Economic Challenges that Modi 2.0 will have to tackle

Published: May 23, 2019 at 2:36 pm

The people have spoken and how! The stock market may rejoice at the results of Lok Sabha 2019, but the new government has its work cut out. Modi 2.0 faces many economic challenges,  perhaps because of their own doing: demonetization.

Read about any sector, be it agriculture, auto, consumption, exports, banking, airlines etc, the one word that pops with worrying regularity is “slow down” and naturally this is evident in the GDP growth too.

One worrying doubt is, was the GDP growth in the last two decades driven by a segment of the then middle class whose income grew significantly thanks to liberalization?  And we are now a facing a saturation from this segment while waiting for next strata of society to earn more and consume more?

In other words, a chunk of the middle class has moved to the upper middle class, but the wheel is moving a lot more slowly now for the next batch to move up. If that is the case, then the manufacturing sector requires a huge push, in term of credit and employment and better infrastructure. This is the only way all sections of the society can continuously strive for regular employment, higher income and higher consumption.

The standard of living for a blue-collar Indian worker has improved in the last two decades but an economic slow down might seal off a generations ability to live better and also reduces chances of a better life for the next gen.

On the other hand, Indian agriculture has natural challenges like global warming and man-made challenges like infrastructural expansion. As we want the business that we invest in to beat inflation, we often do not recognize that they do so by destroying biodiversity and our own ability to feed the population.

Stability and possible growth in the agricultural sector is a natural priority of any government. However, it also must balance this with manufacturing growth.  If this new government can trigger growth in both sectors in its first 2-3 years, we can get out of a slump. Can Modi 2.0 do this? I hope so.

Unless India becomes a manufacturing giant in the next 10 years or so, we can forget about dreams of making big returns from the equity market. All types of investors may be keen to add money and drive up stock prices today, but their patience will run out soon.

One the one hand we have the poor electorate who, more than subsidies or freebies, want a steady chance to improve their livelihood and on the other hand, have the big businessmen who have the money and influence to change legislation.

Politicians have conventionally used rhetoric for the former group and appeasement for the latter. It is time to do the opposite.

Reference: Centre for Monitoring Indian Economy

Do share if you found this useful

Did you know? We have more than 900+ videos on YouTube to explore! Join our YouTube Community!

Use our Robo-advisory Excel Template for a start-to-finish financial plan!

Join our courses in exclusive Facebook Groups!

  • 500+ members are now part of our new course, How to get people to pay for your skills! (watch 1st lecture for free). Learn how to get people to pay for your skills! Whether you are a professional or small business owner wanting more clients via online visibility or a salaried person wanting a side income or passive income, we will show how to achieve by showcasing your skills, building a community that trusts you and pays you!
  • 1822 members have signed for Goal-based portfolio management (watch 1st lecture for free). This is an online course to reduce fear, uncertainty and doubt while investing for a financial goal. Learn how to plan for your goals before and after retirement with confidence.

Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners on a monthly basis
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps