Two events have given hope to liberals in India. The first was Union Minister Piyush Goyal attacking the Tatas at a gathering of corporate honchos. And the second is the name-calling by RSS-affiliated magazine Panchjanya against India’s most venerated white-collar sweatshop, Infosys.
Why should liberals, opposed to Narendra Modi, be happy with this? They suspect that the tide is turning. If the government starts attacking businesses, then chances are that India Inc will also stop backing the government. And that matters not just because parties need loads of cash to fight elections, but also because corporates control and influence state institutions, the media and public discourse in general.
BJP’s Massive Assets
India’s Opposition parties have been living off crumbs when it comes to corporate funding and space in corporate-controlled media. The Association for Democratic Reforms’s (ADR) data show that the Bharatiya Janata Party (BJP) got over ₹720 crore in corporate donations in 2019-20, while the Congress got just ₹133 crore. In 2018-19, the BJP had total assets worth ₹2,904 crore, which was three times that of the Congress. In fact, the BJP had more assets than all other national parties combined.
The Opposition probably fares worse when it comes to coverage in corporate-backed or corporate-owned media. Not only do media houses act as cheerleaders of the Modi government, often passing off official handouts as news, but they also go out of their way to attack the Opposition. Mamata Banerjee or Rahul Gandhi only make it to the headlines when the news anchor wants to criticise them.
So, the Opposition, especially the Congress, can be forgiven for wanting to believe that the cosy relationship between Big Business and the Modi regime is about to end. Neither should one begrudge liberals their hopeful speculations that the Modi magic is over. The underlying assumption, in both cases, is that COVID-19 has destroyed India’s economy and corporates no longer have any patience with this government.
But Look At the Distribution of Income
On the face of it, this seems an accurate diagnosis. India’s latest official data show that despite the bounce-back in the June quarter, our real GDP is below what it was in the same period in 2018. The numbers are even worse when adjusted for population growth: per person GDP in the June quarter is lower than what it was in 2017. In that sense, India’s economic clock has gone back four years.
But these are blunt figures, which tell us nothing about how the nation’s income is distributed. We can gauge that from some other indicators. The first is corporate profit.
Data compiled by the Centre for Monitoring Indian Economy (CMIE) for over 4,300 companies shows, that in the June quarter, the combined sales of these companies went up by 44 per cent compared to the same period last year. That beats the nominal GDP growth of 32 per cent by a good margin.
Wages and salaries have also increased by 14 per cent, which is significantly higher than retail inflation, which was 5.5 per cent.
What about corporate profits? The combined net profit of these companies went up by a whopping 493 per cent. You could say that this is an artificial rise, since last year, there was a general lockdown in the June quarter, which caused a sharp decline in corporate earnings. So, let us instead compare this year with the same period in 2019. Corporate net earnings are up 56 per cent compared to Q1 of 2019-20 as well, while sales are up just 3 per cent. Even if one adjusts for inflation, real corporate profits grew by 44 per cent over two years, while sales fell by 10 per cent. The real, inflation-adjusted growth in wages and salaries was just 2.5 per cent over the same period.
The Poor Count in Elections, Not the Top 1%
That means corporates managed to increase their share of national income in real terms, while the share of employees and workers dropped sharply. This can be seen from another indicator — the ratio of net profit to wages. In the June quarter this year, for every ₹76 earned by workers, owners of capital earned ₹100. This is the highest return to profit relative to wages in any April to June period since 2014. So, there is absolutely no reason for India Inc to not back PM Modi.
But, owners of capital are very few. While their money counts in elections, their votes don’t. That’s where the poorest of the poor come into the picture. Anecdotal evidence and various news reports tell us that the poor are in deep distress right now. They are right. What they don’t tell us is that there are various degrees of poverty in this country. The people we, the middle class, consider to be poor, are categorised as “lower middle class” in most economic data.
CMIE’s data on consumer sentiment paints a slightly more complex picture. Households that earned less than ₹8,333 per month, accounting for about 15 per cent of India’s population, saw a big improvement in consumer confidence in July compared to June. The second-biggest jump was amongst the one per cent richest households.
It appears that while the economy as a whole has tanked, the top 1 per cent and the bottom 15 per cent are doing better than before. This is exactly what the Modi government’s election-oriented policy strategy has been — keep the richest happy so that there is enough financial and ideological support from the elite, and ensure the poorest can maintain a subsistence level of existence so that they continue to be loyal subjects. That is the key reason why all government handouts and the various schemes that allow the poor to access governmental power are directly identified with the Prime Minister. That is the reason why Modi’s photograph adorns every COVID-19 vaccine certificate.
So, there might be rumblings here and there in the political alliance between the BJP and corporates, but it isn’t ending any time soon.
(The author was Senior Managing Editor, NDTV India & NDTV Profit. He now runs the independent YouTube channel ‘Desi Democracy’. He tweets @AunindyoC. This is an opinion piece. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)