Modi’s economics has hurt India's growth. Raghuram Rajan must be having the last laugh

Angshukanta Chakraborty
Angshukanta ChakrabortyJun 02, 2017 | 18:12

Modi’s economics has hurt India's growth. Raghuram Rajan must be having the last laugh

On October 31, 2015, still about a year before he exited the organisation he led for three years and helped develop a spine, Raghuram Rajan, the former governor of the Reserve Bank of India, delivered a much talked about speech at his alma mater, IIT Delhi. Rajan said, “India’s tradition of debate and an open spirit of enquiry is critical for its economic progress.”


In his public utterances and articles, Rajan has constantly emphasised how new ideas, openness, tolerance, the spirit of questioning, being sensitive to local economic ecosystems, engaging with alternative viewpoints, etc, have been the engines of economic growth. “Without this competition of ideas, we have stagnation”, he said in his IIT Delhi keynote speech of 2015.

This is the same Rajan who had been prescient of the 2008 Wall Street crash as far back as in 2005, at the cost of being branded a “Luddite” by Larry Summers, the then US treasury secretary. Rajan’s numerous accolades – academic and professional – include him being made one of the youngest RBI chiefs, and someone to pay heed to in matters financial and pertaining to the political economy.


It’s important to recall not only Rajan, but also Nobel laureate in economics Amartya Sen, who saw even in India’s 2012-2013 high GDP growth spell – at nine per cent and above – an “uncertain glory”, because it was still a far cry from an equitable, all-inclusive growth, and left much to be desired.

Interestingly, even the architect of India’s liberalisation and post-1991 economic edifice, former Prime Minister Manmohan Singh, must also be remembered when we discuss the current economic morass that India finds itself in, under the stewardship of PM Narendra Modi.


Modi government has just completed three years in office and over these three years, the downward slide in economic growth, in the gross indicators and in indices that depict the overall health of a nation, has been rather sharp. The latest addition to this chamber of horrors is the 2016-17 Q4 figures that show a major dip in the GDP growth rate.

India’s economy grew at 6.1 per cent from January to March 2017, slowing from even the provisional 7.1 per cent that was estimated in January 2017 by the government. While the gross domestic product growth rate was 6.1 per cent, the gross value added growth (GVA), that’s revenue minus indirect taxes, slowed to 5.6 per cent in Q4 compared to 6.7 per cent in Q3. In the same quarter last year, the GVA was 8.7 per cent.

The GDP-investment graph has dipped sharply, and had it not been for the government’s own spendings, the GDP growth rate would have been even worse. 


As economic analysts, business journalists and financial experts have already weighed in on the monetary gravity of the situation, ascribing much of the current crisis to the impact of demonetisation diktat on November 8, 2016, as was widely expected, we need to ask ourselves a different question, something that Rajan, Sen and Singh have all hinted at, asked and posed at different times.

What is it about the Narendra Modi government that’s at the heart of this humungous economic mess? Why is it that the government that launches a new policy, a new catchphrase, a new flagship scheme almost every other month, that’s buzzing with buzzwords and mantras, and is populated with cabinet ministers with a penchant for acronyms, fails so terribly to make any tangible economic and progressive political contribution to the country it’s supposed to be serving?


Whether it’s demonetisation, which impacted India’s poor and lower middle classes the most, robbing them of cash for three to four months since the diktat, hitting the informal sector causing it to haemorrhage so bad that the GDP growth rate dipped by two per cent, primarily decimating thousands of small and medium enterprises; or the new cattle trade restrictions, once again hitting India’s poor farmers and the Muslim/Dalit traders in cattle by-products, such as meat, leather, bone ash fertilisers and many others – the thoughtlessness of the government policies is directly proportional to the staggering impact they have on the country’s teeming multitudes.

As dedicated environmentalists and long-time ecological experts have pointed out, the real impact of the latest livestock market regulations under gazette notification 396 of the Prevention of Cruelty against Animals Act (1960), will be on India’s poorest farmers, and the economy of livestock which is valued at over Rs 3 lakh crore.

In addition to it being a stupendous blow on federalism and the constitutional right of choice over eating habits, the effective ban on cattle slaughter will hit hard those small and marginal players in India’s ailing agricultural sector who are already debt-ridden and seeing their brethren commit suicide to escape the vicious debt cycle.

However, Modi government, in its tunnel vision towards creating a country that’s artificially amputated to look like a Hindu Rashtra, cow-belt version, is decimating the millions of cattle-dependent and cattle-respecting lower class and lower caste Hindus, by robbing them of their ability to conveniently dispose off the old and infirm livestock.

Though the government’s hardly covert intention is to legislate an effective beef ban through backchannels, to show the meat-eating religious minorities and the large meat-eating lower caste Hindu people their “place” in the Hindutva hierarchy, what it’s really doing is cutting off the nose to spite the face.


Yet, this anti-poor, anti-minority stance – as evidenced during demonetisation and the backdoor beef ban – is crippling India’s economy as a whole.

Because an economics of intolerance, an economic model minus any compassion but driven by the machinations of a rigid electoral Darwinism, financial imperatives to benefit a thin slice of corporate funders while forcing hundreds of millions to do away with its old cash reserves, sucking out 85.6 per cent of liquid currency from the system overnight, robbing the poor of their meagre savings in notes they had no way of exchanging because the nearest bank was hundreds of kilometres away – all this and more, are bound to extract a heavy price of its own.

On November 23, 2016, in his Rajya Sabha speech, former PM Manmohan Singh had made a passionate plea warning us of the imminent impact of demonetisation, which he described as a “monumental mismanagement, legalised plunder and organised loot”. One of the soundest economic brains of our times, Singh cautioned that GDP rate would decline by about two per cent, and he has been vindicated by the Q4 statistics that have hogged the headlines since yesterday.

But it’s not in the one-time heedlessness of the Modi government wherefrom the fear of future eco-political assaults stems. It’s in the now palpable pattern of orchestrating multi-pronged and sustained attacks against those who don’t fit into its narrow nationalist views of India in the 21st century.

Just like the Modi government has decided to deny a hungry child its mid-day meal – sometimes the only solid morsel that s/he would have in a remote part of the country – if s/he doesn’t have her Aadhaar number/enrolment proof, similarly, it refuses to acknowledge that its blanket ban on sale of cattle intended for slaughter would wipe out industries and destroy the delicate balance in the interdependent crop and cattle factors in the already suffering agricultural sector.

The economic logic that’s guiding this government is that of xenophobic exclusion, and not one of pluralist and secular inclusion. Hence, even though it wants to mostly reap the dividends of the policies that the previous government sowed, including the GST despite the flabby current structure, the Modi government is blinded by its antipathy towards those who don’t conform to its political and economic jingoisms.

And the result is for every one of us to see and recoil in horror.

The seeming policy overdrive of Modi sarkar is a farcical contrast to the repeated failures on financial and economic progress fronts. Even the policy paralysis of UPA era had far better an economic and political report card to show at the fag end of its second tenure.

The only lesson that can be learnt from the Modi government-engineered economic quagmire is that there’s no “voting for development” separate from voting for tolerance, progressive politics and inclusive economics.

The artificial and false distinction between the two, which was the 2014 Lok Sabha election mandate, has been thoroughly and comprehensively discredited by now.

Last updated: June 02, 2017 | 18:13
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