Mainstream WeeklyMr. Modi has been PM of India for the last 12 years. In 2014 the long period of coalition rule at the Center ended and hat was characterized as a period of uncertainty when hard decisions could not be taken and consequently there was policy paralysis and economic downturn. India was called a fragile economy. Since 2014, PM Modi has ruled with little challenge so it is said that there is political stability. Has that meant better economic performance externally and internally?
BJP claims, under Modi, it has grown the economy, expanded road, rail and air infrastructure, provided amenities and housing for the poor, transferred about Rs.44 lakh crore to beneficiaries of various schemes through DBT, provided tap water to millions of households, etc.. But, doesn’t that happen automatically in an – more roads, schools, houses and institutions. Even during the British colonial rule, these expanded, even if slowly. The moot point is, policies can speed up development or slow it down. Has Modi’s 12 year rule succeeded in accelerating development?
Political Stability?
What does political stability imply? USA under Trump’s rule looks unstable with daily turmoil. A democratic country may be stable in spite of coalitions and changes in government while it may be unstable in spite of a strong leader helming it. Autocratic rule in a democratic country may appear to be stable at a point in time but in the long run it may face insurmountable problems, especially if it comes to power by accentuating social and political divides.
Autocratic regimes believe they know all and impose their narrow agenda rather than going for wider consultation and debate. They surround themselves with sycophants. That is not good for a diverse nation like India where pluralism is required for long term stability. This has been missing in the last 12 years and consequently big mistakes have been made. In the name of controlling corruption, opponents are being harassed thereby weakening democracy.
India is being run by PMO. Even Cabinet Ministers have been marginalized. Thus, major have been made like, demonetization, implementing a structurally faulty GST and a sudden lockdown during pandemic. Delusionally, believing that India is a Vishwaguru, vaccines were not ordered in time and a large number of people died in the Delta wave of Coronavirus.
Homogenizing tendencies to favour the majority are sought to be implemented. For instance, the idea of one election, one civil code, dominant language and dominant religion. These are polarizing society. Hinduism and Hindi are being pushed vigorously to the detriment of minorities and the non-Hindi speaking states.
Considerable hinduization has taken place of the political parties, the legislatures, the police, the judiciary and the bureaucracy. For instance, bulldozer justice has spread in spite of the Courts ruling against it. Often, the Constitution does not appear to be guiding state action. Minorities have gone silent and sullen because they feel they are denied justice. This is explosive.
Promises Undelivered
The promise of creating 2 crore jobs remains unfulfilled. Farmers’ incomes instead of doubling have stagnated. Businessmen complain of rising corruption - a far cry from the promise of not only controlling black income generation but bringing back the black wealth stashed abroad by the corrupt. The previous government was blamed for policy paralysis, weak rupee, slow growth, persisting poverty and what not. The BJP promised a new beginning where things would be set right and India would achieve new heights.
With a clear majority, Mr. Modi was in a position to chart a new path to set things right. A bottom up approach, as suggested by Gandhi, was required to reduce inequality, create jobs, raise the rate of growth of the economy, etc. Instead, policy has become more exclusionary with promotion of crony capitalism, organizing the unorganized sector, passing on trade in agriculture commodities to big business, privatization of education and health, etc. Allocations in the Central Budget have tilted towards the organized sector which is capital intensive and against the labour intensive sectors.
Jan Dhan Yojana designed to include the unbanked into banking has been used to transfer benefits to the poor. But, the large number of zero balance account point to the fact that the poor have no savings to keep in the bank. These accounts were used as mule accounts during demonetization to enable the rich to launder their black money. And, now they are increasingly being used by fraudsters who indulge in digital arrests, phising, etc.
The poor lack adequate work and incomes. They need safety nets, as the World Bank recommended in the mid-1980s. But that is feasible if only a few per cent of the people need to be supported, but not if 90% need it. Also, the vastly corrupt administration is incapable of delivery to such a large number of people. Thus, a variety of schemes like Skill India and Poshan have neither succeeded in training workers nor in eliminating stunting and wasting of children and malnourishment among women.
