1. Modi’s misguided economics will catch up to him

Modi’s misguided economics will catch up to him

It's been almost three years since Narendra Modi took over as prime minister of India -- but, in many ways, it feels longer.

By: | Published: May 1, 2017 10:36 AM
Modi’s domination of Indian politics, and of Indians’ imagination, is complete; no alternative seems possible, every challenger has been defeated. (PTI)

It’s been almost three years since Narendra Modi took over as prime minister of India — but, in many ways, it feels longer. Modi’s domination of Indian politics, and of Indians’ imagination, is complete; no alternative seems possible, every challenger has been defeated. But bad economics has a habit of catching up with its practitioners eventually. And for all his political success, Modi’s mismanagement of the Indian economy may yet be his downfall.

When he became prime minister, in 2014, Modi was welcomed by market-friendly liberals convinced that his record as a pro-business leader of Gujarat state meant that he’d be a reformist in New Delhi. Reality was a harsh let-down. Modi’s government has certainly instituted reforms worth noting — a nationwide tax overhaul and a new bankruptcy law, for example. But he hasn’t moved as aggressively to expand the role and power of markets as many had hoped. At best, he’s about as market-friendly as the government he replaced.

He’s even gone backward in some respects. One gets the feeling that the mood in his government is distinctly truculent today. Bolstered by a big election victory in India’s largest state, it isn’t interested in listening to liberals bleating on about privatization, freer markets and trade.

Perhaps the turning point was Modi’s decision in November to withdraw all high-value currency notes in circulation. Most people would think that taking 86 per cent of a country’s currency out of circulation, and then botching up the process of returning the money stock to normal, would be a disaster politically. It was certainly a disaster economically. But Modi has since gone from strength to strength politically. Not only did he win a series of state-level elections in March, but last week he trounced one of his main challengers, the anti-corruption crusader Arvind Kejriwal, in local elections in the latter’s stronghold of Delhi.

It would be a serious problem for India if Modi saw these successive victories as a sign that he could sell any policy, no matter how disastrous. Yes, the currency withdrawal — “demonetization,” as it’s called — was terrible economics while being excellent politics. The average Indian suffered a great deal of hardship, but consoled herself with the belief that rich, corrupt Indians were suffering as much, if not more. It would be easy for any politician to believe that if they’ve succeeded so well in turning a blunder of nearly unique proportions into an electoral advantage, then they could do whatever they please with the economy without suffering the slightest blowback.

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Recent signals from Modi suggest he thinks just that. This week, he inaugurated a new airline scheme that featured caps on ticket prices of 2,500 rupees, or about $40. The government had already experimented with price controls — for example on cardiac stents, the price of which it forced down by about 85 percent. Last week, Modi hinted that he might force doctors to prescribe only drugs mandated by the government, claiming that their bad penmanship was a conspiracy: “Poor people do not understand the handwriting,” he said, and have to buy medicine “from private stores at high prices.”

You get the sense that Modi, who came into office as a market-friendly reformer, is happy to fight the next general election in 2019 as a class warrior. And on current form he might well win handsomely.

The problem is that India’s economy is growing at 7 per cent today — more than most other countries, but well short of its potential. Good policy would get you double-digit growth. And it’s double-digit growth, as China’s experience shows, that produces the kind of social and economic transformation that Modi repeatedly promises his voters.

If he fails to make good on those promises, the first casualty will be Modi himself. He may have no credible challengers now, but democracies have a way of creating contenders out of nowhere — as was the case with Modi’s own rise. Potential opponents are being incubated already, within the prime minister’s own party. In the long run, bad economics doesn’t give you growth, investment and jobs. And doing without growth, investment and jobs isn’t good politics at all.

