Contrary to general world perception, India’s economic woes are increasing by the day. India’s once-impressive economic growth, averaging above 8 per cent over some time, slowed to below 5 per cent in the last year while inflation rocketed into double digits. Maryam’s Uncle Modi’s changing of the status of the autonomous state of Jammu &Kashmir will have not only political and international repercussions but will force-multiply the economic worries for India. Modi, who had run the state of Gujarat for over ten years (and was politically responsible for the anti-Muslim pogroms in Gujarat in 2002), won the national elections in 2014 with an aggressive focus on the down-sliding of the economy.
Blaming the Congress Party for a failed economic policy Modi promised the voters to do better. A very slick public relations campaign by a large number of tycoons fed this perception assiduously. However the system caught up with a number of them, quite a number are in deep financial trouble. Indians have been incensed over the enduring culture of corruption at every level of government, from bureaucrats who demand bribes for basic services to MPs embroiled in huge scandals involving public funds. His second focus was there on fighting corruption. Hope for relief from economic slow down and corruption that devoured much of the economic gain brought the BJP and Modi into power five years ago.
Modi started his economic “revival program” on November 8, 2016 by announcing that at the stroke of midnight, some 14 trillion rupees worth of 500 and 1,000-rupee notes 86% of all the currency in circulation would no longer be legal tender. Fighting corruption money with that step it turned out to have been a gross miscalculation, India’s economy plunged into chaos and has not recovered.
In order to hide this Mr. Modi tried fudging the economic slow-down statistics. Arvind Subramanian of the Center for International Development at Harvard University in a recently published paper showed how the Indian government changed its data sources and methodology for estimating real gross domestic product (GDP) for the period since 2011-12 and with the help of this trick showed its GDP until 2017 at about 7% while, according to Subramanian’s estimate based on the previous methodology this lies between 3.5 and 5.5% only. Modi has been using the pepped-up data to win the second term in government for himself and his party.
The ruse has been detected by international economists and is getting felt in India. Both the industry and the banking sector have recently admitted that they are facing a slowdown in demand. Some business leaders were hoping that this is only a temporary feature that will improve, others are not so optimistic. One reason has been the shrinking availability of loans for investors. The banks are arguing that tighter rules for loans are necessary to avoid loan defaults. Thus investment in many sectors has slowed down due to the scarcity of money. Many blue chip companies are facing bankruptcy, it is not a secret anymore!
On the international front, the trade war between US and China could have been a huge opportunity if India had been able to attract units leaving China. But that also turned out to be a missed opportunity as US companies leaving China choosing Vietnam and Thailand. And even when Indo-Pakistani trade has been far less than it could be the Pakistani decision to cut off all trade with India is not improving the situation at all.
For the Indian population that means further escalations in the high prices of fuel and other goods in the domestic market, affecting the daily lives of the people. That has resulted in less spending of consumers which then hits back at the economy. The major reasons behind this include the outfall of the US-China trade war and the steady declines in the value of the rupee in terms of dollar is causing escalating prices of all imports.
Business leaders of India have been demanding a support program in the infrastructure and housing sectors that would help the construction industry, so far their calls are gone unheard. The recent move to take away J&K autonomy was meant to be a political success for the Modi government, it may turn out to be counterproductive when looked at from the economic angle. Instead of working to improve Indian economy the recent move has alienated millions of Kashmiris; even the previously pro-Delhi leaders are up in arms, they are now under arrest. Tourism and handicraft industries that are Kashmir’s strongest economic sector will be damaged for years. Forced to leave before the announcement of the scrapping of §370 and Kashmiri autonomy the tourists will not come back any time soon. Other countries are already issuing travel warnings for Kashmir. What may have looked like a political boon for the BJP could turn out a bane for Indian economy. Bengal Finance Minister Amit Mitra hit out at the Modi government these days for the lowest GDP in the last five years, this is showing on the living conditions of the people with unemployment highest during the last 45 years. He sees India in a deep recession since 2014, the year the Modi government took over. The “Hindu Business line” called India the ‘worst performing market of 2019’.
The Indian economy does not seem to be Modi’s first concern anymore if it has ever been. As was expected from his track record in Gujrat, Modi has turned to destroying norms and fanning ethnic and religious tensions for short-term political gain. How soon before he realises, “it’s the economy, stupid!”.
Contributed By:
Dr. Bettina Robotka
