Dear PM Modi, India's Economy Needs Strong Policies, Not Headlines
In a stadium in New Delhi, on August 29, prime minister Narendra Modi said, "Whether it is the boardroom or Bollywood, whoever is fit touches the sky. If the body is fit, the mind is hit."
The banality, of course, is par for anybody who has lent an ear to Mr Modi for nearly a decade. But cruel reality check hit India less than 24 hours later.
In separate missives, the official statistical department released data that said India’s economy was in dire straits: growth during the (first) April-June quarter, was 5%, the lowest since 2014-15 when Modi stormed to power.
At the time, he accused the previous, Manmohan Singh-led United Progressive Alliance (UPA-II) of pouring sand in the machinery of work, wealth and aspiration. Modi promised achhe din, or better days, ahead. That has proved to be a mirage.
Economic Slowdown: A Pervasive Reality
Manufacturing, around 16% of India’s economy has collapsed: from growing more than 12% in the same time last year, to stalling at 0.6% now. Car sales have crashed to 20-year lows. Manufacturing responds to demand from either consumption or investment.
Consumption, now around 60% of the economy, has also fallen: sales of low-cost biscuits to innerwear are down. Incomes of around 70% of Indians who depend on farm and farm-related activity grew barely 2% in Q1, compared to 5.1% in the year-ago period.
The growth of construction, which employs much of India’s vast army of ‘unorganised’ workforce has nearly halved, from 9.6% to 5.7%.
Meanwhile, on Thursday India’s central bank, the Reserve Bank of India (RBI), reported its own take on the economy. It says our economic scene is ‘grim.’ Stripped of jargon, this is what it says: Sometimes, economies go through happy or bad times, depending on peoples’ moods and how well the rest of the world is behaving.
Where Are Meaningful Economic Reforms?
This can be set right with shock reform, changes in tax or interest rates, buying and selling government debt, manipulating currency trades. Intended goal: to break out of a ‘cyclical’ downturn. Otherwise, economies can choke on bigger problems, for example a lack of functioning markets in farm produce which causes 40% of the stuff to rot, or the absence of banks in the hinterland, which forces people to borrow from moneylenders at cut-throat rates. Policy wonks classify these failures as structural hassles.
Every village idiot knows the way out of income slowdown is meaningful economic policy, not blocking communication lines in the erstwhile state of Jammu & Kashmir or listing 2 million Assamese as ‘illegals’.
Headline Management Can’t Compensate For Policy Paralysis
But the Modi government has reacted to the crisis with, first, blather: “The government is alive to the situation and has taken several measures on the slowdown of Indian economy. The slowdown in growth is due to endogenous and exogenous factors,” said Krishnamurthy Subramanian, our top sarkari economist.
Now, Subramanian isn’t the brightest lightbulb in the room, but his words must reflect something about the regime’s willingness to battle an economic crisis. So far, an Alfred E Neumanesque, “What, me worry?”
Two, finance minister Nirmala Sitharaman has now been rostered full time to addressing media briefings. The content of these range from the banal, “We have not decided how to deploy the RBI’s surplus,” to merging 10 state-owned banks into four. Hailed as ‘consolidation’ it’s hard to see what this merger can possibly do to reduce banks’ mountain of bad debt, at more than 9% of all loans, nearly double China’s current level. Merging several losers doesn’t necessarily create a winner. And headline management doesn’t compensate for policy paralysis.
(The writer is a Delhi-based senior journalist. He tweets @AbheekBarman. This is an opinion piece and the views expressed are the author's own. The Quint neither endorses nor is responsible for them.)