New York Times has a scathing editorial on ‘Modi’s strongman economics’
It seems castigating editorials on the Indian prime minister is becoming a routine feature of the foreign press. After The Economist calling Prime Minister Narendra Modi “a constant tinkerer”, “not much of a reformer”, among other not-so-enviable names, it’s the turn of the New York Times to brand the PM’s version of playing financial hardball “strongman economics”.
Adam Roberts, the European Business and Finance correspondent of the NYT, who also happened to be the former South Asia reporter for The Economist, has, in a scathing editorial, torn into Modi’s financial fortress that somehow seems to be beyond criticism from mainstream Indian press, particularly the TV media. Exactly as the globe-trotting prime minister struts around from one country to another, followed around 24X7 by a retinue of dedicated press corps and TV cameras, as well as by his chosen people in the political and corporate theatre, economic mayhem strangles India in a slow but ever-tightening hold.
Roberts begins with Modi’s 2014 denigration of former PM Manmohan Singh’s economic performance, saying it was an “embarrassment”, when it was actually above average, at a steady 7.8 per cent during the ten years that he held the reins of the economy. In comparison, despite Modi’s empty bluster of adding 100 million new manufacturing jobs by 2019, the reality is that the job creation rate has fallen to zero per cent. Moreover, Modi bragged of restoring India’s “image”, saying the “I” in BRICS has become a burden, while the truth is that the high-voltage confrontation with China has put a question mark before India’s hitherto formidable role in BRICS itself.
The jobs drought versus Modi’s promises
Roberts writes:
“Almost no new jobs have been created under Mr Modi. In the late Singh years, economists say, at least 400,000 extra jobs were added yearly. In the last three years of Mr Singh’s government, from 2011 to 2014, on average 579,000 extra jobs were added yearly in India.”
This is harsh, but adheres to facts. That’s exactly the ground reality which can be seen when one takes off the rose-tinted glasses that Modi has lured the mainstream media into wearing while looking at their dear leader. Roberts is as critical of the job drought as he is of the investment climate:
“Local business leaders quietly grumble there is no dynamism on the ground, little consumer demand. Much infrastructure, such as wobbly roads and slow freight trains, needs improving. Indebted banks — state-run and vulnerable to political meddling — won’t lend without reform.”
It is extremely distressing but now a constant feature of the Indian political economy that the industry leaders are afraid to speak their minds, though they express their fears in private, or anonymously, to journalists in the domestic and foreign press. Even though business heads dance along with Modi, congratulating the PM on his thoughtless diktats such as demonetisation, or the GST with the innumerable tax slabs and cesses, or new-scheme-a-day propaganda blitzkrieg, they miss the “dynamism on the ground”, which is resulting in dried up jobs, lack of innovation and original thinking.
Demonetisation
Roberts expresses deep suspicion of Modi’s penchant for charming his way to compensate for real, deep-set reforms – the bulwark of his development plank that rode him to power in 2014. Roberts writes that Modi sees the whole of India, with its teeming diversity, as an extension of Gujarat and its imposed homogeneity.
“Mr Modi [likes] to think his personal role is immensely important. He recalls his 13 years running Gujarat, the western Indian state, where he corralled investors, offering land and attractive terms to set up factories. He is tempted to think a country of 1.3 billion might be run in the same way.”
It is here that Robert defines what he means by “strongman economics”, the titular phrase of his article. It connotes “the idea that a dominant leader’s sweeping promise is more powerful than deep-set, complicated, economic problems” – a brilliant and accurate diagnosis of India’s failing economic health and the financial quackery of Modi’s travelling salesman contribution to the India story.
It is exactly this reason that Modi’s imagined invincibility propelled him to take the decision to demonetise Rs 1000 and Rs 500 notes overnight and push India’s sprawling informal sector towards a near death experience. Article after article in the print media as well as feature stories on TV have documented the catastrophic impact of notebandi on India’s small and medium enterprises, the cash flow bottlenecks it created then, causing a domino effect on the supply chain. Agriculture was hit bad, and the poorest of farmers, small shopkeepers and traders, smaller retailers and grocers, as well as those in freight, transport, wholesale markets, etc, were left twiddling their thumbs, courting penury.
“When Mr Modi chose to withdraw most bank notes from the economy last November to fight corruption, economists gave plenty of warning that a nasty shock would follow. Demonetization was a big reason growth slowed this year, as many workers went unpaid and consumers delayed spending.”
Slow GDP growth rate
Robert goes on to enumerate how the GDP rate has slowed because of demonetisation-induced shock, even though Modi has had it really easy with the oil prices at half the 2014 rate.
“Official gross domestic product statistics show first-quarter growth in the economy, at an annual rate, was just 6.1 percent — unimpressive for a big, poor country with much catching up to do. Global economic conditions are remarkably benign right now. Oil prices are less than half what they were in 2014, when Mr Modi came to power. They are crucial for India, which is a huge oil importer. Monsoon rains have been relatively kind. Else, India’s recent story would be much harsher.”
Robert even goes on to eviscerate Modi’s “24X7 prime time prime minister” claims which “fawning” TV anchors, saying they are as overdone as dawdling trains. “Mr Modi’s economic promises are so extraordinary they must be taken with a deep slurp of salty lime juice. He vowed India would train apprentices by the hundreds of millions to service that manufacturing boom. He said internet networks would get to all of the country’s 600,000 villages shortly. He promised to clean the polluted Ganges River and build 100 million extra toilets by 2019. And, he said, India will have 100 new “smart cities” and a network of high-speed trains, and the World Bank will rank it as one of the 50 countries friendliest to businesses — up from 130th now.”
It’s this yawning gulf between hype and reality that has been exposed by the NYT oped by Adam Roberts. Given PM Modi’s weakness for favourable international press, this isn’t likely to go down well with his cheerleaders. However, it would do well for the Modi bhakts to pay heed to the bitter truth conveyed in the last para of the article.
“India’s tolerant, secular character forms the bedrock on which a strong economy can be built. You need not be a big economist to grasp that it would be crazy to weaken that foundation.”