The economy is in the doldrums. After sheer rhetoric-mongering and incessant claims of an economic growth juggernaut, Prime Minister Narendra Modi’s propaganda balloon deflated once the Central Statistical Office (CSO) released the first quarter (Q1) GDP data of financial year (FY) 2019-20. In the April to June 2019 period, the Indian GDP growth was 5%, far lower than what most pessimists anticipated. While the rate of GDP growth in Q4 of FY 2018-19 was 5.8%, most economists, amid a severe economic slowdown that hit the manufacturing sector badly after ruining the agriculture sector, predicted a 0.1 percentage point fall in the GDP growth and projected it somewhere around 5.7% for the Q1.
This fall of the GDP to 5% is a tight slap on the face of the Modi regime and Modi’s Bharatiya Janata Party (BJP), which is the leading member of the National Democratic Alliance (NDA) ruling the country. It came soon after Amit Shah, the notorious outgoing president of the BJP and India’s Union home minister, praised the Modi regime for ushering India to a period of unbridled economic development. Modi himself didn’t stop patting his own back. Leaving the economy to feed for itself, he got engaged with a trivial Fit India campaign, which he participated to promote the products of big corporations dealing with the health and wellness forte. Catering to the aspiring middle class, the prime minister didn’t hesitate to even run social media campaigns to promote his Fit India programme, while the economy’s fitness went for a toss.
Mind it, the data that’s released by the CSO is not the actual and authentic GDP computation data. To inflate its figures vis-a-vis the Manmohan Singh-led United Progressive Alliance (UPA) years, Modi has forced the CSO to adopt new computation standards that fudges the actual numbers achieved during the NDA era. The BJP harps on such fudged data to market the resilience of the Modi regime in the political market vis-a-vis the disarrayed UPA I and II regimes. Yet, if the old standards would’ve been used, the GDP growth rate may have gone below 4.5%, lower than the Q1 of FY 2012-13 when it was 4.9% under the UPA II.
The fall in the GDP growth happened due to a severe fall in demand for consumer goods and automobiles. The Q1 drop story is all about the urban demand falling beyond any redemption level. The rural economy has been in severe distress for years, and in 2018-19 it became worse than ever. To generate rural demand, the Modi regime introduced a scheme for direct cash-transfer to farmers just before the general election with much hype. However, with Rs 6,000 per family per annum, ie, Rs 500 per family per month, it’s impossible to generate any massive demand at the grassroots.
This rural distress merely helped Modi to capitalise on his direct cash-transfer scheme during the election and hoodwink the farmers. Hitherto, the only buffer zone for Indian industries was the urban India, where rising unemployment, lack of credit, lack of trust in the market, and lack of public spending have combined together to generate the negative vibes important for an economy to go down the hills. The demand died down gradually, sending ripples across all sectors, and resulting into massive job cuts, which again added to the woes of the economy.
Neither Modi nor any BJP stalwarts have an iota of knowledge about economics. They can’t even predict where the situation is heading to. Though they will brag about an ambitious project to make India a $5 trillion economy by 2022, they won’t tell people how they want to accomplish that goal with current growth rates. Even to meet its demand of doubling the farmers’ income to Rs 3,000 per month on an average from Rs 1,500 in 2016-17, the growth rate of agriculture must be in two digits, which is a Utopian dream in the present scenario, leave alone the $5 trillion economy.
Amid a fast-falling demand for consumer goods like cars, motorcycles, biscuits, clothes, etc, the government remained a mute spectator and forced the Income Tax department to engage in “tax terrorism”, which created a hue and cry among those big comprador capitalists who were targeted by the Modi regime to ensure only its favourite big comprador capitalists like Gautam Adani’s Adani Group, Ambani brothers’ Reliance offshoots can profiteer more from the agony of the Indian people. The eerie alarm of an economic emergency was ringing for months, yet neither the Modi regime nor the BJP took stock of the situation.
It was only after the lobbyists from the automobile industry, one of the worst-hit industries at present, came to Finance Minister Nirmala Sitharaman with their requests, that the finance minister announced a host of measures to boost the economy by providing more loan opportunities to businesses, a rate cut by the RBI, end to Angel Tax on startups. All these measures are worthless in arresting the recession that has set in and a lot of people will have to suffer due to job cuts in the days to come.
