Modi's Second Term: What the First 100 Days Reveal

Prime Minister Narendra Modi's third term began in June 2024, yet the first hundred days of his new cabinet reveal a government focused more on consolidating economic gains than pursuing the radical transformation promised during campaign season. The early indicators suggest pragmatic continuity over revolutionary change.

The Economic Context

India enters 2026 with a 7% GDP growth rate—respectable in a global slowdown but below the pre-pandemic 8-9% average. Inflation has stabilized around 4-5%, within the RBI's target band. Yet job creation remains contested, with official statistics claiming creation of 2+ million formal jobs annually while critics argue informal employment growth masks stagnation in manufacturing employment.

The government has pushed aggressively on the Production Linked Incentive (PLI) scheme, attempting to build manufacturing capacity in semiconductor, electronics, and battery sectors. Early results are mixed—investment commitments exceed actual job creation, and global supply chain shifts still favor established manufacturing hubs in Vietnam and Indonesia.

Infrastructure and Fiscal Reality

The government continues prioritizing infrastructure investment—railways, highways, port development. The Gati Shakti multimodal connectivity project promises to link ports, airports, and rail networks. Yet implementation lags rhetoric. Tender delays, land acquisition challenges, and contractor capacity constraints slow progress.

Fiscal consolidation continues pushing toward a 3% deficit-to-GDP ratio by 2025-26. This requires either revenue growth—still dependent on GST collections—or expenditure restraint. The political pressure to increase spending ahead of state elections creates tension with fiscal prudence.

Make in India: Promise vs Reality

Ten years after launch, Make in India has succeeded in electronics and pharmaceuticals but struggled in automobiles and capital goods. Manufacturing employment as a percentage of total employment remains stagnant around 12-13%. Wages in manufacturing remain low, limiting consumption growth and skill upgrading.

The focus has shifted toward semiconductors and electronics post-COVID, with Intel, Samsung, and TSMC announcing fabs. Yet these require substantial support and won't create significant employment until 2027-28.

The Structural Challenge

India's economic growth increasingly depends on services—IT, business process outsourcing, financial services. These sectors employ urban, educated workforces. Manufacturing, which historically employed rural migrants in large numbers, hasn't provided comparable employment growth.

This creates a paradox: 10 million people enter the workforce annually; formal sector job creation is 2-3 million. The remainder enters informal employment—street vending, construction, agriculture. This limits consumption growth and social stability.

Forward Outlook

The Modi government's early second-term focus on consolidation suggests recognition of these constraints. Radical reform—labor law changes, corporate tax reduction—remains unlikely in a coalition government dependent on regional partners. Instead, expect incremental improvements in implementation, targeted PLI support, and infrastructure push.

The real test comes in 2027 when election season begins. If growth slows—a real possibility given global uncertainties—political pressure for expansionary spending will intensify, challenging the deficit consolidation path.