Article written by jain and govil - astute political observers
This is the second part of the multi-part series where, like always, we will review the promises made and published by Modi government as part of their 2014 election manifesto and how has his government lived up to the promises.
In the previous article, we touched upon two of these promises, namely, Basic Amenities to All and Involved Woman. In this article we will touch upon three additional promises – Vibrant and Participatory Democracy, Empowered and Inspired People and Productive Youth.
A copy of the full manifesto can be downloaded here: http://www.bjp.org/images/pdf_2014/full_manifesto_english_07.04.2014.pdf
The three promises, selected for this article, are intricately linked. Linkage comes by way of creating financial infrastructure, creating demand for goods and services and executing high visibility and moral boosting projects.
Let me expand on this based on my real-life experience. I was travelling to India and I took a taxi from a service called “Ola” taxis. During the journey, we got talking and I asked if driving the taxi was enough to pay for living expenses. The driver was young and was very open. He said “yes”. I then asked him if it would be better in terms of making money to join a company. His answer startled me and made me realize how far India has come in creating empowered and productive youth. He said, “well, initially I was just a driver and now Modiji has made it very easy to get small loans to start your own business. I took the loan and I am now the owner of this taxi”. He further explained that he is about to pay off his full loan and is now qualified to get medium size loan and he plans to buy 3 more taxis and hire 3 drivers. This is what empowerment of people is all about. Three people that this Ola driver will hire could in turn start their own business or if not qualified can at least have a decent living. Alternative scenario would have been for them to remain unemployed and unproductive. Also to be noted that only 10% employment in India comes from the organized sector and 90% of the employment comes from avenue such as these called unorganized sector.
Second example that I would like to highlight is that in India on every train station there are street food vendors who serve the customers when the train is making stops. Since the train stops are generally brief, they have to be very fast and window of selling the food is rather limited. One street food vendor who was very popular took out a micro loan and started packaging the food and keeping it ready when the train pulls in. He also bought a food trolley so that he could have one of his assistants deliver the food while passengers are sitting in the train. What started as a personal initiative is now inspiring other to follow the suit and it is rapidly expanding into a business model that is gaining increasing adoption rate. This is now creating entrepreneurs! It is estimated that his income is well over INR 3 crore ($420,000) per year – belonging to rich class by any standards. Another development in this sector is that people have developed mobile apps allowing the passengers to order the food from the restaurants while travelling in the train and the food gets delivered. Food delivery is labor intensive and is giving employment to youths who can chose to spend part time, full time or overtime! The growth of this sector can be seen from the exponential increase in the business of service providers such as Zomato, Ziggy, Food Panda etc.
In these two simple real-life examples we see that they are becoming job giver from job seeker. The model of “job giver” and not just “job seeker” distinguishes Modi in its long-term planning and strategic vision. Entrepreneurship, along with empowerment through reduced bureaucracy and corruption, is what gives a nation a sustained development, growth, and innovation environment. As discussed, below, the MUDRA scheme disbursed over $100 billion of loans to entrepreneurs – almost 25% compared to national capital expense budget!
The chart, below, in itself suggests how the India economy through its democracy is becoming more vibrant through the empowerment of the youth. Reflection of empowerment of the youth comes by way of analyzing the data on microloans called Micro Units Development & Refinance Agency Limited (MUDRA). Since the launch of this scheme in 2015, over $105 billion worth of loans have been sanctioned and 95% of which has been disbursed.
Source: https://www.mudra.org.in/
To understand how this results in creating a vibrant and participatory democracy, one must first understand the concept of “Money Velocity” and how the increase in money velocity creates vibrancy in economy.
Increasing Money Velocity
The velocity of money is the rate at which money is exchanged from one transaction to another. It also refers to how much a unit of currency is used in a given period of time. Simply put, it's the rate at which people spend money. While there are different measures of money velocity such as M1 (all cash and notes in circulation), M2 (M1 plus savings and time deposits), M3(M2 plus large deposits and institutional money funds), M1 supply matters the most when we speak of economic vibrancy as the money supply has a direct correlation to the GDP. Given below is the chart of how the M1 money supply in India has increased over time.
It may be noted that the temporary dip in 2016-2017 in money supply was primarily due to the demonetization initiative that the BJP government undertook. A Couple of other points to note is that if there was an artificial printing of the money without a demand of goods and services then this would reflect in the inflation rate but if there was a true growth through participatory economic development then the inflation rate would not increase in proportion to money supply but instead there will be a demand for new and existing goods and services. The chart below suggests that year-over-year inflation rate is on a constant decline and decline in inflation rate has accelerated through the initiatives of the Modi Government. Please note that the Modi government came into power only in May 2014. So credit can only be given to drop of inflation from 5.8%.
The Second point is to understand that the hoarding of cash outside of the banking system, even though classified as M1, doesn’t trigger growth. So, for banks to lend money to increase the money rotation, citizens have to be depositing money in the banking system. The Graph below clearly indicates that the rate of lending by banks has substantially increased over time which is reflected in the growth of the number of people with accounts in the banking system and the amount deposited to the tune of $12 billion, which was almost all of was hoarded outside the banking system.
The net result of creating this financial infrastructure is an explosion in goods and services that is now available to masses at a very affordable rate. Today, you can pretty much have anything, and everything delivered to your home which includes services such as home cooking, home cleaning, handy-man etc. Handy-man services such as plumbing, electric work, etc. were available earlier also but now they have become part of successful business model integrated with the convenience of internet and mobile payments. This, in our opinion, is just a start of the innovation revolution as people now realize that they can do it and they can succeed. This increases the employment, creates value and reduces the ills of unproductive youth.
Now let’s talk about how people inspiration. Inspiration is an emotional state of mind. Part of it is “organic” where someone does the unthinkable that inspires others to do the same. And part of it is “visionary” where it makes people think that all along, they were not achieving higher scales because they thought that they could never do it and that is the state of mind that the Modi government changed through very bold and visionary projects.
Inspiring people through inspirational projects
Inspiration is not a single dimension but multi-dimensional. People are inspired through actions abroad, make in India, recognition of our heritage and giving awards to national figures, and inspirational projects. Some of the ambitious projects that have been undertaken and completed by the Modi government are mentioned below.
From science and technology perspective, India made a world record when it launched 104 satellites in a single launch through its indigenously developed cryogenic rocket engines.
“I was shocked the other day to read that India, on one rocket launch, deposited more than 100 satellites in space,” former Senator Dan Coats told lawmakers during his confirmation hearing for the position of Director of National Intelligence.
BBC reports “India has created history by successfully launching 104 satellites on a single mission, overtaking the previous record of 37 satellites launched by Russia in 2014.”
Through ISRO (equivalent to NASA in the USA), India became amongst a handful of nations to have an unmanned flight go to Moon and to Mars. In fact, India was the first Asian nation to send a probe to Mars.
In the area of construction, India completed the construction of the world’s tallest statue called “Statue of Unity”.
In the area of engineering and manufacturing, India created a world record in building a modern engineless train in just 18 months from blueprint to launch of the train service. The train is known as TRAIN 18 and is currently the fastest train on tracks.
These projects are creating a whole new eco-system of productivity that wasn’t possible earlier on.
Inspiration is contagious and we are seeing that the level of optimism across the board has increased which automatically results in higher performance. We are seeing that in the arena of sports, speed of completion of new projects, cleanliness etc.
In conclusion, number of people who are paying the taxes by virtue of having an income and the amount of tax revenue which has doubled in last 4 years is a good indicator that these promises have been met with an astounding success and impact of these policies will continue to be felt in time to come.
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