The good, the ugly

Narendra Modi’s tenure thus far has brought about significant structural change in the economy. But the nation needs to be careful about false morality and cow vigilantism

Written by Surjit S Bhalla | Updated: June 3, 2017 1:24 am
BJP, BJP three years, GDP, India GDP, Demonetisation, Cow Vigilantism, india news The BJP inherited an economy not in the best possible shape — GDP growth of 6.5 per cent and inflation of 6 per cent. Illustration: Manali Ghosh

In the movie The Graduate, Dustin Hoffman gets advice about the future from an experienced old hand. Only one word was needed to describe the future: Plastic. The Narendra Modi-led BJP has finished three years and I have two words to best describe Modi’s tenure from 2014-17 and beyond: Structural Change. This structural change has occurred across various dimensions, and it is continuing. Whether it be economics, politics, social politics, foreign policy, you name it — a distinct stamp is being placed on India. Let us examine some of these dimensions.

Beginning with the macro-economy: In terms of growth and inflation, the combination suggests that the Indian macro-economy today is the best it has ever been. UPA-I had held the record for best macro performance across the dual indicators of GDP growth and inflation. For the first three years of the UPA regime, GDP growth averaged 8.7 per cent per year, and inflation (GDP deflator) averaged 5.4 per cent. The inherited data for 2003-4 was a GDP growth of 8.5 per cent and inflation of 3.6 per cent.

The BJP inherited an economy not in the best possible shape — GDP growth of 6.5 per cent and inflation of 6 per cent. (Incidentally, CPI inflation was 9.4 per cent in 2013-14). The last three years, GDP growth has averaged a healthy (but still well below potential) 7.5 per cent and an average GDP deflator inflation rate of only 2.9 per cent. (Hush — don’t tell the inflation professionals at the RBI and the Monetary Policy Committee who think that inflation is roaring back to, if not already at, double digits).

So, you decide — would you prefer 7.5 per cent growth and less than 3 per cent inflation, or growth 1 percentage point (ppt) higher and inflation 2.4 ppt higher? As we know, high inflation may purchase growth in the short-run, but often comes with slowing growth, and higher inflation, in subsequent years.

But macro-economy is not just growth and inflation — it is also about jobs. Ministers in the BJP government have admitted to the possibility that India is experiencing jobless growth; that is what the available data shows. Thankfully, the government has set up a star-studded committee of professionals to examine the data on jobs and their report is keenly awaited. Till then, we should reserve judgment. My own personal view is that the NSS data may not be capturing all the elements of job growth. But if a comparison is to be made with the UPA-I period, let it be known that in that period of average 8.5 per cent GDP growth, in 2004-2009, NSS job growth averaged only 0.8 per cent per annum.

Alongside, economic reforms: Did we ever think that the ruling government of the day would attack two of the holiest cows in India — the sale of Air India and the introduction of an agricultural income tax? The Modi government has been more willing to talk economic reform — and enact reform — than any government in Indian history. The set of economic reforms already in place in India (the list is long and expanding): Reforms in agricultural marketing and agricultural insurance, the introduction and expansion of direct benefits transfer and the corresponding decline in PDS and NREGA corruption, a bankruptcy code, the beginning of direct tax reform (a reduction in corporate taxes with a promise of a major direct tax reform next year), GST, and now, the soon to be comprehensively attacked (and resolved?) NPA problems of banks. These policies add up to more far-reaching reforms than the cumulative economic reforms introduced in India between 1991 and 2014.

In other words, the last three years have brought about more reforms than the sum total of the previous 25 years.

Plus, demonetisation: Of course, any discussion of the Modi government is incomplete without reference to that greatest “experiment” of all — demonetisation. As I have consistently forecast over the last several months, that contrary to naysayers (almost the entire in-the-box economic fraternity), demonetisation has not had a very large negative short-term effect on the Indian economy. Just released CSO data indicates a decline in GVA (gross value added, broadly comparable to GDP) growth from 7.9 per cent in 2015-16 to 6.6 per cent in 2016-17. However, as several analysts note, a slowdown in Indian growth was already present in the July-September 2016 quarter — that is., before the introduction of demonetisation on November 8.

