On 5th October, almost one year after the implementation of Demonetisation, addressing the company secretaries Narendra DB Modi, The Prime Minister of India said, some get a sound sleep at night only after proliferate Pessimistic notion about the Government and on the Economy. According to the Human behavioral psychology, it is a sign of self-soothing expression, but his remark to the critics really mean?
Before digging into the Prime Minister Narendra DB Modi’s Economic policy and how optimistically it is taking the Country’s Economy growth forward, it is amusingly relevant to point out the possible inspiration which shaped his understanding.
Rashtriya Swayamsevak Samgha (RSS) which is the topmost advisory council to the present day BJP government on Statecraft and External affairs mostly influenced by Kautilya @Chanakya. There is no wrong to get inspiration from the great man, who laid the foundation stone of the Democratic Monarchical system and developed a pan Indian Spirit. But it is something abnormal with the brain that thinks which were relevant some 1500yrs ago can be implemented nowadays with exact significance.
Mr. Modi’s sudden announcement of Demonetisation, surprising announcement of various schemes, his Religio-Political gimmicks all are understandable from a chapter of Artha Shastra; the sloka (5.2.39-45) narrates how to exploit the gullibility of the people.(Kautilya- The Artha Shastra, L N Rangarajan, penguin)These include:
-Building overnight, as if it happened by a miracle, a temple or a sanctuary and promote the holding of fairs and festivals in honour of the miraculous deity;
- Exploiting an unnatural happening, such as an unseasonal flower or fruit, by making it into a divine phenomenon;
- Using secret agents to frighten people into making offerings to drive away an evil spirit;
- Playing tricks on people by showing a cobra apparently with many heads, or a stone cobra coming alive;
- selling remedies against evil occult manifestations.
If people are not taken in so easily, they should be frightened into doing so.
The next chapter also elaborates (5.2. 46-51) other methods of cheating to collect revenue.
The Artha Shastra is not purely like modern day Economics. It is a treatise on statecraft and affairs of government and governed. Narendra Modi led government at the centre lacks this basic understanding about the economics. Why and How?
Firstly, the entire economic edifice and the administrative setup both good and bad are inherited from the previous government. But the Modi government has been evasive on this theory. Except for one or two instances, for some unavoidable circumstances, Modi government accepted the truth.
Secondly, which is, of course, the most perilous part that they always apprehensive to prove their stand right.
There may be a strong reason behind such approach; Firstly, BJP came to power by tarnishing every activity, schemes of the Congress-led UPA government, even though most of them were quite good and noble. So it will backfire if they recognise it publicly. Secondly, if they recognise the legacy of the previous government, there leaves little room for them to prove they are doing the best.
This is the fundamental mistake of the Modi government which makes them further secretive in making economic and administrative affairs.
Since my focus is on the economic situation, with an apology I am taking out the administrative and Political issues and reserve it for another article.
Economics is Primary cogwheel of a person’s life. Throughout one’s life, economics will play a major role in determining what one do and how happy he is doing it. Not only individual’s life Economics equally vital for a country. It influences the affairs of the government and determines the wellbeing of the nation as a whole.
The “Laissez-faire” philosophy which since the beginning of the 19th century has been the driving force to determine the course of democracy and the role of the government is now becoming more complex. The advancement of new technologies basically Digitisation there is a growing demand for the de-materialization, de-monetisation, and democratisation of information, currency, and resources. The contours of Economics are also expanding and overlapping other areas. As the Income is largely depending on how effectively the nation or the individual participating in the economic process. Every step towards a more intricate economy brings new problems and economic interrelationships.
However, it seems that Modi government has learned the importance of the above facts. Hence with more enthusiasm, it is trying to implement the digital transactions. It demonetised, Simplified the Tax regime, wants to store the electronic database of every individual’s. But the Truth is, all these noble economic steps inherited from the previous government. Since Modi Government inherited the idea only not the understanding, it is facing a setback in every implementation.
In my previous article, “countering the economic crisis, Modi govt is on the horns of dilemma” I have analysed how India had made the standstill economy vibrant and successfully countered the 2008- 2010 global financial crisis and put the country’s GDP all-time high at +9%. Modi Government inherited a hale and hearty economy with some revolutionary schemes to implement further. The concept of the healthy economic scenario is neither a big leap nor total shifting of the track, but a sustainable and equitable development.
Between 2004 and 2012 most states did well in poverty alleviation. The Reduction of the poverty was 10 to 15 percent. Although the poverty in some states like Nagaland, Mizoram, Arunachal Pradesh, Gujarat increased but the well known poor states like Bihar, MP, UP, Odisha, Rajasthan improved their “poverty reduction rank.” Other government data indicates that the increase in the urban poverty and large-scale migration to urban areas.
