A few days before Narendra Modi was elected India’s prime minister in May 2014, I had met him at his office in Gandhi Nagar, Ahmedabad, Gujarat, a state he was ruling as the chief minister. He exuded a leonine confidence in himself and the future of India as represented in his person. It was clear he saw himself replacing Jawaharlal Nehru as modern India’s key architect. He also thought then, as now, that the incumbent and ever silent Dr Manmohan Singh and his Congress-led government inept; certainly, not driven.
A little over three years later, not even his worst enemies would say Narendra Modi is not driven, or that he is wanting in labour. But the results have not been proportionate to his passion.
Depending on the source, India’s growth rate has slumped from near double digit figures in the Manmohan years to 7.1 per cent, 6.1 per cent, 5.3 per cent or even 3.8 per cent , despite reasonable rains — a key condition for India’s yet agrarian economy — and crash in global oil prices, which means smaller import bills, higher foreign exchange reserves, and considerable savings for investments in development.
A widely held reason for this slow down has been demonetisation, which exactly a year ago, on November 8, came into force and the government culled big denomination notes like Rs500 (Dh28.4) and Rs1,000 from circulation by way of curbing black money.
In a discussion in parliament, Manmohan Singh, who has a PhD in economics from Oxford, described the effect of demonetisation as “organised loot” of the public. Modi, and his minister for economy, Arun Jaitley (whose speciality as it happens is law), continue to defend what has turned out to be a well intended but massively premature measure.
The reasons for this are by now well known. Nearly 80 per cent of Indian economy is run informally. That is another way of saying cash is the currency. It has to be visible. And it has to be passing hands quickly. This includes the once booming real estate sector and the vast agrarian rural markets of India.
The real estate in India has been for long a parking spot and a tax haven for black money. Indeed, a buyer was forced to pay a black (unaccounted) component to the unscrupulous builder as part of an unwritten law. In interior India, where smart phone and internet penetration are fractional, transactions were cash-dependent. Add to that, the fact that 60 per cent of the population is nearly non-literate, and you get a rough idea why demonetisation was destined to fail.
Out of the Rs15.44 trillion in currency that was rendered invalid on November 8, 2016, Rs15.28 trillion has come back into the Indian banking system, according to the Reserve Bank of India. This means that 98.96 per cent of Rs1,000 and Rs500 notes that were banned returned to the banks by the end of June 2017.
So, in effect, a vast amount of money has reached the banks — no matter, the nationalised ones are notorious for their huge accumulation of non-performing assets. Yet, the government is somehow not positioned well enough to help the economy kick start. Clearly, demonetisation as a measure has been quick and ruthless in its execution, but the Modi government had not thought of a strategy to put that money back into people’s lives. Demonetisation as an economic measure then remained as one; and, so, pointless despite the fact that Modi had the political will to disrupt.
It’s another matter that, politically, the BJP gained as its top functionaries and friendly billionaire business tycoons knew what was coming, and sucked out the cash well in time, and cached it away.
It also helped the ruling BJP to financially drain the main opposition party, Rahul Gandhi’s Congress. Which was how the Uttar Pradesh assembly polls early this year installed the extreme right wing exponent, Yogi Adityanath, who has in a short span proved himself to be administratively incompetent, and open to be led by the nose by senior bureaucrats.
Modi has been a lot like the bull in the China shop. He has been quick to trample on corrupt but reasonably productive systems; but that will and ruthlessness in breaking apart old paradigms are not accompanied by social and cultural ecosystems that enable the translation of hard rules to the direct benefit of the people, whom he professes to be in sympathy with.
The lack of sensitivity (or emotional IQ, if you will) and thoughtlessness in terms of governance means basically more and more disruption. The heavy duty, Goods and Service Tax (GST), that the regime was in such a tearing hurry to implement has been another instance of that disruptive principle characterising the Modi government. The 18 per cent GST, on every transaction, has broken the back of the middle class consumption in India. And businesses and restaurants have been shutting down by their thousands, which means real income is coming down, and that unemployment is rising.
Recently at a speech in Himachal Pradesh (scheduled for assembly elections in the first week of December), Modi said: “Over 300,000 companies have shut down after demonetisation and a probe into 5,000 such firms has found a fraud of Rs40 billion, while investigation against others are on.”
This ironic claim could be put down to compulsive brownie points scoring. Because, Modi is addressing crowds that are directly affected by what he takes to be visionary economic measures. Critics like Yashwant Sinha and Arun Shourie, both BJP champions once, have pointed out that sufficient thought has not gone into Modi’s irrepressible urge to rock an already leaking boat.
In any less passive country, the measures that the Modi regime enforced might well have led to its downfall. But India is desperately hoping. Always has. So for the time being she still seems to be in the forgiving mode. Perhaps not without a measure of reason: thousands of poor have got subsidised gas connections, for instance; though the price of gas, as far as the middle class is concerned, has rocketed. On the ground, then, Modi still has a lot of good will; nothing deceives as hope. A lot of people also believe Modi needs more time.
To me, the underlying reason for the problematic aftermath of almost all Modi measures is an acute lack of real education. Subjects like economics is extremely complex; and a lawyer like Arun Jaitley, perhaps is the wrong man to guide the hardworking PM. But that lack of education is also visible in Modi’s sense of history and science, when, say, compared with a Pandit Nehru or a Vajpayee. He also suffers from what I can describe as only as a vanity of signs. His obsession with gleaming and expensive toys like Bullet Trains, when, for example, the inhuman Bombay local commuting system catering for some 7 million people claims the lives of nearly 2,000 victims annually, is a clear instance of this Madame Bovary syndrome.
A year after introduction of demonetisation — and similar epochal measures, whose anniversaries are round the corner — Modi’s government continues to be visibly strong on dreams; but, equally, they continue to sleep on the same bug-ridden beds. The basics in short are missing. As a result, you can see the castle, but the steps leading to it remain steep, crooked and slippery.
C.P. Surendran is a journalist based in India.
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