Power doesn’t always flow from the barrel of the gun. Neither is it generated by the torque of wealth creation. India’s seat at the global high table moved up not because it is the fastest growing economy. Trump and Xi Jinping did not hold hands with Prime Minister Narendra Modi for photo ops because India is beating them in economic growth, but because they trust his decisive leadership. India is no longer the world’s fastest growing economy since its neighbours have raced ahead temporarily. But Modi still gets maximum worldwide attention in the press, social media and other platforms. He is the first Indian politician with 30 million followers on Instagram and 50 million on Twitter and gets the maximum response on his own digital platforms. Of late, his government and he have been at the receiving end of criticism for the relatively poor showing on the economic front.
Prominent international newspapers, think tanks and other bodies are denigrating India’s stressed economy. From The Economist to the World Bank, the dangers India is likely to face going forward are being flagged by many bodies. Some are even predicting the end of the India Growth Story. A large number of credible economists have questioned the quality of India’s economic policies, which has led to massive contraction in consumer demand even as the government continues to expend its energies on boosting supply by offering tax concessions to corporates and writing off huge business loans.
“Vikas” is the cause celebre now. But is the number of people using private taxis or going to theatres the best indicators of a rising economy? Or is it the number of people going to work and spending money on consumer goods, houses and travel? The jury is still out. The negative projection of India’s economy has rattled the establishment. Unable to counter the doomsday narrative, the ruling party and its economists are hard pressed to offer an effective and credible justification for the visible downturn. For instance, the otherwise erudite Union Minister Ravi Shankar Prasad facetiously cited the box office success of Bollywood films as an example of a sound economy.
He quoted the total collection of `120 crore for Joker, War, and Sye Raa Narasimha Reddy on October 2—the highest single-day movie ticket sales ever—as an argument to demolish the slowdown outcries. He ridiculed even the official data on burgeoning unemployment. A few weeks earlier, the habitually cautious Finance Minister Nirmala Sitharaman blamed the “mindset of millennials” for the fall in demand of four-wheelers since the EMI-averse New Age executives prefer Ola or Uber to buying cars.
Even as mantris and mandarins slip into denial mode, international agencies are warning India about its declining economic health. In the past, the World Bank and IMF had eulogised the Modi government for initiating a reforms-led economic ecosystem. So did rating agencies like Moody’s whose positive predictions habitually make governments economically smug. Now, it has given India the thumbs down. The growth forecast has been lowered to 5.8 from its previous target of 6.2. In 2017, Moody’s had upgraded India’s sovereign ratings after 14 years because it found the country’s credit worthiness robust. It felt that the Modi-led government was introducing new “structural” reforms. But not anymore.
The same agencies feel that government policies have failed to ensure sustained development. The World Bank stated recently that India no longer enjoys the privileged tag of the world’s fastest growing economy. During 2019, both Bangladesh and Nepal are estimated to grow faster than India—Bangladesh by 8.1 per cent and Nepal by 6.5 per cent. Official statistics, which are questioned by ministers themselves, show that the economy is reeling from a fall in consumption of goods from underwear to pricey four-wheelers.
The real GDP growth has dipped from its peak of 8.2 per cent in 2016-17 to 6-5.8 per cent, which is expected to fall further this year. Even the highly publicised sales by e-commerce giants like Amazon and Flipkart haven’t helped much in boosting sales. The government has tried every remedy in its economic materia medica to improve spending sentiment. Surprisingly, NDA-III has stuck to the capitalist model of encouraging supply creation. India has found an alternative leadership in Modi who is strong and innovative. But he is yet to discover a set of new economists who could tailor alternative economic models for growth. Babus now double up as masters of both markets and economics.
Over the past 25 years, almost every sector from power, telecom, automobiles and hospitality was given government support to double its total capacity over actual demand. Easy access to public money by both the private sector and the middle- and upper-level consumers fuelled artificial demand. It has peaked now. People previously looking to purchase a second car or house are unwilling to fall under the EMI yoke. Earnings of car dealers declined to 30.9 per cent in July 2019 from what they made in 2018, the steepest since December 2000 when the fall was 35.22 per cent. For the first time, the sale of two- wheelers and commercial vehicles plunged.
All automobile majors introduced partial shutdown in their plants—around 3,00,000 jobs were lost and 300 showrooms were closed across the country. But the government is still unwilling to correct its philosophy of helping “wealth creators” rather than empowering the consumer. Sitharaman and her advisors are burning the midnight oil to find ways and means to revive buyers’ sentiments by releasing around `1.25 lakh crore as income tax concessions to industrialists and nudging and advising banks to reduce interest rates to increase competitiveness. But none of the corporates has passed on the concessions to consumers.
The government is yet to realise that unless consumers are left with more money in their hands, inventories will remain unsold. Infrastructure and housing can generate employment and additional demand for numerous goods and services. As of now, around 1.3 million completed houses worth `10 lakh crore haven’t been sold because buyers are not in a position to pay the balance and new homes aren’t forthcoming. Even in glitzy malls, there are more employees than actual shoppers.
To become a truly empowered society, India must economically rise from the bottom up. For that the government must evolve a road map to enable the lower classes to become the middle class, which will in turn rise to the higher class in the manner the Industrial Revolution of Europe changed the class composition of the bourgeoisie. Technology should be a facilitator rather than be an eliminator of jobs. Let bicycles, two-wheelers, affordable housing, motorable roads and safe public transport systems become engines for growth. Only the equitable distribution of income and wealth, which forces the transfer of excess income from the richest downwards, can ensure long-term prosperity and Samarth Bharat.
Prabhu Chawla
Email: prabhuchawla@newindianexpress.com
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