Indian Perestroika: From this point to future

Lambodar Prasad Dash

After 70 years, India going through a new phase. Government under Narendra Modi has tried to bring a structural change of the entire economic, social and governmental setup mostly influenced by the right-wing ideologies. Since 2014, India has also experienced many reformations some of which are government induced and some independently through legal and international aspects. Can all these reformations bring a better future? There is no simple answer to it, but a section is Hopeful and another section is skeptical to it.

After 3 years, we are in the middle of the evolution of Economical, Social, legal and political policies. However, the situation is such that we neither rewind the process nor has same enthusiasm to embrace all of them. Now be specific to the question, can this Perestroika of Indian Economy move forward with the same spirit? International Monetary Fund (IMF) in its recent world economic outlook and the World Bank both are positive but with an asterisk mark, which clearly stated: “if government thrust for the change remains unchanged”. Will the Government resolution remain same? It is a big question and also a game changer. Many International and national financial and governmental policy watchers including IMF and WB positive towards Modi Government for a single most powerful reason that it has a strength of democratic numbers, unlike previous government. In the contrary the forecast based on the mechanical analysis of statistical data only which has complete blind towards several relative issues like, the commitment of government machinery, implementation strategy,  and people’s emotional response to the pros and cons of the policies.

Policies are the binding force between centre and state, more precisely it determined the quality of the relationship between Government and its people, which in turn establish a collective effort for the nation’s development. Besides this, most of the economic policies are designed to solve particular problems at a particular time. Not all policies are a panacea to the plethora of problems for all the times. So, for the sustainability of the economic development, we have only two options, allow the policies for continuous evolution or formulate it with a collective approach. But, the fundamental predicament of the policies which brought disasters and severe criticism is Modi government’s plan to build watertight and congruent policy order with an aim for universal application throughout time (!) in a simple sentence, Modi Government unlikely to accept India as a unity of diversified interests and economic life.  

Of Late, the intellect of the Modi Government accepted the truth. On 11^th of this month, in the 1^st meeting of Economic Advisory Council (EAC) to Prime Minister emphasised the government to stay firm on the reformation but recommended to evaluate the policies and ready to take suggestions from beyond the rightwing contours. However, when the government has a congenital right-wing instinct and within a few months going to face series of assembly elections and general election, will this suggestion be implemented with its true spirit? The voters of 2019 will not be like 2014’s, the Image of the BJP is diminishing, Voters trust much strained due to promiscuous promises. In such condition, these democratic exercises have largely determined the future of the policies and the ability of the government.

Even if we presumed that the Modi Government will pass through unscathed in the next 2 years, the IMF figures are not so high-flying for India in comparison to the other nations with a similar economic scenario.

India's forecast in IMF's World Economic Outlook, 2017

In 2009, the year when the whole world was under the grip of severe economic recession, India’s total investment was 36.480 percentage of the GDP. In the current year, it further declined to 29.936 and as per the IMF forecast in 2022 it will be 30.936. It will be wrong to give a reason that with an increase of the government investment in infrastructure and productivity of the human resources the forecast will be altered. Without proper utilisation of the human resources and private investment, the government spending will be more than the revenue and subsequent decrease in savings.

This situation further pointed out by IMF, in 2009, the Gross National Savings (GNS) was 33.665 percentage of GDP. In 2017, it is 28.558 and in 2022 it will be 27.939 (% GDP). This implies government is spending is more its income than it produces.

The government revenue in the current year is 21.130 percentage of GDP while it was 18.518 in 2009. In 2022 it will be 21.326. Mean, the subsequent years the revenue generation is not increasing but will remain static. In contrary to the static revenue generation, the government expenditure is decreasing around 10% year-on-year basis. In 2009, the expenditure was 28,052, in 2017 it is 27,488 and in 2022 it will be 26,683. But recently, more WB supported SANKALP and STRIVE scheme and increase of salaries by implementing 7^th pay commission recommendations, the government showed its keenness for the more government spending to counter GDP growth. This is also somehow against to the suggestions of the IMF and detrimental to the future sustainable and inclusive growth of India.

Further, the declining government savings implies two issues, one, in future manufacturing industry will be more dependent on the government purchases and second, and people will spend more on consumption. If we take the 2^nd issue, it implies the growing CPI inflation in coming years.

Although IMF is hopeful for the Increase of GDP, it will reach 300,223,330 Billion INR (at current price) than the current 167,184,181 billion INR. Meanwhile, the data also indicates that the GDP deflator index also increasing. In 2009, it was 87.183 and current year it is 128.518 and in 2022 it is forecasted to 158.002. This implies two major things, the loopholes of the government planning to subdue the declining GDP and increasing the cost of living. Increasing cost of living is a clear sign of an increase of Poor-Rich gap and expansion of population under chronic poverty.

While, Modi government tries to blend its Right-wing economic model to the neoliberalism, but to tackle the economic problem it follows the Keynes model. If the government went further without any amendment to the present economic model, in near future government will be more blamed. If in order to gain mass popularity, the government would reduce or avoid taxation (Land, Gold, Oil not under the GST purview) and then meet the revenue shortfall by the creation of more artificial money, eventually it will lead more corruption like previous government coupled with a maladroit economic situation.

Modi Government in Reality-Shock

Lambodar Prasad Dash

How much Modi Government trying to stifle the growing piques on the Jay shah's alleged financial gain issue, it is another incident which further exposed the Modi Government to the Reality-Shock Syndrome. Recently, the RBI’s Quarterly Policy Report and Earlier to this the Centre’s financial report on GDP and Economic Survey already made the Government incarcerated to the situation.