An economic life of a rural person is quite different from an urbanite. Even though they earn less than their urban counterparts they are somehow protected from the immediate impact of the unstable economic situation. Since, they highly relied on the simple life, dependence on home/local produced foods/goods, their monotonous diet, etc. Most of the Village folks live out his years never going more than 25miles (a rough estimation) from his home village.
Most of the Demonetisation sufferers are the urban poor and lower income groups, who left the village and earned their livelihood from the unorganised sector. There is no authentic data to show how much the unorganised sector affected by the demonetisation disaster. What the figures government are disseminating, likely to hoodwink the faults.
Many ministers including Finance minister, High rank officers narrated it was to give bolt to “Parallel Economy” run by “Black Money.” But there is no applied term in economics to describe Black Money; it is unaccounted money or untaxed money laundered in Tax heavens. The Parallel economy in its general usage refers to Black market. But in economics it has no negative sense, but a definition to bring more effective monitoring techniques. Economists like Feige defined it as, “hidden economy as including those economic activities which go unreported or are unmeasured by the prevailing techniques for monitoring economic activities.”
However, it is sure that the role of Hard currency for most of the activities in Black Market is highly implausible. On the other side there is an innocent world, where a Parallel economy has prevailed since time immemorial. It is the rural area which suffered most (though the impact varies from state to state depending upon the economic activities). How scanty the earning, it is hard earned from the unorganised sector. It never deposited in Banks, maneuvered by the unregistered local money lenders.
My firsthand experience says the demonetisation triggered the reverse migration. Many returned to the village. Ironically, before demonetisation, Modi Government contracted the budget allocation for many social welfare schemes. Due to contraction of the revenue allocation State governments were reluctant to spend on Infrastructure. The mining sector was under regression. The Market was highly susceptible because of the possible implementation of new tax order. Agriculture was under stress. Those who returned to villages found no employment immediately. For them, two optioned opened either they borrow money or sell and mortgage what they have. Modi Government totally closed its eye to all these factors.
Good Economy produces two things one is “Constant” another is “Equilibrium”. In Constant, like a cogwheel, it pulsates other things to run. Secondly, when a new economic composition brought forth it must give rise to a state of equilibrium. If the new economic order brings any capricious result it never termed as good economy.
In contrary, Modi Government arguably unwavering by debating that it is quite common to protest any novel Idea. However, this is rhetoric filled with a fallacy of Logic and reason.
Without rectification, the economic order, either in deliberation to implement its political agenda or to satiate its inferiority complex Modi Government has unabated in committing series of economic mistakes. It is a general sense of understanding that when the economic condition is highly volatile, one should not go for external aggression or become a perpetrator to the warlike situation. But Modi Government increased Defense budget, Undergone two warlike situations – Pathankot and Doklam Standoff, did surgical strikes. Conversely, in a fully employed economy, we must choose between guns and butter, If we use a big chunk of our productive resource for national defense our standard of living in civilian good is going to be correspondingly lower.
It is quite amazing that in one hand Modi government is talking to take India to a new height and showing dreams to make it Master of the World (Viswa Guru), on the other hand, it is tightening the noose around a healthy economy.
Before concluding my analysis, it is relevant to point out a major issue which may bring disaster to the Indian economy in the near future. As a close watcher of the world especially Indian Economy, I felt that the consumer behaviour of the Indians highly manipulated not by the market but by the Ruling Party (!). The demand for the variant goods now squeezed (may be due to various economic reasons) but there is a selective dissemination of demands, orientation for what to choose and what not to be chosen, imposed preference for a particular variety of goods. When we are competing with the world especially a neighboring country (China) which is very strong in the retail chain, such practice may bring the catastrophic result to many MSME sector and Innovations. It is imperative from the fact world market is skeptical to the “Make in India” products; Even The country’s own defense sector is not willing to absorb it.
Last though not the least, Now Modi Government planning for another blunder. It proposed to hold simultaneous elections. The argument for it is to reduce the burden of expenditure. But Modi Government should not forget that the Economy is a perennial process. The reformation only can be fruitful when you work persistently by remaining on the track. The early election may in distance future give some relaxation to the economy but the state exchequer which is already under the stress could be more brittle with this step.
By general agreement, it is the job of government to establish and enforce the basic rules to enable men to deal effectively together. Without understanding this, the slogan “collective effort, inclusive growth” will be an epithet of the abysmal dismay of Indian Economy.