  1. J
    J Madhav
    May 2, 2017 at 10:46 am
    All changes made so far have been done in the interest of the common man where even the rich benefit.
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    1. S
      Sunder
      May 1, 2017 at 4:45 pm
      Modi is a successful snake-oil sman, nothing more. What has he done for public education for the poor and villagers, universal health care, employment generation, nutrition, basic needs, rural connectivity, environment, greater economic equality, removal of social inequalities ? Nothing whatsoever. Where is the Lokpal ? He is squandering money on meaningless defence expenditure. He supports cow vigilantes. His penchant for rhyme and alliterative sloganeering and 'schemes' is getting to be irritating. He is a divider, keeping the hindutva vote bank happy by 'kabristaan vs. smashaan, ramzaan vs. diwali' kind of sick election speeches.
      Reply
      1. K
        Ketul
        May 1, 2017 at 3:29 pm
        Western media has no clue about Indian economy. Indian economy is the most diversified in the world and statistics speak that. You have to come and live in India to even know about it. As an example, with binocular you can see Moon (half, full, no Moon) so close but don't really know what is happening there. This article is just completely misguided and pathetic. Western media just can't digest the right future they see for India.
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          Against Sick
          May 1, 2017 at 2:47 pm
          Besides the usual leftist suspects like NDTV, IE etc whenever i read names such as Bloomberg or Huffing ton Post or BBC Hindi, i dont at all waste my time reading the article because historically it is known that these publications have huge bias against PM Modi and hence will never write even remotely anything good about Modi or BJP or even Hindus for that matter. The reason is simple--they are the agents of Christian missionaries in India
          Reply
          1. S
            Shekhar Shukla
            May 1, 2017 at 1:56 pm
            Its very bad attempt to write negative about Mr.Modi. Bloomberg should not lend its name to such lop sided writers who have little understanding of economics. They are driven by politics rather than economics.
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              Madan M Sharma
              May 1, 2017 at 1:24 pm
              This article is most stupid I have ever read. The writer seems to have neither an economic point in mind nor avcare for the common people who form 80 of po tion of the country, whose welfare the Prime Minister is addressing all the time and this is the reason he is getting w hearted support for them. Should he ignore their welfare? No. The writer should learn something before writing a substance-less piece.
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                Aman Jethi
                May 1, 2017 at 12:15 pm
                With time, I have been feeling that Modi is the Salman Khan of Politics. The hero of m es, win hearts with his style and dialogue baazi but with little content to prove his mettle.
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                  Aman Jethi
                  May 1, 2017 at 12:32 pm
                  But, as on today we don't have any good leader other than him. And some of his good initiatives are Jan Dhan Yojana, Access of LPG Cylinders to poor, strengthening foreign relations and a drive for Digital India. Indian democracy needs a strong opposition.
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                    ashok
                    May 1, 2017 at 4:37 pm
                    These initiatives were of congress but never advertised. LPG scheme of subsidy started in 2010. Jan dhan called financial inclusion by congress started in 2010. Digital india what is that. India is always digital. Infact modi opposed GST and aadhar. Now he embraces it . We need educated leaders as PM like we had Rao, MMS etc
                2. I
                  IS
                  May 1, 2017 at 12:12 pm
                  Poorly written article. Writer has failed to understand context & get a pulse of nation. Market friendly doesn't mean profiteering & looting public money and rob. All those bing citizens with shoddy product & services. Citizens of the country deserve good governance and good quality of life. All steps in this direction should be welcomed. This rather reorients industry & business to be more focused, efficient and accountable to contribute to the growth of the economy.
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                    Venkatesh
                    May 1, 2017 at 12:09 pm
                    Bloomberg which is from USA has history of publishing non-sense. This is one such example.
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                      Venkatesh
                      May 1, 2017 at 12:07 pm
                      Sitting somewhere and writing nonsense articles is easy. Your article only looks at free market trade and is entirely focused on how to make rich people even richer but India has been and will always be different. The US style or Europeans style of ecnomics won't work here. To say the least the author of this article does not have any sense about India or by chance you are from India then you don't know India. So this is a trash material.
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                        PANKAJ SOOD
                        May 1, 2017 at 11:37 am
                        The main objective of any government should be that our country progresses and policies should be made accordingly
