India's mood = Moody's India?

Last Friday, I provided hard copies of some medical documents stored on my computer to a laboratory. The printout was hazy due to the humid weather. I apologised to the technician and wondered when our extended monsoon would end. “When achhe din come,” the young lady said, without cracking a smile. She looked a solidly conservative Gujarati, not given to sarcasm, who had almost certainly voted for Narendra Modi in all elections, regardless of who the actual candidate was.  

It is not yet six months since the landslide general election victory of Mr Modi and the Bharatiya Janata Party (BJP). After the jubilation of that historic triumph, other sugar rush events, such as Howdy Modi in Houston and the Mamallapuram summit with Xi Jinping followed, along with the much-cheered (within India excluding the Kashmir Valley) scrapping of Article 370 and reorganisation of the erstwhile state of Jammu and Kashmir. One expected that the victors would bask in the warm afterglow for some while yet. But my interlocutor’s obvious mockery indicates a deeper discontent prevailing even in Mr Modi’s backyard.

Gujarat is not the only region to register such a reaction. Last month’s Maharashtra and Haryana Assembly elections showed a wider spread of the dismay. After the tidal wave of popular vote in its favour in the general election, every analyst assumed that the BJP juggernaut would roll on, decimating what little remained of the opposition in these states following en masse defections to the ruling party. The Congress leadership was missing in action, while Sharad Pawar ploughed his lonely furrow in an inhospitable terrain. It appeared that the BJP would sweep the polls by default even before the first vote was cast.

We know that this did not quite happen. The customary hosannas after the famous “victories” were muted. The BJP won a majority in Maharashtra with its truculent ally, the Shiv Sena, but is not forming the state government, at least for now, due to the Sena’s hard bargain for its pound of flesh. In Haryana, a hasty marriage of convenience with greenhorn Dushyant Chautala saved the day, but only after a hefty dowry of deputy chief ministership.

Although the BJP was the largest single party in both the states, the result cannot be termed as anything but its defeat, with the opposition having nothing to do with it. It is tempting to say this was due to the BJP’s complacency or arrogance of power, but the fact of the matter is the much quoted James Carville aphorism, “It’s the economy, stupid!”

Economic bad news has been trickling in since the beginning of 2019, but was buried under the nationalistic election rhetoric.  After Modi 2.0, the alarm bells rang louder and more frequently: Recession in the automobile industry, falling industrial production, tax revenues below expectations, international and domestic agencies cutting growth forecasts, until the last weekend’s downgrade of Moody’s outlook from stable to negative.

Finance Minister Nirmala Sitharaman has been trying bravely to turn back the tide of economic woes through a slew of measures: Sops to housing, medium, small and micro enterprises, shoring up the tottering financial institutions, but there is as yet not much cause to cheer. No wonder columnist Tavleen Singh reported gloomy forebodings from the corridors of corporate power, albeit only sotto voce (The Indian Express, November 9, 2019).

Consider this: The Prime Minister himself provided two criteria while addressing planners. He said that without breaking the logjam, the growth rate in the immediate future could fall to 5 per cent.  He also said that India needed an investment of $1 trillion to get back on the high growth path. His economic advisers listed steps needed to revive India’s growth: Policy predictability, quick project clearances and payments, encouragement to investment, containing inflation, fiscal consolidation. The new measures are at best pot-shots at the devils that hobble the economy, not in themselves sure-fire means of taming them.  

Of course, that did not happen. These observations are from a 2013 column talking about the economic mess of the second Manmohan Singh government, but they are just as applicable to the situation today. Mr Modi only speaks of the $5 trillion economy, and not the measures needed to get there.  He may have turned to domain experts in foreign policy, but has been his own chief economic adviser all along.

All this is of little concern to the aam aurat. She is increasingly worried about two things: Berozgari (unemployment) and mehangai (inflation). Almost everyone knows or has heard of someone being laid off, or put on short hours, or youngsters not getting jobs. And even if the inflation indices are low, mehangai crops up because in the overall scheme of things of a household, incomes are not growing, or not fast enough, to meet its aspirations. Its young now mostly figure only in the denominator of the family welfare equation and not in the numerator as they used to earlier with their incomes, however small they may have been.

Share markets are often moved by that elusive factor, “sentiment.” The political scene is also subject to similar sentiments. And the 1.3 billion stakeholders in India are not upbeat at all, sharing Moody’s negative outlook.
The writer is an economist

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