Opposition parties, a few NGOs, and global market forces are spreading sensational and false narratives about India’s economy under PM Modi to instil fear in the common individuals, causing him/her to revolt against the government and teach lessons during various elections. Fake economic narratives include: 1. The Modi government’s hefty loans will be responsible for the economy’s decline in future. 2. India will soon be an economically failing nation.
When Narendra Modi took over as Prime Minister in 2014, India’s GDP had been 1.7 trillion dollars during the first 64 years, and it had risen to 4 trillion dollars in the last decade under PM Modi’s leadership. This demonstrates the widespread dissemination of false narratives by opposition parties and other people seeking to destabilise governments. After PM Narendra Modi took over the Reins from 2014 onwards, Bharat has not taken a Single-blind loan without matching the feasibility to repay on Calculated term loans & the contrary has repaid nearly 35 per cent of the past governments loans to World Bank, ASIAN Bank, etc., in last 10 Yrs of its rule & are now in a position to loan & finance other countries. India’s economy is globally significant. It features a vast, young population and an open, democratic political system. It is presently the world’s third-largest economy (PPP) and a major contributor to global economic growth.
One example of growth: India is home to 111 unicorns, with a combined valuation of $349.67 billion. In 2021, 45 unicorns were born with a total worth of US$ 102.30 billion, while 22 unicorns with a total valuation of $ 29.20 billion were born in 2022. India currently has the third-largest unicorn base in the world. In the coming years, major Debt will be settled – for the past Mistakes & Anomalies Created by the Congress government.
Understanding the concept of Debt
Not all Debt is bad, including personal Debt. For example, someone may have a home loan debt of ₹50 lakhs, but in return, they have an asset of their own home and may live peacefully. While personal Debt is usually negative, organisations and nations incur Debt to support their development.
Having a young tree and a large debt is good because your apple supply will grow. A huge debt with a mature tree is terrible because your earnings will not improve significantly (for example, in Italy). It is exceedingly undesirable to have a dying tree and not have planted a new one when you have a large loan (for example, Japan). Despite its high GDP debt ratio (more than 100 per cent), Singapore has some of the world’s highest ratings. This is because what matters is what you do with the borrowed money. Singapore borrows money and invests it in creating assets, increasing the value of Debt. This is simple economics. As a result, they can repay the Debt and interest while also profiting from it. That is what India is doing: it uses Debt to build infrastructure, increasing its value. India has room to take on additional Debt, which is positive. A growing economy requires a greater quantity of Debt to fund large-scale investments.
What should be prioritised is India’s ability to service its Debt, often known as its “Debt Servicing capacity”. This could be due in part to the Indian government’s ability to negotiate deals in INR rather than USD, thereby protecting against the latter’s appreciation, as well as securing better lending terms and improving India’s foreign reserves as a proportion of total Debt. There is no doubt that India’s external Debt has risen significantly.
However, India’s external Debt has fallen as a percentage of GDP. During the UPA years, the external debt-to-GDP ratio was approximately 24 per cent, but it has since dropped slightly more than 18 per cent. Considering the total Debt of the Indian central government, India is in far better shape than big Western nations. India’s Debt is about 83 per cent of GDP, Japan’s is 261 per cent, and the United States is around 121 per cent. The entire Debt of the American Federal Government is over 34 trillion dollars, whereas that of the Indian Central Government is around 2.06 trillion dollars.
Let us be clear: Debt fuels the world’s economies. However, these loans must be employed for productive purposes, such as capital spending. India need billions of dollars in annual investments, and we do not have that much money, therefore we would take out a loan to fund these projects. We should not be concerned about loans until they are used for capital spending.
We must not forget the Coronavirus years, which raised the Debt of every economy in the world due to significantly higher spending and less revenue. I believe that Indian Debt is under control, and there is no need to be concerned until we expand economically steadily. In 2013, the Prime Landing rate was around 12.5 to 13 per cent, but now 8.4 to 8.75 per cent, indicating that the average Indian’s debt burden has decreased significantly.
Key Points to Understanding Debt-to-GDP
The debt-to-GDP ratio is an equation that uses a country’s gross Debt in the numerator and its GDP in the denominator. A high debt-to-GDP ratio isn’t necessarily bad as long as the country’s economy is expanding because it allows for leverage to boost long-term growth. Debt-to-GDP ratios can cause problems for countries in various ways, including unexpected slowdowns, demographic changes, and wasteful expenditure. Numerous strategies for dealing with a larger debt-to-GDP ratio include reducing government spending, stimulating growth, and increasing tax revenue.
Current status of the financial situation under the leadership of PM Modi
PM Modi and team has worked hard to reduce the Debt through the following means:
With the Insolvency and Bankruptcy Act, the government is now better able to seek the recovery of bank loans (particularly to corporations) made indiscreetly under the previous administration. The current account deficit (CAD) has been narrowed to about 2 per cent. Foreign exchange reserves have increased from USD 304 billion to 681 billion. Intense negotiations resulted in significant savings on defence acquisitions.
The Make in India project promotes indigenous production, domestic investment, and employment generation. For example, the number of mobile sets produced in India has increased from 6 crores to 22.5 crores. The Aadhaar and Jan Dhan schemes have eliminated pilferage and guaranteed that scheme benefits are distributed directly to deserving individuals.
Inflation has been considerably low throughout the period compared to the world’s developed economies. He has ensured that the ordinary man’s money is put to better and more productive use. The government has cleared an oil loan of Rs. 1.30 lakh crores from Iran and a large number of oil bonds from the previous regime. Through demonetisation, the government has recovered Rs. 80,000 crores from tax evaders and brought many tax evaders under its radar, with efforts continuing. GST has been a game changer. It has streamlined the country into a single tax framework, resulting in greater compliance.
Borrowing and repaying are prevalent in all countries; the government’s income source determines repayment. Here, we should learn how much our Indian financial services spend on our current defence, which is critical in dealing with China and Pakistan. This question is intended to criticise Modi’s leadership and lead folks astray.
The Modi government is repaying our Debt, which past governments, mainly congress governments, piled on the heads of all Indians, including ourselves, over several decades due to corruption, misrule, and inefficiency. In most emerging nations, as the economy grows, foreign Debt builds to solve a lack of domestic savings; India is no exception. Economic activity in India influences the buildup of external Debt, reflecting years of policies allowing the private sector to access international Debt.
Given the challenges of policymaking in such a huge, diversified country with a federal government, PM Modi has demonstrated his dedication to the development of 1.4 billion people by implementing timely decisions and policies despite harsh conditions and non-supportive opposition on several occasions. The sluggish economy he inherited in his first term was a significant challenge, but he converted it into a source of positive growth and will be an excellent pathfinder.
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