THE first 100 days of Modi 2.0 are over. Propagandists of the regime are busy enumerating the amazing ‘achievements’ of the Modi-Shah order – triple talaq, Kashmir, moon mission. They are talking about everything except the one thing the whole country is discussing – the economic slowdown. They thought they would be able to brush it off as a temporary, cyclical affair, but now comparative figures for every quarter and for every parameter indicate a clear and alarming decline. The GDP growth rate has officially come down to 5% and if we adjust it for inflation, it would virtually come down to zero. Production is declining, domestic sales and exports are dropping; our currency is weakening in international market; only the prices of essential goods and services are going upward along with figures of unemployment and retrenchment.
The slump in automobile sales has become the biggest talking point for the business press. With sales dropping, major auto manufacturers have all begun to cut down production. It is not difficult to imagine the impact of this slowdown on the huge chain of ancillary industries. In fact, every economic activity around the Maruti plant in Manesar – from vegetable vendors and roadside hotels to clothes and groceries shops – is reporting a major drop in business. Encouraged by the BJP IT cell propaganda which seeks to explain away recession as changing patterns of business models, the Finance Minister has attributed the decline in automobile sales to the changing ‘millennial mindset’. According to the minister, the preference of young professionals to use public transport like metro rail or hired cabs like Ola and Uber is adversely affecting automobile sales. She is conveniently forgetting that trucks and tractors are also selling less and there are no Ola and Uber services for trucks and tractors!
It is not just big ticket items like automobiles and expensive consumer goods like air-conditioners and refrigerators or televisions and washing machines which are reporting a major drop in sales, even five rupee biscuit packets are selling less, and biscuit companies like Parle and Britannia are also retrenching workers. The slowdown is truly comprehensive. We should also note that this slowdown is mostly ‘made in India’; it is not an extension of the global financial or economic crisis to India. In fact, India managed to stay reasonably insulated during the Asian meltdown of 1990s or the global financial crisis a decade ago, emanating from the US. The recession that we are facing today in India is a cumulative impact of the agrarian crisis which has eroded the income and purchasing power of the vast majority of India’s rural population and economic policies and disastrous measures like demonetisation and the hasty imposition of an arbitrary GST regime.
The rise of information technology and the resultant rise of an upwardly mobile middle class had served to veil the underlying economic crisis for some time, but that superficial consumer boom cannot pull the economy of a vast country like India for long. The lack of purchasing power of the vast majority of Indians limits the growth of our domestic market and we now have a recession that cuts across all sectors of the economy and all segments of the market. For long the Modi government lived in a state of total denial about the recession. Today the government is forced to partially acknowledge the problem, but the response of the government is highly inadequate and misplaced. Basically the government is only trying to revive bank lending to big companies which are already sitting atop a mountain of unpaid loans. Banks which had been debarred from further lending as a precautionary measure have been merged with relatively stronger banks to circumvent the lending ban. The government has also tapped into the RBI surplus to pump money back into the banks. The GST council is also contemplating cuts in GST rates for automobiles and expensive consumer goods ostensibly to boost demand.
The entire approach revolves around promoting luxury consumption and extending more loans to corporate defaulters. Nearer home we have the example of China which managed to withstand the global financial crisis and a slump in exports by raising wages to increase the purchasing power of the working people and thus boosting domestic demand and mass consumption. The Modi government is treading just the opposite path landing the country deeper into a protracted and comprehensive recession. The only way out of the crisis is to force the government to reverse the strategy, raise wages and increase public expenditure for social welfare and labour intensive sectors and activities. A renewed focus on the economy of the common people however demands a paradigm shift in our current political environment, away from the disastrous politics of hate and destruction to the basic needs and interests of the people. In other words, India needs an urgent course correction, in the realms of both economics and politics.