Data Manipulation
The ruling party has been dressing up its image by manipulating data and using the media to project it. Adverse data is rejected and dressed up to present a good picture of itself. This has been the case with data on GDP and its growth, consumption, unemployment, poverty, etc. The NHFS 2019-21 data was suspect. During the pandemic in 2020-21education, health and incomes were adversely impacted. Yet, it was used to show that multi-dimensional deprivation declined sharply compared to NHFS 2015-16 and that 25 crore people moved out of poverty.
If extreme poverty has indeed dropped below 3% as officially claimed, then why are 81 crore people (55% of population) being offered free 5 kg of foodgrain? Not only food, competitively, during elections a large number of freebies (bus tickets, cash, etc.) are also being offered to people. Farmers are being given Rs.6,000 per annum because a large number of farmers earn poverty line income.
This makes two things clear. First the marginalized sections are struggling and need to be supported. Second, they do not have faith in the rulers’ long term promises of improving their lot and want something now in their hands. They are not impressed by the propaganda of India being 4th or the 6th biggest economy of the world. They sense the truth that India’s global rank in terms of per capita income is the 140th.
Fog of Data
Even this rank hides the fact that the GDP data is based largely on organized sector data and does not represent those in the unorganized sector. Thus, their contribution to the GDP is over estimated at least since 2016-17 when demonetization decimated them. Further, GST led to a shift in demand from them to the organized sector. An example of this shift is the growth of the mechanized e-commerce which is displacing the labour intensive neighbourhood stores. Evidence of this shift in demand is also coming from leather goods, luggage industry, etc. Thus, there is a methodological problem in the measurement of India’s GDP and its growth.
If independent scattered data is taken into account, GDP is not growing at 6.5-7% over the last 10 years but at an average of 2%. An example of this over estimation is the year 2016-17 when during demonetization the economy declined but the official data showed it growing at a record 8%. Cumulatively, in the last 10 years, GDP is over estimated by 55%. In other words, India did not become the 4th largest economy in 2025 and was the 7th largest, ahead of Italy. Now that the rupee has further depreciated against the dollar, India is perhaps the 8th or the 9th largest economy.
More recently, during the Gulf war, when many small units closed down and their workers returned to their villages, the economy is shown as growing at above 7%. This is not even the growth rate of the organized sector much less the unorganized sector. The reason for this over estimation is another methodological problem in GDP estimation, namely, the use of projection from the previous year which was a normal year to the current year in which the economy has experienced a shock.
The fog of data is also at play in the inflation data. It is based on the average consumer price data (CPI) which represents the rich, the middle class and the poor. Their consumption baskets are very different from each other. So, CPI does not represent the situation of the poor who had to buy their gas cylinder at a black market premium of Rs. 3-4 thousand. Since they earn around Rs.10,000, this means for them inflation was around 30 to 40% because of the black market prices that do not get counted in the CPI which was around 3.5%. Consequently, they were cooking only once a day, couldn’t pay their children’s school fees, walked to work, couldn’t send money home, etc. No wonder they protested.
In brief, data neither captured the decline of production nor the rise in prices, especially for the marginalized who faced stagflation even if officially this is not admitted.
The fog of data hides the true picture during normal times but it is in a crisis like now or during the pandemic that it gets revealed. The economic shock aggravates the destitution making it stark and leading to protests among workers and farmers.
Vishwaguru Claim Belied
It is during Modi’s rule that one repeatedly hears of India being a Vishwaguru. Is it to boost the sagging spirit of the nation facing severe problems or a sign of an insecure nation making tall claims? The elite and the Indian diaspora in foreign lands seem to have taken to it enthusiastically but the issue is whether the common people facing destitution can identify with it? Also, how do foreign powers and their citizens view India?
