Lost year: India could have turned a corner in 2019 with political stability and economic recovery

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Published: December 25, 2019 12:43:54 AM

This was a year where India could have turned a corner, with political stability and economic recovery. I

niti aayog, indiaIllustration: Rohnit Phore

In retrospect, the arc of events in India in 2019 seems predictable. Early in the year, political events afforded the government with an opportunity to highlight external threats in the general election campaign. This was arguably a major factor in giving the ruling party an unassailable majority, and seemingly, a mandate to accelerate its political and societal agenda. Indeed, this is what has happened, with actions that are well-known, including the peripheries of Kashmir and the Northeast, but ultimately reaching at the heart of the idea of Indian democracy.

Meanwhile, the economy has continued to falter, with the government seemingly always a step or two behind in what needs to be done to restore both confidence and growth. There was an interim Budget before the election, a full one after, but each with policy changes that seemed to deal with symptoms and not causes, to be reactive rather than proactive, and never quite enough.

This month is seeing nationwide protests against the latest political moves of the government, with young people leading the way in some cases. Their protests are driven by a concern for the kind of country they are going to live in for the majority of their lives. Other protests are motivated by fears of competition from immigrants. The protests are being met with police violence and internet shutdowns. It is not hard to see that the ebbing of hope in the nation’s economic future is connected to both kinds of protests. India’s potential demographic dividend is out in the streets, decrying the creation of fear and uncertainty about their futures, rather than moving forward with hope. And an atmosphere of fear, uncertainty, violence and repression, is not one in which economic progress is likely to thrive.

The government is clearly pursuing a well-defined, if narrow, strategic vision with respect to India’s polity and society. It is proving to be bold, relentless, even rigid, in this pursuit. There does not seem to be room for debate and discussion with respect to policy choices and implementation. Centralisation and concentration of decision-making are not favourable conditions for the complex economic policy making, let alone defining priorities. The post-election statements of the vice-chairman of the NITI Aayog, regarding a priority list of “big bang” reforms, seem like a mirage at this stage. Even the pollution that choked northern India in November, harming millions of people because of poorly understood and managed economic policies, has been overshadowed, even forgotten.

This was a year where India could have turned a corner, with political stability and economic recovery. Instead, the year has been lost. It is possible that India’s rulers will make some course corrections, and rethink what is important for making India truly great (which is at the heart of their vision).

But it is just as possible that matters will be allowed to go on as they are proceeding, with the government’s power over law and order and the media allowing it to impose its will. That course is unlikely to be good for the economy. Authoritarian regimes have certainly succeeded economically, but they are also capable of generating catastrophes. Rigid and weak democracies may also allow problems to fester, but the global evidence suggests that democracies do better on average, in terms of economic growth. Nor does India’s current course bode well for its global standing or its attractiveness to foreign investors, notwithstanding the currently strong stock market.

What is the way out, so that a lost year does not become a lost decade? India’s citizens will not get a chance to render a new verdict nationally for over four years, though state elections may help send useful signals to the government. But given its current mindset, it may be that only a change in that mindset will make a difference. What is remarkable in the current situation is that India, despite its diversity, is 80% Hindu. All minorities in India have navigated this dominance, and the country’s political and constitutional structures implicitly incorporated this imbalance, without making it intolerable for minorities. Despite many imperfections and inequities, the Indian model seemed to be reasonably stable, and a basis for finally making serious economic progress.

Instead of building confidence and trust by embracing and strengthening the positive features of Indian society, recent political actions have been based on a mindset of fear and victimhood. Again, this is remarkable in a nation where there is such a firm majority for one religion, with an associated culture that is even more pervasive. Other countries also treat minorities badly, and blame them unfairly. There is no evidence that this approach is good for economic progress, besides its negative implications for human rights. A lost decade for the economy can stretch out further, and can be a lost decade for society as well. Indeed, the arc of history is even longer, and may bend away from progress and general well-being for many decades at a time. It is remarkable and disquieting that India is facing this prospect as 2019 comes to an end.

The author is professor of Economics, University of California, Santa Cruz.

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