Prime Minister Narendra DB Modi and BJP National President Amit Shah (File Photo)

Jay AmitBhai Shah, the only son of most powerful Bharatiya Janata Party (BJP) national president Amit Shah. The Wire, an online media house uncovered the alleged financial misappropriation which gives Jay a whopping 16,000 times monetary gain within 2 years. The amount of truth behind the accusation is yet to be proved (if Modi Government or a judicial proceeding wants). It has put an incorrigible question mark on the submission of the Modi Government and its precision on corruption. Although the issue is not related to any members of the treasury bench for which the government to take the blame, yet it is the subject directly impinge on the party’s very sensitive part, its image.

Before going to the details, it is relevant to quote Tom peters and Nancy Austin from their book “A passion for excellence: The leadership difference”. 

• People have ego and developmental needs ...and they will commit themselves only to the extent that they can see ways of satisfying these needs.
• People cannot be truly motivated by anyone else...That door is locked from inside.
• When people are in an atmosphere of Trust, they will put themselves at risk, only through risk is there growth....reward...self-confidence...leadership.

Now, come straight to the 3rd point, since 2014 Election Campaign Narendra DB Modi time again has reiterated that the “corruption” is the biggest enemy of the country and it is the only hurdle to India’s development. He promised that his mission as Prime Minister is not to enjoy power but to uproot it. He also cautioned that the fight against corruption is not so easy and called the people’s support to be ready to bear the difficulties patiently during these fighting.  People unquestionably believed his Magniloquence. Extended support not only during demonetisation but also in his every disastrous reformation.

Contrary to the situation, during the same time, in recession stuck Brazil People came out to the streets and forced the government to rollback demonetisation. In Brazil, there was widespread resentment, spontaneous Protest sparked overnight. In many Western Countries, it is evident that if the government failed in any economic administration, the people’s remonstration is intense. But, in India the situation is different. People are more forbearing and indulgent towards such situations.

Now, come to the 2nd point, It seems that soon after 4 months of the implementation of demonetisation people de-motivated slowly but surely. As most of the economic reforms could not substantiate the Modi Government’s claim on corruption, Black-Money, Terrorism, Parallel economy, digital transaction, except the government forced surroundings. Rather the economic reforms posed as a stumbling block to the big ticket schemes like “Startup India”, “Make in India”, “Smart City Mission”, and “Skill Development”. Besides this, Modi-Government unable to boost the Export of indigenous products except for software

The Spice of India, most demanding products faced severe hardship during all these years. In the year, 2016-17 (Apr-June) the export reduced to 621.78US$ from 2432.85US $ (2014-15). Agriculture and Processed Food Products Export Development Authority (APEDA) Export performance abridged. In the year 2015-16, total export of Agri and Allied products was 43,369.62INR Cr which is reduced to 6,398INR Cr in 2016-17. PEC, a Government company, primarily engaged in export of projects, engineering equipment and manufactured goods, defense equipment & stores and import of industrial raw materials, bullion and agro commodities also faced financial constraints. Sales turnover reduced from 9780INR Cr (2013-14) to 3746 INR Cr (2016-17). Similarly, the sectors which declined are Processed meat (-77%), Leather and leather manufactures (-6.08%), Chemical and Related Products (-73%). Plastic & Rubber Articles (-2.68%), Base metals (like Iron, Aluminium, Copper) (-6.25%), except machine and Telecom instruments the export of other electronic items reduced. In the IT sector, Software service export growth dropped off (5.6% in 2012-13 to -.7% in 2016-17), IT-BPM export growth reduced from 11.1% (2012) to 7.8% (2017).  All these sectors accounted 40% of the total exported goods and services.

Last but foremost, In the above mentioned psychological traits of people in relation to an organization or a nation, the first assertion is on the people’s ego and development needs, which now are dwindling. As now, when people see that the Modi Government is noiseless on the perpetrators of corruption, Black Money rather their own men has been accused of the series of corruption charges. Employment is not generated as per the Election Manifesto but to a certain extent adding numbers to the unemployment.

It seems that the chest thumping on development and projecting himself “Vikash Purush” (Messiah of development) won’t produce development. The statistical figures of the government itself negate the claim of the Modi Government.  It shows that either Government is suffering from Hemispatial neglect Syndrome (a person who could not see or recognise the other half of the things) or it is a deliberated attempt of manipulation of facts, doctored data and managed publicity to hide its weakness.

For example, the Modi government’s one of the most hyped programs is the rural electrification scheme. The government maintained that even after 70years of Independence many villages having without electricity and they are doing a tremendous job to make all of them electrified. But in reality, before 2014, except Jharkhanda, Bihar, Odisha, UP, WB and Assam all the states achieved electrification between 90-98%.

In the Human development index (HDI) India already gained 4 positions before 4 and within last 3 years the condition not improved well even after the increase of budgetary allocation on social welfare schemes. According to the economic survey report (2016-17) part-2, Indonesia, Brazil, Sri Lanka and Malaysia are far better-performed nations than India. 

T S Venketaraman (Management Crises and Strategies for Growth, The Hindu Speaks on Management) rightly quotes, "... the financial difficulty is a result of several managerial mistakes made months or sometimes years ago. If a manager has misused funds once, he will do the same next time if he is given more money."