Preferences are clear. While Indians are queuing up before embassies to migrate to advanced countries there are no such crowds in front of Indian embassies in advanced countries, lining up to migrate to India. India is shamelessly demanding more H1B visas to send its talented abroad because it is unable to give them proper work. So, India is exporting its talented. There is hardly any demand from foreigners wishing to migrate to India.
Since last year, India’s lack of strategic autonomy in global affairs has been apparent. USA squeezed India by levying high tariffs because India was not conceding opening its agriculture market and reducing crude oil purchases from Russia. India not only did not retaliate, but hardly resisted the imposition given its weak global situation.
India has had to concede to China with which it has a record trade deficit of $102 billion. It buys high technology items and also low technology items like Dewali lights and pichakaris. Many factories run with Chinese machines that require Chinese engineers to operate them optimally. So, in spite of China having entered Indian territory, we continue to depend on them for much of our needs.
Truncation of strategic autonomy is due to weaknesses in technology. In today’s world a nation’s strength depends on its technological capabilities, whether it be in trade or militarily. Not only does India spend only 0.65% of GDP on R&D, the climate for research is weak due to feudal authoritarianism in research establishments. Orders come from above and criticism is discouraged which comes in the way of innovation.
USA and China spend 3% of their GDP on R&D so that they are spending 22 and 100 times more than India’s spending. India AI Mission investment target is $1.25 billion. Private sector promises spending more but given India’s lag, these may not fructify. Trump announced an investment of $500 billion as soon as he took over as President. India is lagging behind in development of AI since it has not developed its own LLM and there is a threat of becoming dependent on the USA. No wonder while technology companies in the USA have done well, Indian tech companies have performed poorly in the stock markets. So, even in software, considered one of India’s strong points, the nation is not doing so well.
Organizing the Unorganized
The government repeatedly claims to want to organize the vast unorganized sector. This is not possible given the small scale of operation of the unorganized sector which employs 94% of the workers. Farmers operating half an acre or even 2 acre of land cannot become organized. At most they can become workers after selling their land because the government pursues policies which ruin them. 85% of farmers are small, operating less than 5 acres of land. Similarly, the micro sector employing an average of 1.7 people per unit can only fold up but cannot become organized. 97% of the employment of MSME is in this micro sector.
Government’s policies are leading to a shift in demand from the unorganized to organized sector which is capital intensive, automated and mechanized. Therefore, the jobs generated are far fewer than those lost in the unorganized sector. The result is growing unemployment and persistence of poverty and rising inequality. This limits demand and slows down the economy.
Wrong government policies are adversely impacting the social sector. Education and health are being rapidly commercialized and privatized. The result is proliferation of malpractices since greed is taking over. Public hospitals are in poor shape while the private health care is prohibitively expensive and malpractices have increased. In education also malpractices like question paper leakages, fake degrees, cheating, and poor standards of teaching are widespread. Consequently, India is producing a vast number of ill-trained youngsters who cannot cope with the rapidly changing technology and will remain at the margins.
Conclusion
While Mr. Modi’s rule over the last 12 years appears to be politically stable since there is little challenge to him, the country has suffered due to his increasingly autocratic rule. Since control is centralized, diversity is being sacrificed and major mistakes in decisions have been made. Whether it be demonetization, faulty GST, sudden lockdown during pandemic, trying to organize the unorganized sector, claiming to be Vishswaguru, promoting crony capitalism, etc. In the name of controlling corruption, opponents are being harassed thereby weakening democracy.
A fog of data is used to show higher growth and reduced poverty. The vast unorganized sector is getting marginalized leading to rising unemployment, growing inequality and persisting poverty. States are finding their autonomy truncated due to lack of adequate resources. The nation’s strategic autonomy is getting curtailed because of weakness in R&D. Privatization of education and health is leading to growing malpractices and triggering youth upsurge. So, a vast section of the population is suffering due to the so called ‘political stability’.
(Author: Prof Arun Kumar is Retired Prof of Economics, JNU; He is the author of ‘Indian Economy’s Greatest Crisis: Impact of the Coronavirus and the Road Ahead’. 2020)