The Narendra Modi government completed four years on 26th May 2018. In these four years the Prime Minister has taken many bold decisions for the economic and social progress of India. For businesses these four years have been one of the most fruitful periods ever. A simpler indirect tax regime has been introduced, some significant land and labor reforms were implemented, the Non-Performing Assets(NPA) is being solved by Insolvency and bankruptcy code, corporate tax is low, and as a result the ease of doing business ranking is at an all-time high. The effects of these reforms are visible in the form of the growth of the Indian economy at a healthy 8 percent since last fiscal quarter. There are ongoing efforts to make India a welfare state, some notable examples being the National Health protection scheme, Direct Benefit Transfer of subsidies etc. The historic step of demonetization proved successful in formalizing Indian economy to a large extent and increased the country’s taxpayer base. The direct and indirect tax collection is at an all-time high.
All these are significant achievements of the government but one of least talked accomplishments is how the Modi government has been able to keep inflation rate low in the country.
One of the reasons why the Congress government lost so badly was the high inflation rate prevalent in its last years ranging from 6 to 10 percent.
The inflation rate has been low especially in respect to food inflation. In fact in initial months, the food inflation has been in negative figures, it rose slowly but once again was capped down due to GST. As evident from the map below the contribution of food in overall inflation is coming down since Modi government came to power.
Most of the daily consumer goods have been put in the tax slab of zero to 5 percent due to which food inflation came down significantly.
So, let us cut the chase. Let’s assume that there is a family of four – Mr. Sharma, his wife, his daughter and his son. Mr. Sharma is the sole bread-earner of the family and they live in Lakshmi Nagar in New Delhi.
We attempt to sketch Sharma Family’s expenses in 2014 and compared that with the same in 2018. Please note that we have shortlisted the most common 15 grocery items that find their mention in almost every middle-class family’s shopping list.
Assumptions:
1.) The calculations are based on approximate monthly consumption in a family of four.
2.) The time-period assumed in the calculations is April 2014 and April 2018
3.) The prices have been sourced from http://agmarknet.nic.in and farmer.gov.in
Note: The prices are the spot “Mandi” prices for the mentioned time period.
Therefore an average middle class family of four is actually saving 145 rupees a month on Food and Kirana items, while the average income of families have grown proportionate to the economic growth of the country which is between 7 to 8 percent per year.
The food prices in the country became significantly low level especially in the post-demonetization period despite upward rally in global commodity prices. Demonetization broke the spine of illegal hoarding networks, as the hoarders did not have enough cash to hoard commodities for a long time period.
Earlier these hoarders used to purchase products in bulk when they were cheap and sell the same when the prices moved north. This activity could not continue in post demonetization period due to cash crunch and more transparency in economy.
Therefore, it’s very easy to conclude that since Modi government came to power, the household expenditure of families have decreased while the income has gone upwards, all thanks to low food inflation. This is also evident from the growing purchase of vehicles (Four wheelers and two wheelers), investment in real estate, jewelery etc. So, it will be safe to assume that the Sharma family probably has a car now that they didn’t have in 2014. Mrs. Sharma must have brought a new necklace last Dhanteras and the kids get to go to water parks more often now.
Good for the Sharmas, and the crores of other families like them. The quality of life in the country has surely improved, thanks to a visionary government.