Comment on “Modinomics: Design, Implementation, Outcomes and Prospects”

• DOI: http://doi.org/10.1111/aepr.12237
• Published date: 01 January 2019
• Date: 01 January 2019

Comment on “Modinomics: Design,

Implementation, Outcomes and Prospects”

Mohamed ARIFF†

International Center for Education in Islamic Finance (INCEIF), Global University of Islamic Finance

JEL codes: O00, O10, O50, Q01

Accepted: 27 June 2018

The term “Modinomics”embodies the essence of Indian Prime Minister Narendra

Modi’s economic policies. Jha (2018) explains how Modinomics is reshaping the

Indian economy through a slew of economic reforms and a series of bold measures

aimed at “participatory development.”All this sounds like music to the ears.

Jha (2018) paints an overtly rosy picture of the Indian economy under Modi’s lead-

ership and administration. The narration is quite informative and fairly persuasive.

However, it reads more like an official document than a scholarly piece, which gives

the impression that it is not unbiased.

All this is not to deny the usefulness of Jha (2018), as it provides helpful snapshots

of changes in the key macroeconomic indicators. However, all these are no more than

descriptive statistics which, in the absence of rigorous analysis, can shed no light on

the causal relationship between policy changes and final outcomes. It is too premature

to ascertain econometrically if the double-digit growth of Indian exports in recent

times is attributable mainly to Modinomics or favorable external factors. In this regard,

it is pertinent to point out that India, as an oil importer, has benefited much from the

terms-of-trade gains, thanks to the fall in oil prices.

The record on “cooperative federalism,”a mantra of Modi’s government, is mixed.

A notable milestone in the federal-state relationship was the increase in the states’

share in the central taxes from the previous 32% to the current 42%. Also laudable was

the sharp reduction by more than one-half in the centrally sponsored schemes, giving

the states more freedom in tailoring the schemes to suit their own needs. Of the

29 states in India, 19 are ruled by Modi’s Bharatiya Janata Party (BJP) or its coalition

partners. Apparently, there is little cooperative federalism sentiment on the ground in

the states under the opposition rule. A case in point is the cesses and surcharges levied,

to deny these states their share of additional tax revenues at the center. Several state

governments are facing serious crunches in resources for their own development and

welfare programs. What is more, the imposition of Presidential rule in two states,

†Correspondence: Mohamed Ariff, International Center for Education in Islamic Finance

(INCEIF), Global University of Islamic Finance, Lorong Universiti A, 59100 Kuala Lumpur,

Malaysia. Email: ariff@inceif.org

42 © 2018 Japan Center for Economic Research

doi: 10.1111/aepr.12237 Asian Economic Policy Review (2019) 14, 42–43