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                        1. V
                          Virendra Sason
                          May 1, 2017 at 11:31 am
                          भारत सरकार के लाख प्रयासों के बाद अर्थव्यवस्था की रफ्तार में कोई त्वरण (acceleration), क्यों नहीं जमीन पर दिखाई दे रहा है। जबकि लगभग 3 लाख करोड़ का क्रूड आयल ( Crude oil cushion) Cushion भी है। सर्विस टैक्स में कुछ ज्यादा ही बड़ोतरी भी की जा रही है। Rs 500 व Rs1000 के नोटों का redemonetization किया गया। आदरणीय प्रधान मंत्री द्वारा विदेशों से धन लाने के अथक प्रयास भी किये गए। तथाकथित काला धन को सफ़ेद में बदलने के मोके पर मोके दिए जा रहे है। इस तथ्य से इंकार नहीं किया जा सकता कि बैंकों के NPA के write off किये धन को भी सफ़ेद किया गया है।WHY DO GOVT EXPENDITURE AS A SHARE OF GDP SLIPPING? कारण: प्लूटो और शनि के Declination में बराबरी का होना है जबकि गनीमत यह है कि Lunar Standstill, Maximum नहीं है वरन Minimum है नहीं तो 1929 के बाद वाली स्थिति होती. इसके आलावा भारत की जन्मपत्री के अनुसार अपने प्रभाव देने से चूक नहीं रहे है। ऐसी स्थिति मार्च 2016 से मार्च 2021 तक बनी रहने की सम्भावना है। बैंकों के वास्तविक NPA रूपी गुब्बारा 2021 तक फटने की स्थिति में आ सकता है। All is due to typical Planetary
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                            Pramod
                            May 1, 2017 at 11:28 am
                            The Article is like its le, misguided. The writer is devoid of any understanding of backgrounds in which these decisions of Modi were taken and unique conditions and environment in which indian economy and polity works.
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                              Anurag Jain
                              May 1, 2017 at 11:18 am
                              The writer must understand that economics is just one of the subsets of running a country, holistic thinking will realize that what is being done today will catch up all the subsets and improve the country. This micro level thinking of media / journalists will lead no where.
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                                SEKHAR B
                                May 1, 2017 at 11:16 am
                                Paid pathetic article by sekular media.
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                                  pramughamv
                                  May 1, 2017 at 11:14 am
                                  Allways tries to find problem in every aspects of Mr. Modi, while doing economies for the betterment of the country Mr. Modi also has to take care of the poor people of this country. So there is no question of he failing. He will reach the destination. Theses are negativsm
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                                    Jai
                                    May 1, 2017 at 11:09 am
                                    the author has written the article with half knowledge. The author should first read about the Udaan scheme. The scheme will generate air traffic in now disused airports such as Mysore airport. Further only 50 of the tickets will be sold at 2500 INR the rest will be sold at market value.
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                                      Nisarg Bhatt
                                      May 1, 2017 at 11:08 am
                                      I tried to find substance in this article, but it was like drawing blood from a stone.
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                                      1. J
                                        Jnan Prakash
                                        May 1, 2017 at 11:03 am
                                        An article written by the extreme right wing proponents of free market economy having a scant respect for common man and the problems faced by the majority of Indians in negotiating their daily life. The writer has also glossed over the fact that empowerment of down trodden, improvement of infrastructure and a sustainable growth are major achievements of Modi government. The market has also attained new heights during this period. The writer must understand that this government is not for the followers of Anne Rynd type of economics being propagated but for 'Sab ka sath sab ka vikas' and there lies the strength of Mr. Modi.
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                                        1. S
                                          shangambaba
                                          May 1, 2017 at 11:02 am
                                          You are so intolerant toward the BJP regime in India that you clamor at every poor pretext. Shame on your press ution.
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                                            Prasanna K Ram
                                            May 1, 2017 at 10:54 am
                                            Another pathetic article by misguided western Media.
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                                              Ganesh Vaidyanathan
                                              May 1, 2017 at 11:04 am
                                              Very very true!! :)
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                                                Pradeep Raghavan
                                                May 1, 2017 at 11:09 am
                                                A Typical Modi bhakt! Anything against Modi and BJP becomes pathetic article by misguided western media.
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