All is not well

An insider’s exposé of India’s economic woes

Narendra Modi swept into power in 2014; riding a crest of economic success in the Indian state of Gujarat, where he had been Chief Minister from 2001 to 2014. Even in Gujarat, his tenure’s success is debatable because during his watch, the massacre of over 2000 Muslims took place while his administration has been criticized for failing to significantly improve health, poverty, and education indices in the state.

When Modi was named the BJP’s candidate for prime minister in the 2014 Lok Sabha election several BJP leaders expressed opposition to Modi’s candidature, including BJP founding member L. K. Advani, who cited apprehension regarding leaders who were “concerned with their personal agendas”.

Modi projected himself as a person who could bring about “development,” without focus on any specific policies. His message found support among young Indians and among middle-class citizens. The emphasis on shunning secularism and promoting Hindutva won Modi the support of hardliners but his promise of shining India and economic ascend appealed to the traders and entrepreneurs.

The BJP’s campaign was assisted by its wide influence in the media. Modi’s campaign blitz cost approximately US$ 780 million and received extensive financial support from corporate donors. In addition to more conventional campaign methods, Modi made extensive use of social media, and addressed more than 1000 rallies via hologram appearances.

The meteoric rise of Modi despite the stigma of being a ruthless RSS operative and the “Butcher of Gujarat” label attracted the west who welcomed the erstwhile social pariah with open arms. The U.S. has its own agenda of backing Modi despite his government’s ruthless persecution of Indian minorities and brutal reign of terror in Indian Occupied Kashmir. Containing China and the prospects of penetrating India’s huge market and voracious appetite for acquiring weapons of mass destruction as well as nuclear power plants has endeared Modi to successive U.S. Presidents Bush, Obama and now Trump.

Unfortunately for Indian masses, Modi’s election campaign promises appear to be a façade of failures. BJP administration is burning the midnight oil in spin doctoring to hide Modi’s letdown and its impending fallout on the masses but an informed insider has spilled the beans on India’s economic woes.

Former Finance Minister and senior BJP leader, Yashwant Sinha, in a scathing opinion piece titled ‘I need to speak up now’ carried by The Indian Express of September 27, 2017, has skewered his own government’s economic performance. Yashwant Sinha is no pushover. Former diplomat, Minister of Finance (1990–1991 under Prime Minister Chandra Shekhar and March 1998 – July 2002 under Prime Minister Atal Bihari Vajpayee and Minister of External Affairs July 2002 – May 2004) and author of the blog Musings of a Swadeshi Reformer, Yashwant Sinha is recipient of the highest civilian award of France—The Legion of Honour. Sinha is widely credited for pushing through several major reform measures that put the Indian economy on a firm growth trajectory. Among them are lowering of real interest rates, introducing tax deduction for mortgage interest, freeing up the telecommunications sector, helping fund the National Highways Authority, and deregulating the petroleum industry.

The exposé by Yashwant Sinha concludes that “The economy is on a downward spiral; is poised for a hard landing. Many in the BJP know it but do not say it out of fear.” His observation is not a shot in the dark but based on lacerating observations. The knowledgeable economist informs that in India, private investment has shrunk as never before in two decades, industrial production has all but collapsed, agriculture is in distress, construction industry, a big employer of the work force, is in the doldrums, the rest of the service sector is also in the slow lane, exports have dwindled, sector after sector of the economy is in distress.

Moreover, demonetization has proved to be an unmitigated economic disaster, a badly conceived and poorly implemented GST has played havoc with businesses and sunk many of them and countless millions have lost their jobs with hardly any new opportunities coming the way of the new entrants to the labour market.

The insider also pricks the balloon of India’s projected economic growth. He reveals that India’s claim of 5.7 percent growth is based on false premises. The methodology for calculation of the GDP was changed by the present government in 2015 as a result of which the growth rate recorded earlier increased statistically by over 200 basis points on an annual basis. So, according to the old method of calculation, the growth rate of 5.7 per cent is actually 3.7 per cent or less.

He further reveals that forty leading companies of the country are already facing bankruptcy proceedings. Many more are likely to follow suit. The SME sector is suffering from an unprecedented existential crisis. The input tax credit demand under the GST is a whopping Rs 65,000 crore against a collection of Rs 95,000 crore. The government has asked the income tax department to chase those who have made large claims.

These are harsh realities which are being echoed in the corridors of power in New Delhi as well as by other analysts. Latha Jishnu, a New Delhi based journalist, in her Op-Ed of October 16, 2017, titled ‘Who is sleeping in Modi’s economy’ also reaches the same conclusions as Yashwant Sinha regarding India’s economy.

Ms. Jishnu asks the inevitable question: “Who is sleeping well in India in these days of economic gloom and the terrifying specter of joblessness that is spreading across the country?”  

The noted journalist stresses that the hard truth is that India has slipped badly. From being the poster boy of the big economies in 2015 when it was the world’s fastest-growing big economy India is turning into a laggard, problem child whose fundamental deficiencies are coming into the spotlight.

Indian economists have seen the writing on the wall, which Modi is trying to elude: “As growth rates dip and industries fold up, unemployment remains a terrifying prospect for young India.”

Indian youth, which in its naiveté swallowed Modi’s lie during the 2014 election campaign that his government would create 10 million jobs every year, are now waking up to the bitter truth. Indian population explosion results in at least 12 million young people becoming eligible for jobs every year but sadly, the Modi government has touched a six-year low in job creation.

Jishnu despondently informs that as violent young men, presumably of no fixed occupation, roam the streets looking for soft targets to vent their rage, cattle traders of the minority community and the untouchables of Hindu society have already seen their livelihood disappear in the name of religion.

The official crackdown on abattoirs has had a serious impact on the economy with export of leather goods, an important foreign exchange earner, taking a beating.

Narendra Modi started life working at a tea stall and has seen poverty and hunger at close quarters. It would be expected that he would adopt measures to ensure that Indians rise above a life of squalor and deprivation. So far Modi’s quixotic economic strategy is only ensuring that more Indians fall below the poverty line than ever.