Monday, 9 March 2015

The Death of Modinomics

N.B.: This is my latest "Guptara Garmagaram" column, which is due to be published in next issue of THE INTERNATIONAL INDIAN magazine (Dubai).

With the election of Prime Minister Modi, it was clear that most Indians thought that his “Modinomics” would transform India.

But what is (or was) Modinomics? Basically, having an apparently incorrupt political leader who could make the bureaucracy efficient, encourage development of infrastructure to support industry, and work successfully with investors (foreign and domestic) to implement business projects within deadlines.

So is Modinomics in fact dead? If you look at this government’s achievements, you might be tempted to think that it is alive. Consider that ordinary Indians’ welfare payments are now going to be paid directly into their own bank accounts in order to reduce corruption, Foreign Direct Investment is currently running at Rs 1000 crores a day (inflows have crossed $11 billion), the Spectrum auctions have bids worth Rs 86,000 crores (around $13 billion), there has been 10% greater devolution of financial resources to India’s States, and so on. On the other hand, the government’s main economic roadmap for the next year, the 2015 Budget, is best described as “half-hearted”: the promised “big bang” has failed to materialise.

This simply continues what has now become the hallmark of this government: its promises continue to be broken, just as its lies continue to be exposed. The government has now confessed it cannot fulfil its promise to cut the nation’s fiscal deficit to 3% of GDP by 2016-17, just as it has admitted as a deliberate lie its promise to bring back all black money it claimed was deposited abroad and so to pay Rs 15 lakhs into the bank account of every single Indian within 100 days of election.

The new way of calculating economic growth which has been inaugurated has left even the nation’s chief economic advisor Arvind Subramanian "puzzled ", while RBI Governor Raghuram Rajan did not "want to say anything about the numbers until we understand them better". That was over a month ago and, as the Governor has not said anything till now, it can only be surmised that he does not understand them any better after a whole month of study.

Now, even Modiji’s corporate sponsors have begun to doubt him: on the day I write this, a survey published by ASSOCHAM, the Associated Chambers of Commerce of India, which claims to be India’s oldest, leading, and largest Chamber of Commerce and Industry, said a large majority of CEOs and CFOs find the revised GDP data of over 7 per cent growth "too good to be realistic".

What killed Modinomics?

Was it the Kejriwal backlash? No Modinomics had already become merely empty noise by then – and that was at least one important reason for the backlash. Moreover, Modi’s own personal commitment, as well as his involving all the big BJP guns in the election campaign in Delhi, backfired because people got the impression that BJP was more interesting in gaining power at any price than in delivering actual performance – the big guns should have been blazing away at real national problems, not attacking Kejriwal. By contrast, people remembered that AAP had actually delivered on its promises during the almost unbelievably short 49 days that it was allowed to have power in Delhi.

Was Modinomics killed by the RSS’s idiotic campaigns such as Ghar Wapsi, and attacks on mosques and churches? Did that reveal the hard face of the RSS after hopes that the national mandate would cause them to become more responsible? Were Hindus finally coming out with our vaunted religious neutrality? All these may well have played their part.

Or was the reality that Modinomics is a mere mirage in which people were foolish to have put their trust in the first place?

Under Modi, consider Gujarat’s actual record :

- in the 1990s, its economy grew 4.8%, compared to the national average of 3.7%; in the 2000s it grew 6.9% compared to the national average of 5.6%. That meant that the “Modi effect” increased the difference between Gujarat's growth rate and the national average increased by only 0.2 percentage points (from 1.1 percentage points to 1.3 percentage points). Sure, good, but hardly worth a song and dance. Especially when one compares Gujarat to Maharashtra, which improved its growth rate from 4.5% in the 1990s to 6.7% in the 2000s, so the difference between its growth rate and the national average increased by 0.3 percentage points (from 0.8 percentage points to 1.1 percentage points). Or compare Gujarat with Bihar: the difference between the latter's growth rate and the national average increased by a whopping FOUR complete percentage points (from 2.7 percentage points BELOW the national average in the 1990s, to 1.3 percentage points ABOVE the national average in the 2000s).

- Meanwhile, Gujarat's performance on the Human Development Index actually declined: it had been above the national average in the 1980s & 90s, but decelerated in the 2000s and came down to the national average.

- The level of inequality in Gujarat was less than the national average in the 1980s and 90s, but actually rose above the national average in the 2000s

- The largest poverty reduction of the past decade was achieved by Tamilnadu, not Gujarat.

So, if the last national election had been based on facts rather than hype, the winner should have been the Chief Minister of Bihar or the Chief Minister of Tamilnadu.

I conclude that the sad fact is that our people believe what they want to believe.

As sentiment moves against the Modi government, the danger is that its real contributions to India’s development will be ignored, just as the real contributions of the last government were ignored. That is the problem with our being a nation committed to myth and sentiment rather than truth and facts.