Dubai: Two bad stories came out of India this week. The GDP growth plunged to five per cent during the quarter ending in June, a massive drop from eight per cent growth in June last year and a 0.8 per cent dip from the previous quarter. By the government’s own admission, the massive slowdown was attributed to a dramatic dip in consumer demand. Another set of shocking statistics released on Monday showed the country’s core sectors grew at just 2.1 per cent, a catastrophic drop from 7.3 per cent during the same period last year. The core sectors represent over 40 per cent of all industrial production and includes coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity.
‘Vendetta politics’
Two days after the GDP numbers were released on August 30, former prime minister Dr Manmohan Singh launched a scathing attack on the government. In a video message, Dr Singh said: “The state of the economy today is deeply worrying. The last quarter’s GDP growth rate of five per cent signals that we are in the midst of a prolonged slowdown. India has the potential to grow at a much faster rate but all-round mismanagement by the Modi government has resulted in this slow down.”
He also said: “I urge the government to put aside vendetta politics, and reach out to all sane voices and thinking minds, to steer our economy out of this man-made crisis.”
And added: “This makes it very clear that our economy has not yet recovered from man-made blunders of demonetisation and a hastily implemented GST.”
The attack by Dr Singh, a Harvard-educated economist who is not known for making reckless political statements, was surprisingly sharp and clearly went beyond a seasonal commentary on affairs of the economy. The choice of words and phrases made his message much stronger than his famous statement in 2017 when he dubbed demonetisation as “organized loot” and “legalized plunder”.
Reaction
The government initially avoided reacting to Dr Singh’s message. When Finance Minister Nirmala Sitharaman’s reaction was sought by the media, she said: “Has he said that? All right, thank you, I will take his statement on it. That is my answer.” On reports of economic slowdown, she said: “I am meeting industries and taking their inputs, suggestions on what they would want and expect from government, I am responding to them. I have already done this twice. I will do it more number of times.”
It is not clear why Dr Singh asked the Modi government to “put aside vendetta politics”? In what context he used such a strong phrase? Was he referring to the arrest of his former cabinet colleague P Chidambaram who is accused of corruption while he was the country’s Finance Minister? We will elaborate on this later.
High impact decisions
Since 2016, the Modi government has taken several bold decisions – on economy, social issues national security -- including Demonetisation in November 2016, GST rollout in July 2017, Triple Talaq in 2017 (passed by Parliament in July 2019), National Citizenship Register in Assam and Article 370 abrogation in August this year. Each of these decisions have had economic and social impact, long-term consequences and have dominated the national discourse. For example, Dr Singh feels the economy is still lurching violently long after Demonetisation and the GST were implemented years ago. While there is a consensus now on the disastrous economic impact, we still don’t know how these two mega decisions impacted the country socially. We would not know for a while how Triple Talaq, Article 370 or the planned nation-wide NRC rollout would impact the society in the coming years.
Political windfall
What is abundantly clear, however, is that some of these high-impact decisions resulted in a political windfall for Prime Minister Modi’s Bharatiya Janata Party. For example, the poor and the working class trusted Modi when he said Demonetisation was a small sacrifice they would make in the country’s fight against illegal money and that it would affect the rich more than the poor. This resulted in Modi’s thumping electoral victories across the country. The poor bought Modi’s argument that his populist measure to fight illegal cash would hit the rich more without realising that the rich were also job creators and without realising that Demonetisation would hurt their ability to invest and employ people. They learnt it years later when the economy simply stopped creating employment and existing jobs began to vanish. Also, the GST rollout did not impact people immediately but the consequences are being felt now when the economy is reeling due to the slowdown. Similarly, we don’t know yet what will be economic cost of Article 370 abrogation, some reports suggest that India is spending millions in having tens of thousands of military boots on the ground. The massive security presence will likely remain for months if not years in Jammu and Kashmir to maintain dominance.
Political expansion and social discord
The political windfall led to a massive expansion of the BJP under Modi’s leadership and his party grew geographically and socially, even in regions where the party’s nationalist agenda once had few takers. When Modi became the prime minister in 2014, his party ruled in eight states and in just four years the BJP captured 20, a phenomenal growth not seen in the history of Indian politics. Coincided with this massive expansion of the BJP’s footprint was growing social and communal discord. Official figures show incidents of communal violence grew by 20 per cent between 2014 and 2017. Incidents of violence by cow vigilantes grew under the BJP rule, between 2010 and 2017, 28 people, including 24 Muslims, died in 63 incidents of mob violence. Most incidents happened after Modi took over in 2014, according to a Reuters compilation of figures. Official statistics do not record hate crimes in India but some media houses have published their own numbers -- according to Quint.
Social discord and consumer sentiment
Not surprisingly, these incidents have deeply impacted the psyche of people who are worried about growing lawlessness and the right-wing vigilantes’ ability to escape prosecution for their brutal attacks that, in many cases, were captured on camera. The government is reluctant to admit problems with the economy, there is a consensus among commentators who underline poor consumer sentiment as one of the main causes of the slowdown. While these commentators link consumer sentiment to poor demand, they are unlikely to draw a parallel between consumer demand and social anxiety. I feel that there is a strong connection between the two and this social uneasiness, in addition to the economic factors and mismanagement, is also contributing to the slowdown by influencing consumer sentiment. Here, I would like to emphasize that factors contributing to political windfall may not necessarily also contribute to economic stability or growth.
Settling scores?
Returning to Dr Singh’s message, we may not know why he chose the phrase “vendetta politics” to attack his successor. We may not know if he was upset because his former minister Chidambaram is under arrest or something more. Meanwhile, on Sunday, India’s Telegraph newspaper published an article titled ‘The unusual transfer of Madras High Court Chief Justice…’ The article sought to draw a link between the transfer of the chief justice and Gujarat riot cases this lady judge handled while she was posted in Bombay high court in 2017. Justice VIjaya Kamlesh Tahilramani, one of the two woman chief justices in India, upheld the conviction of 11 people in the Bilkis Bano rape case, one of the most heinous crimes committed during Gujarat riots in 2002. The transfers and postings of judges is handled by a collegium headed by the chief justice of India, the newspaper’s attempt to link the transfer with Gujarat cases add to the narrative of witch-hunting of government officials who tried to deliver justice to the riot survivors. This article may appear to be farfetched, Dr Singh is the not the first person to talk to vendetta politics. Opposition leaders have accused Modi government of unleashing investigative agencies and tax authorities to go after former ministers and the academics have raised concerns about attacks on the intelligentsia. These concerns playing out on prime time TV and on social media add to a national narrative that divides people and contributes to the fear psychosis across a wide spectrum of the society.
Tuesday’s stock market crash and rupee slide show that measures taken by the government to pump up the economy have had little or no impact. These steps may work in the long run but the government must create an atmosphere of trust and security to improve consumer sentiment.
