime, here’s what the numbers reveal about the Modi government’s economic performance.

Growth pangs

To pull millions out of poverty, India’s GDP needs to grow faster than even 7%.

For the quarter ended October-December 2018, the growth rate stood at 6.6% and any marked improvement has been ruled out in the ongoing financial quarter as well. Therefore, India’s Central Statistics Office has revised the country’s estimated GDP growth downwards to 7% for this financial year – the slowest under team Modi. The earlier estimate was 7.2%.

In January 2015, India recalibrated its GDP growth series data. Based on this, in August, the Ministry of Statistics and Programme Implementation revised past GDP numbers. The data revealed that growth during the previous Congress-led United Progressive Alliance’s term averaged around 8.1%, higher than the 7.3% in the first four years of the current government.

This sparked a political debate and Ministry of Statistics and Programme Implementation later added a caveat saying the data is not final.

In November, the government think-tank Niti Aayog and Central Statistics Office downgraded growth during the UPA years. The first four years of the current government now showed higher average growth (7.4%) than during the UPA era (6.7%). The Modi government disregarded the August numbers as experimental, sparking opposition fury that questioned the sanctity of the numbers.

The GDP debate aside, lower consumer spending, sluggish investments, and slower growth in agriculture and manufacturing, are retarding growth. These issues are bound to be flash points as campaigning peaks.


Fiscal woes

The UPA government had been severely criticised for its lack of fiscal prudence. In 2004-’05, when it came to power, the fiscal deficit was 3.88%, down from 4.48% in the previous year. However, in 2012-’13, this ballooned to 4.9%. Fiscal deficit is the value of the government’s expenditures over revenues and a gauge of economic health.

In comparison, the Modi government seems to be doing better, even if it had to give its initial fiscal deficit target of 3.3% for this financial year a miss. In the interim budget this year, the figure was revised to 3.4%. However, economists are not very sure even this target will be met and there are concerns it may stubbornly stick to the current 3.5% levels.

The government may not have achieved even the current fiscal deficit, if not for the Rs 28,000 crore ($4 billion) that the central bank transferred as interim dividend for financial year 2018-’19. The move hasn’t been termed prudent by economists. The opposition parties accused the government of accounting jugglery to meet disinvestment targets and keep fiscal deficit under check.

“There have been farm loan waivers, populist measures in the budget, and a shortfall in revenue and still fiscal deficit is under check. (This is) a wonder and just forces one to think how is the government actually managing to do it,” said an economist with a rating agency, requesting anonymity.


Falling investments

One important reason GDP growth has been faltering is the sombre investment environment.

Investments into new projects in the quarter ended December 31, 2018, stood at their lowest level since Modi took charge, according to the Centre for Monitoring Indian Economy, a think tank that tracks economic data.

This is a far cry from the ruling BJP’s electoral promise of bringing in fresh investment and kick-starting stalled projects to spur growth. In fact, in October-December 2018, the value of stalled projects shot up to Rs 3.18 lakh crore, the second highest in the current government’s tenure.

Given this is an election year, uncertainty will continue to keep investors at bay, and the situation is expected to deteriorate further, believe economists.

This also showcases the failure of the Indian government to implement its Make in India programme, which aimed to make the country a manufacturing hub and spur investments. “It (Make in India) started off with a lot of fanfare but has not managed to take things off the ground. We don’t seem to have a comprehensible plan for local production of goods or services,” said Abheek Barua, chief economist of HDFC Bank.

Data: CMIE

Inflation check

Slowing rural growth, softening international commodity prices, and erratic monsoons have taken a toll on Indian farmers in certain geographies. Farm income has slumped to a 14-year low and even the non-farm wage growth has slowed down which paints an even bleaker picture of the state of the rural economy.

Despite this, the Modi government has managed to keep inflation in check. “It is an achievement of the current government as prices of essential items have not shot through the roof,” Devendra Kumar Pant, chief economist at India Ratings, told Quartz.

It is important to note that even the Reserve Bank of India, besides the government, plays a role in this. The central bank has an inflation target of 4%, plus or minus 2%, which it keenly tracks because it is a key factor in determining interest rates.

Data: RBI

Ease of doing business

Under Modi, India has managed to become a better place to do business. In 2018, India secured the 77th rank among 190 nations in the World Bank’s ease of doing business index. This was a leap of 23 spots from 2017.

India’s ranking on the index improved 65 places under Modi as his government made it easier for companies to start a business or trade across borders. Now India ranks in the top 25 countries in parameters including getting electricity, getting credit, and protecting minority investors.

By 2020, India aims to reach the 30th position.

FPI inflows

Yet, foreign investors have been pulling out.

In the first six months of 2018, foreign portfolio outflows from India amounted to nearly Rs 50,000 crore – the steepest in a decade. The situation hasn’t changed since then.

“Capital flow to developing economies has been slowing down due to a strong dollar and increasing yields in the US and it is a global phenomenon,” explained Pant. But there are weaknesses in the Indian economy as well, which has made things worse.

“Foreign investors keenly watch to see that there are no political or economic uncertainties, which we have seen in the case of India. There have been some policy flip-flops, like in the case of angel tax or e-commerce (regulations) which can drive away global funds,” he added.

Data: NSE


One of the most important factors that helped Modi secure a thumping majority in 2014 was his promise of adding 10 million new jobs if voted to office. Five years later, his failure on that front could potentially prove to be his undoing.

Two of the government’s biggest decisions, demonetisation (November 2016) and rolling out the goods and services tax regime in July 2017 have been blamed for growing unemployment.

In fact, the situation was so grim that unemployment rose to a 45-year high of 6.1% in 2017-’18, according to a government survey, cited by the Business Standard newspaper recently.

This is a huge red flag for a country expected to add over 280 million people to the job market by 2050. In fact, the country needs to create 8.1 million jobs a year to maintain its current employment rate, a World Bank report had pointed out.

“This is one of the most critical factors that can play on voters’ minds as India has been stuck in a position of jobless economic growth for a while and the government has not been able to reverse it,” added Barua.

This article first appeared on Quartz.