Chief Economic Adviser (CEA) KV Subramanian didn’t speak about the real challenges before the economy like his master. The CEA tried painting a rosy picture of development and growth, while the data spoke about a sheer collapse of economic girds and binds. Subramanian blamed everything generic and with empty phrases for the economy’s crisis except the Modi factor, which gave incessant shocks to the Indian economy, more than what it can absorb at one point in time.
No one in the mainstream press even highlighted how Modi’s disastrous demonetisation exercise hit demand of the consumer goods industry and ruined micro, small and medium enterprises (MSME), rendering thousands jobless. If that attack in Q3 of FY 2016-17 wasn’t enough, the rolling out of Goods & Services Tax (GST) in 2017 gave the fatal wound to the MSME sector. Though the government has been claiming that the GST filings are made easy, teething issues are solved, yet nothing on the ground proved helpful for the MSME, as GST increased their working capital and also increased complicity in doing business.
To oblige his employer, the CEA blamed exogenous and endogenous causes for the fall and told the press that the Modi regime is working hard to resolve this impasse. What it’s exactly doing? What steps does it contemplate to take? What contingency plans the government has? These questions weren’t answered by the CEA. Rather, each attempt was made to undermine the CSO’s data, ironically derived from fudged numbers.
The gross value added (GVA) growth of the manufacturing sector tumbled to 0.6% in Q1 FY 2019-20 from a whopping 12.5% last FY and 3.1% in the previous quarter. Manufacturing is one of the leading employers in India after agriculture. The drastic fall in its GVA shows how complicated the economic issue is and why someone like Sitharaman can’t even figure it out, let alone resolving it.
Adding to the distress, the agriculture sector, the largest employer in India, only grew at 2% in Q1 of FY 2019-20, a fall from its 5.1% in FY 2018-19. Construction and mining GVA also grew at a slower pace, 5.7% and 2.7% respectively. In the last FY, these sectors grew at 7.1% and 4.2% respectively. This means there is a bad phase for both mine workers and the construction workers awaiting ahead. The other sectors of the economy are doing equally bad and none of the big comprador capitalists are happy, except Adani & Ambanis, who are unaffected by the crisis, thanks to the shield provided to them by the Modi regime.
The bailout that the Modi regime is planning, for which the NDA took out Rs 1.76 trillion from the Reserve Bank of India (RBI) recently, will go to the Ambanis and Adani in some or the other way. The surplus withdrawn by the Modi regime from the RBI is unprecedented and it’s going to affect the crucial contingency funds of India severely. As the non-performing assets (NPA) of the public sector banks (PSB) are on the rise, even as the RBI tries to bring discipline in lending. The government, ignoring the current balance sheets and the NPA burden on the PSBs, firstly decided to infuse Rs 700 billion to their accounts to help them lend more, obviously not to those employment-generating projects, but to those that will help the Reliance offshoots and the Adani Group with easy lending.
Not only Finance Minister Sitharaman is trying to force the PSBs to lend more to the unscrupulous corporate entities, but she also merged several PSBs into five major banks and reduced the number of PSBs from 27 in 2017 to 12 in 2019. The merger of the banks is not a good idea at a time when each of them are fighting to reduce NPA. Who will get whose NPAs and why the NPA happened at the first place are matters that will be swept below the carpet. The government will enjoy its time, waiting for the Apocalypto, and wish for some miracle to take away this economic distress. No strong and effective plan will be implemented to fight this crisis situation which can aggravate itself in the days to come.
This crisis news has shown the mirror to the toady lap dancers of the Modi regime who keep performing theatrics and forge details to claim that India is rapidly transforming under Modi’s watch. The GDP data is neither authentic nor an indicator of equitable distribution of wealth or social welfare. Hence, the real situation is worst yet remains cloaked from the world. If the economic disaster continues for more quarters, then either a full-scale war or a limited military conflict may flare up in cooperation with the Pakistani rulers to distract the mass attention and to project Modi as the only viable leadership candidate that India “needs”. The more this economic catastrophe is explained to the basic masses in their language, the better it would be in combatting the Hindutva fascist menace of the BJP.