The second anniversary of the Narendra Modi-led National Democratic Alliance government at the Centre is fast approaching. Since Mr Modi took office as prime minister on May 26, 2014, his government has been at pains to communicate the work that it has been doing. But it was sworn in with such giant expectations following the unprecedented mandate that it received that some disappointment was perhaps inevitable. Its social policies have proved somewhat controversial, but many agree that the specific focus of the NDA government was to be economic - the resumption of a high growth path, and the creation of jobs. Judged on that front, how has the government performed? And is disappointment objectively justified?
There have certainly been many steps forward under the Modi government. Most importantly, steps have been taken to strengthen India's institutional structure in the area of economic policy. The agreement on a monetary policy framework signed with the Reserve Bank of India is one such. It would hopefully see India's monetary policy being set in a more predictable, institutionalised and broad-based manner. Some other major changes have been introduced recently. The Insolvency and Bankruptcy Code has been passed by Parliament in the last session. Although much work remains to be done in creating the infrastructure and ecosystem that will give this ambitious reform support, it is a major and important step forward in improving the flexibility of capital. An agreement to amend India's decades-old double tax avoidance treaty with Mauritius has been signed recently - which, although it focuses only on shares, may help allay some of the fears that the capital pouring in through the island nation was simply "round-tripped" black money. Other measures have also been taken, especially on foreign direct investment - some long-pending, such as in the insurance sector, and some newer focuses, such as in defence.
However, it is also true that - bankruptcy code apart - the larger structural reform agenda remains untouched. The need is to increase the flexibility of Indian factor markets, but labour and land laws remain largely unchanged even as the Centre seems to be relying more on states to bring about necessary changes in these laws. The biggest reform on the agenda was, of course, the goods and services tax; but the government has signally failed to bring the Opposition on board in order to allow the necessary amendment to the Constitution to pass. Draconian and capricious tax administration - which was denounced as "tax terrorism" by many, including some in the current dispensation - needs to be further reformed, but plans to do so are still in the nascent stages. Troubled public-sector banks have been provided a greater measure of operational independence, but formal government control has not been diluted. There have also been a series of unnecessary and ignominious roll-backs of progressive measures - starting from the increase in suburban rail fare shortly after the government took office, and continuing most recently with the rollback of changes to the employee provident fund regulations.
Overall, the numbers for the Modi government look solid - India's macro-economic state certainly seems better than it did two years ago and the government's commitment to a path of fiscal consolidation is commendable. But a great deal of that is due to lower oil and commodity prices. Private investment is yet to recover and restore the economy to a high growth path. Public infrastructure investment and management has seen lots of action - particularly coal, power and roads - but the effects of this are still to be seen in most sectors. Overall, the government's economic record has been mixed, and a great deal remains to be done.
