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

• Published date: 01 January 2019
• Date: 01 January 2019
• DOI: http://doi.org/10.1111/aepr.12238
• Author: Toru Nishihama

Comment on “Modinomics: Design,

Implementation, Outcomes and Prospects”

Toru NISHIHAMA†

Dai-ichi Life Research Institute

JEL codes: O00, O10, O50, Q01

Accepted: 9 July 2018

Jha (2018) defines “Modinomics”as a series of economic policies and reforms that lead

the Indian economy to growth with “everyone’s participation, everyone’s progress”

under the Modi administration. Global financial markets have strong expectations that

the Modi administration will makes a breakthrough against the economic slowdown in

recent years. The budget for FY 2018-19 is the last one of the first term of the Modi

administration. Therefore, Modinomics is at a stage where an evaluation of whether its

methods are appropriate and effective.

Jha (2018) explains Modinomics from the viewpoint of the necessity and its structure, an d

evaluates its outcomes and future prospects. In particular, the concrete methods and expected

results of demonetization and the introduction of the Goods and Services Tax (GST), which

Jha considers critical for structural reforms, are elaborated on in detail. In addition, Jha

explains the series of economic reforms implemented under the Vajpayee and Singh adminis-

trations preceding Modinomics, and the reasons why the second term of Singh administration

fell into “policy paralysis.”Learning from the deadlock of its predecessor, the Modi adminis-

tration has paid attention to the environment for implementing economic reforms.

The demonetization has the clear result of highlighting the informal sector and wid-

ening the tax base for fiscal consolidation. According to financial inclusion, many house-

holds now have opportunities to access the banking sector, and the government bond

market has been deepened. However, the sudden announcement and implementation of

demonetization caused confusion in the economy, and the government was forced to

make adjustments to its implementation. In combination with the government’s slogan

of a “Digital India,”the shock has been settled earlier, and the reduction of transaction

costs for all economic activities may stimulate the economy. However, the latest data

shows the amount of notes and bills in circulation is now greater than that before the

demonetization, and this may mean economic digitization is still only half achieved.

The introduction of the GST is the reform that has progressed the most among the

reforms of the Modi administration. A value added tax (VAT) tends to be regressive in

many countries, but the Modi administration has designed the system to ease the tax

burden for the low income class, and is still making adjustments for its smooth

†Correspondence: ToruNishihama, EconomicResearch Department, Dai-ichiLife Research Institute

Inc., 1-13-1Yuraku-cho Chiyoda-ku, Tokyo100-0006, Japan. Email:nisihama@dlri.dai-ichi-life.co.jp

44 © 2018 Japan Center for Economic Research

doi: 10.1111/aepr.12238 Asian Economic Policy Review (2019) 14, 44–45