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Fix the ailing economy

Annual GDP figure for FY2020-21 released by the National Statistical Office (NSO) – an unprecedented contraction of -7.3% – has only confirmed what experts have been saying for a long time: the Indian economy is in a mess.

Sure, this wretched and devastating virus deserves the blame. It locked billions into their homes and brought almost all economic activity to a standstill for months. But the fact remains that the economy was in a state of prolonged slowdown much before the Covid-19 pandemic struck India. If anything, the pandemic only accelerated the fall.

From an economy cruising at 8.3% in FY2016-17, growth had slowed down to 3.1% in the last quarter of FY2019-20 – the eighth consecutive quarter of economic decline and the slowest pace of quarterly growth since India started measuring quarterly figures. Growth for the full FY2019-20 (4.2%) was also the lowest in 11 years. The Modi government obviously believes that everything is hunky dory and that it’s the usual cabal of perennial pessimists read the opposition parties, critical journalists, and certain economists, raising a hue and cry over a crisis that doesn’t exist. Such outright denial isn’t surprising.

Partly because the leadership is not seized of the gravity of the crisis and mostly because no one dares to speak the truth to him.

In the six years of the Modi government, the country has witnessed an exodus of domain experts. From RBI governors like Raghuram Rajan and Urjit Patel, deputy governor Viral Acharya, to former Chief Economic Adviser Arvind Subramanian, and NITI Aayog vice-chairman Arvind Panagariya, all have preferred academic roles over advising the Indian government. No serious democracy can afford to not take globally-sought-after experts and their opinions seriously. But we did and now we have only ourselves to blame.

When this distaste for experts is internalised such as through the “Hard work not Harvard” jibe, bureaucrats know that they must not speak what is the truth but what the leader wants to hear.

While the echo chambers of power paint a rosy picture, independent facts and statistics state otherwise. Latest data by the Centre for Monitoring Indian Economy (CMIE) puts the unemployment rate at a frightening 14.5% as of the end of May with rural unemployment crossing 7%. With the prospect of an impending 3rd wave of Covid-19 infections and snail paced vaccination, further job losses seem certain. This, in a country already struggling with jobless growth and where on an average 10 million people enter into the workforce each year, is a recipe for turning the demographic dividend into a demographic disaster. Also at stake is the risk of undoing decades of hard work on lifting people out of poverty and thus widening the inequality divide.

We know for a fact that millions of Indians- almost 230 million according to Azim Premji University’s “State of Working India” report 2020- have fallen back into poverty. The middle class, a microcosm of an aspirational India, shrunk by 32 million people in 2020 according to a Pew Research Centre report. Mind you none of the two statistics contain the impact of the second wave which has been far more punishing and cruel than the first. The BJP may take pride in dehyphenating economic performance with electoral success. For it has indeed shown through victories in multiple states and in the Lok Sabha in 2019, that you can falter on the economic front and yet win elections after elections. This theory may no longer work given the hit- both personal and economic- that the middle class has endured since the onset of Covid.

Massive unemployment coupled with widening inequality will also feed into social strife. And while social divisions may favour the BJP’s brand of aggressive and polarising politics, the real casualty would be brand India. The latter has already been sullied by an authoritarian aversion to free speech and dissent, and a marked departure from an inclusive and plural idea of India. India slipping on global indices, police knocking on Twitter’s doors, and India refusing to honour an international arbitration ruling is not the kind of advertisement we need to woo global investment into India.

More worryingly, New Delhi’s underperformance is leaving a void in South Asia that Beijing is more than happy to fill in. A slow stuttering economy limits our ability to meet the aspirational needs of our neighbours, giving China a strategic advantage in bossing South Asia. And as the phenomenal rise of Bangladesh shows, India can no longer afford to presume that it is the default would-be-super-power in South Asia. It is time the Modi government woke up from its slumber and smelled the coffee.



Views expressed above are the author’s own.


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