The Modi engine continues to steamroll 11 years on

Anniversaries are often occasions for a pat on the back. After 11 years of the Narendra Modi government some of the encomiums are well-deserved even if one ignores the noise that accompanies such events.

If one were to list individual achievements—the success of government schemes and other milestones—one could indulge in a considerably long exercise. A much more fruitful classification rests on a tripod of economic progress, the country’s security situation and India’s standing in the world. On all three legs, India stands strong.

The signal economic achievement of the Modi government is its success in ensuring that India’s investment growth continues to race ahead, irrespective of the political and economic constraints. This has been recognised by everyone—cutting across political lines—as the essential ingredient of economic growth. The key constraint here—always—is that precious little is left after distribution among the many claiming groups across the country. Major subsidies cannot be reduced below a certain threshold nor can expenditures on defence and committed items (salaries and pensions). There is only that much that can be re-jigged. This is the iron law of Indian political economy.

But here is where Modi and his team have produced a miracle of sorts. In the 10 years between 2016-17 and the current fiscal (2025-26), capital expenditure has grown by leaps and bounds. Effective capital expenditure—capital expenditure plus grants-in-aid for creating capital assets—increased from 2.9% of GDP to 4.3% of GDP. This might not seem magical until one considers the nature of Indian politics where the urge and instinct for distribution overpowers everything else. Given the extremely polarized and short-sighted nature of politics, it is nothing short of a miracle that such sums have been devoted for investment. The decadal average for Gross Fixed Capital Formation (GFCF) (from 2014-15 to 2024-25) is 31.9% of GDP (2011-12 prices). This is not a mean achievement. India has known periods of higher GFCF, for example between 2006-7 and 2012-13. But that was probably the last hurrah of globalization when capital flows and borrowings were more or less unfettered. Domestically, the bill came due by 2014 when the twin balance sheet crisis hit India. It took some large infusions of money into the banking system and the creation of an overarching legal framework to resolve these problems (the Insolvency and Bankruptcy Code legislated in 2016). The hangover took a while to end.

By that time the world was a very different place. Globalization was as good as dead by the time Donald Trump became the US President for the first time. But the worst was yet to come. The Covid 19 pandemic in 2020-22 was a once in a century outbreak that caught the world by surprise. Barely had the pandemic begun to subside that the Ukraine War started early in 2022. These events took a toll on all countries across the world but India managed the situation much better than many others. For one, it pushed local manufacturing of vaccines instead of relying on the prohibitively expensive foreign variants. For another, Modi was very clear in not indulging in a generalised economic stimulus. Both steps helped India immensely. By March 2023, more than 2.2 billion doses of the vaccine had been administered. While many economists and opposition politicians made a mindless case for a stimulus, the Modi government resisted that step. By early 2024, when most countries that had spent their way through the pandemic years were forced to raise interest rates as inflation ravaged them, India was poised for a growth take-off. The growth rates of since 2022 testify to the sagacity of those decisions.

A $4 trillion plus economy growing at 6.5% is a situation that most countries will envy. But under Modi, India does not have the time to pause for self-congratulatory breaks. The goal now is to clear the roadblocks and get to a $7 trillion GDP level.

When Modi made the determination to take India to the $5 trillion GDP level in September 2018, he was scoffed at. Some economists and the usual commentators said this would “happen on its own.” Others, especially the Opposition parties, considered the goal itself to be impossible. That mark is now in sight even if there has been a delay on the way.

Naysayers—and there are plenty to be found in India and abroad—are wary of India touching those dizzying economic heights. Their reasons, mostly malevolent, need not detain us here.

In a world where globalization has come to an end—at least as it was practiced since 1991—every country has to fend for itself. India, in particular, is in a very difficult neighbourhood. It is flanked by Pakistan and China, the two countries with which it has been to war in the past and who continue their war-like approach right to the present moment. Bangladesh can now be added to the list. Its interim ruler, Muhammad Yunus, routinely describes India’s North-East in terms that are hostile. That is but to be expected from an impoverished and demographically challenged country.

Meeting these challenges requires India to be a very robust economy. This is over and above the goal of India as Viksit Bharat BY 2047. If the dream of becoming a developed country is to materialise, India needs to grow not only to ensure better living standards and opportunities for its people but also to keep its enemies at bay. The challenge for India is to find the resources to invest in its future as well as find the inspiration to imagine that it can reach that goal. Under Modi there is a chance that India will reach that destination.

Extreme poverty in India dips to 5.2%
171 million uplifted over a decade in the country

The World Bank (WB) has recently updated its global poverty line upward from $2.15 per person per day to $3 per person per day. Even after the new poverty line being raised upward, India has seen a remarkable reduction in poverty.

At the $2.15 poverty line, India’s poverty rate was 16.22% in 2011-12. This meant that around 205.9 million Indians were below the poverty line in 2011-12. Using the same yardstick, the poverty rate fell to 2.35% in 2022-23 implying that only 33.6 million Indians were poor.

Once the new poverty line, $3 per person per day, is used, India’s poverty rate stood at 27.12% in 2011-12 and the number of poor persons was 344.4 million. By the new measure, India’s poverty rate climbed down to 5.25% in 2022-23 or 75.2 million poor persons.

Under both poverty measurements the number of poor has come down drastically between 2011-12 and 2022-23

economic achievementsGDP growthgovernanceNarendra Modipoverty