Economy - The Hope And The Worry

In the third year of PM Modi’s second term and two years into the pandemic, a majority of Indians continue to have faith in the Centre’s handling of the economy. However, high inflation, a lack of jobs and shrinking incomes mar any rosy outlook

M.G. Arun & Shwweta Punj

Prime Minister Narendra Modi’s second term has been filled with challenges, foremost among them being the Covid-19 pandemic, which upended India’s economy, dragging growth into the negative, stoking both inflation and unemployment. Everyday Indians have suffered immense hardship, with successive waves of Covid-19 taking a toll on both lives and livelihoods. However, despite the suffering, Prime Minister Modi seems to have retained public support, be it for his handling of the pandemic or economic management. Though optimism about his handling of the economy had dropped significantly in the previous MOTN (Mood of the Nation) survey in August, it has risen this time around. What seems to have worked in his favour are the slew of welfare schemes and policy measures that have, to some extent, addressed the pain in most sectors. The economy rebounded in the second quarter of 2021-22 as business activity returned to pre-Covid levels. However, with the arrival of the fast-spreading Omicron variant, business activity has once again come under a pall of gloom.

In the current MOTN poll, over half the respondents rated the NDA government’s handling of the economy as ‘outstanding’ or ‘good’. However, this is tempered by the fact that as many as 26.4 per cent rated it as ‘poor’ or ‘very poor’. Also, only 64 per cent of respondents said their economic status had remained the same or improved since Narendra Modi took charge as prime minister, down from the nearly 76 per cent that reported a status quo or economic improvement in August 2021.

The survey was conducted in the backdrop of some persistent economic problems—for one, India’s benchmark inflation rate, measured by the CPI (consumer price index), rose to 5.59 per cent in December 2021, the highest in five months. The country’s unemployment rate was at a four-month high in December, at 7.91 per cent, up from 7 per cent and 7.75 per cent in November and October, according to data from CMIE (Centre for Monitoring Indian Economy). The urban unemployment rate rose to 9.3 per cent in December, while rural employment stood at 7.28 per cent, a significant rise from the 8.21 per cent and 6.44 per cent recorded in November. The pandemic continues to hurt the services sector, with curbs to control crowding denting firms in retail and hospitality.

In terms of future expectations, 31.1 per cent of respondents said they saw the economy improving in the next six months, while 21.9 per cent were of the opinion that it would remain the same. While 29.2 per cent said it would get worse, this was down from the 32 per cent who said so in August 2021. On incomes, an overwhelming 30.1 per cent of respondents were optimistic about their incomes improving, nearly double the 17 per cent in August. At the same time, 27.3 per cent believed their incomes would remain the same (down from 45 per cent in August), while 28.9 per cent expected their income to fall (down from 34 per cent).