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Modi's "Hindu" economics: Development sans investment? Calling bluff from officially-released facts

By Hemantkumar Shah*
Capital investment is essential for development. Production, and thereby national and people's income, increase when small and big companies and enterprises make investment. Yet the fact is, under the Modi regime capital investment is not going up.
In 2016-17 Gross Fixed Capital Formation (GFCF), that is investment in machinery, was 28.5% of national income, i.e. GDP. It remained at the same level in 2017-18.
After Modi came to power, the base year for this calculation was changed to 2011-12. With that base year, the Average Annual Growth Rate (AAGR) of GFCF during two year period of 2012-14 was 11.20%.
With the previous base year of 2004-05, for the eight-year period of 2004-12, the AAGR of GFCF remained at 20.57%. If we take in to account the 10-year period, it works out to 15.88%.
During the Modi regime of four years, 2014-18, the AAGR of GFCF was just 2.09%. In 2016-17, it reduced by 6.13%! It was Rs. 40.03 lakh crore in the previous year and reduced to 37.98 lakh crore in 2016-17!
These figures show that the Modi government has failed in attracting small or big, Indian or foreign investment in the country.
Is this Modi's Hindu economics? Clearly, the claim of Modi government is wrong when he says that in 60 years nothing has been done and only he is developing India.

Foreign direct investment

It is claimed that Narendra Modi successfully attracted foreign investment in India by touring various countries in the world during last four years. This is another great bluff. Let us examine the facts:
The 2006-07 year was a watershed year for Foreign Direct Investment (FDI) in India, when FDi went up by 2.5 times of the previous year. Since then it went up continuously.
The above table shows that the AAGR was highest during 2004-14 period in the 21st century. During Modi's regime it was reduced to an almost half of it, and it went further down to 8% in 2016-17 and mere 3% last year.
This simply means that foreign companies do not see India as an attractive destination for investment under Modi regime.

Rupee's decay

During the 2014 Lok Sabha elections campaign, it was claimed that the Indian rupee will be brought to level of 40 with respect to one US$, if Modi comes to power. It has now been proved beyond any doubt that it was a bluff par excellence, propagated by Modi himself and his bhakts.
When Modi assumed power on May 26, 2014, the exchange rate was Rs. 58.73. On June 28, 2018, it was Rs 69.10. Thus, average annual rate of depreciation works out to be 4.41%.
The exchange rate was Rs. 45.32 in 2004. Thus, the average annual rate of depreciation of value of Indian Rupee was 2.96 % for the 10-year rule of Manmohan Singh.
It shows that Indian Rupee has been comparatively devalued with higher speed in last four years of the Modi raj!
(Sources: Reserve Bank of India; A note dated 31-05-2018, published by the Department of Statistics and Programme Implementation, Government of India; Department of Industrial Policy and Promotion, Government of India)
---
*Professor of economics, Gujarat University

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