Dr. Singh is the quintessential pro-business voice of neo-liberalism in India. Recall his lack of enthusiasm for the Rural Employment Guarantee Scheme; his impatience with the environment ministry’s objections to corporate control over natural resources and his controversial allocation of coal blocks. They reflected the belief that Business should not be forced to pay the social costs of natural resources.
Despite Dr Singh’s claim to have written as a citizen and “a student of economics”, he is in fact airing corporate anguish. When he writes of Indian society’s “fabric of trust and confidence” being torn and ruptured, he is speaking for them. References to the plight of the common man are secondary. Consider his observation: “Many industrialists tell me that they live in fear of harassment by government authorities. Bankers are reluctant to make new loans, for fear of retribution. Entrepreneurs are hesitant to put up fresh projects, for fear of failure attributed to ulterior motives. Technology start-ups, an important new engine of economic growth and jobs, seem to live under a shadow of constant surveillance and deep suspicion.”
He pleads, “I urge the Prime Minister to set aside his deep rooted suspicion of industrialists and entrepreneurs and nurse us back to a confident and mutually trustworthy society that can revive the animal spirits and help our economy soar.” Without denying the politics of Dr. Singh’s intervention, it nevertheless points Prime Minister Modi’s 2014 image as a corporate mascot.
At the time, he had come well-recommended by his record as Gujarat’s chief minister where he had bent laws, procedures and administrative orders to favour corporates. His wooing of Tata’s Nano project is the stuff of legend. Tata was advanced a soft loan of Rs 9,570 crore (thrice more than the total Tata investment of Rs 2,900 crore) at 0.1 per cent interest repayable over 20 years; 1,100 acres of agricultural land sold at Rs 900 per sq. m. against the prevailing market rate of Rs 10,000 per sq. m; exemption from stamp duty of Rs. 20 crore on the sale of land and deferred payment of Value Added Tax (VAT) on the sale for 20 years.
Other prominent beneficiaries of Modi’s largesse included Larsen and Toubro (allotted 800,000 sq m of land at Hazira at Re.1 per sq. m), the Essar Group (allotted 2.08 lakh sq. m of disputed land and forest land) and Reliance Industries (charged between Rs 21 and Rs 390 per hectare for land allotment, much below the market price). The Comptroller and Auditor General recorded that undue favours to the Adanis and Ford as well.
So when he ran as the economy’s best hope as prime minister in 2014, they corporates threw their weight behind him. In addition to being the flag-bearer of the “Hindutva project”, Candidate Modi also became the hope of big business promising deliverance from the policy paralysis, corruption and economic mismanagement of UPA-II.
That promise has started unraveling.
Today the BJP’s political dominance is not because of, but in spite of the economy. Prime Minister Modi may keep up the hype of India becoming a $ 5 trillion economy by 2024, but he seems to be flying without maps. Investment has fallen to a 16 year low, job losses make headlines, GDP has slumped, private consumption is at a 5-year low and rating agencies have downgraded India. He seems to have abandoned the sheet-anchor of corporate support for the crutch of Hindutva ideology.
His budget post- re-election heightened investor fears. It imposed new taxes on start-ups and international investors and proposed punitive measures for CEOs violating Corporate Social Responsibility law. These policy missteps have since been rolled back as corporate anger mounted. But corporate mood had already darkened. Warnings from industry leaders like Adi Godrej, Rahul Bajaj and Kiran Mazumdar Shaw were ignored.
It was not only Indian corporates who were worried.
In October, a letter from Walmart CEO, Dough McMillan, to the prime minister seeking certainty and predictability in economic policy came to light. Earlier this month, Vodafone Group CEO, Nick Read, announced that the group would not infuse any further equity into Vodafone Idea Ltd, citing “unsupportive regulation (and) excessive taxes”. The value of its joint venture with the Aditya Birla Group was written down to zero. Even a dyed-in-the-wool Modi loyalist like Mohandas Pai has begun speaking of slowing growth resulting in job losses in the IT sector.
The only person talking up the economy today is Mukesh Ambani whose comments at Saudi Arabia’s annual investment forum echo the government’s line that the economic slowdown is temporary and that the government’s recent measures will reverse the trend.
But the mood remains dark in the rest of the corporates. They are afraid to invest in the aftermath of policy missteps, falling private consumption and little headroom for an economic stimulus with fiscal deficit (centre plus states) touching 9 per cent of GDP. Whether Prime Minister Modi will be able to revive himself as a corporate project is uncertain for now.