There will be PhD theses written, and several of us will continue evaluating the effects of demonetisation well into the future. As it should, and must, happen. In terms of the short-run, there is a negative demonetisation effect on GDP, possibly amounting to as much as 0.5 per cent. This negative effect is much lower than the doomsday forecasts of a 2 per cent, and more, decline in GDP growth.

More on this at a later date, but a discussion of demonetisation would be incomplete without reference to its extremely positive effects on tax evasion. With a 1.3 per cent lower aggregate GDP growth, personal income tax payments were up 25 per cent in 2016-17, compared to a growth of less than 9 per cent in the previous two years.

Like the French Revolution, five months is too short a time to do a benefit/cost analysis of as large a structural change as demonetisation. But there is little doubt that in a few years from now, demonetisation will make it to the history books as one of the most successful economic “experiments” ever undertaken.

Meanwhile, social reforms: Modi’s three years are marked by a willingness to tackle critical social ills. Finally, there is a genuine attempt to bring an end to the practice of triple talaq and the introduction of a uniform civil code. But this is where the good news ends. The bad news begins with the introduction of a morality code in the lives of Indians. It starts innocuously, but disturbingly, with film censorship. The stupidity of the Censor Board has to be (not) seen to be imagined. What votes is this morality bringing? For every born-again Pahlaj Nihalani who votes for the BJP, several others are going to leave the camp, disgusted.

But it gets worse, and independent of politics, we should recognise that in the social arena, we are handicapped by a problematic Constitution and an even more problematic set of individuals (high court and Supreme Court judges) interpreting this. How does one justify the Supreme Court ruling that the Constitution requires that the national anthem be played before every movie starts?

And what part of the Constitution allows the state to set up anti-Romeo squads to investigate personal relationships? How can an interpreter of the Constitution — like ex-judge Mahesh Chand Sharma of Rajasthan — remark that the national bird of India, the peacock, did not indulge in sex to successfully procreate? These masters of virgin morality make laws in India? And yes, Judge Sharma also called for the cow to be made the national animal.

Cow vigilantism is a much greater threat to the unity and sanity of India than any collection of Romeo squads, justices like Sharma or moralists like Nihalani. The ban of cow slaughter is not due to a particular (fire) brand of Hindutva, nor a particular political party, but rather, the Constitution. It is the Supreme Court that prohibited cow slaughter, and it did so because of the social and religious “Directive Principles” in our Constitution.

Modi realised the dangers last year when he commented that cow vigilantes were (mostly) thinly-disguised anti-social elements masquerading as gau rakshaks. But the problem has only become worse— it is time for Modi, and the BJP to arrest its spread.

Cow vigilantism is no different than communalism. India is not a theocratic Hindu state, so the dietary or religious beliefs of a section of the majority community should not dictate the law of the land. Dietary restrictions for a diverse country like India is political and cultural suicide.

Let there be debate about our inherited Constitution, and a genuine discussion about human, individual and religious rights, and wrongs. For the first time in independent India, debate is happening. Such open debate is structural change, and good will come out of it, Inshaallah. The writer is contributing editor, ‘The Indian Express’, and senior India analyst at Observatory Group, a New York-based macro policy advisory group

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  1. S
    S. Kumar
    Jun 5, 2017 at 12:19 am
    This fellow proves his sickular credentials by pronouncing Insha Allah. An iftaar party type hyprocrite appeaser who brings a religious term to argue his sickular POV. He wants the Cons ution to be changed to accommodate his sickularism. Humbug.
    Reply
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      Amit Singh
      Jun 4, 2017 at 11:37 am
      This bhalla fellow is either moron or . Let him choose. After putting apology on behalf govt for all ill fated moves on india including demon gives strange explanation for cow idiocy. Putting blame on cons ution and court? Bhalla are u sane? I do not think so. Its people like u than cow vigilante we need to worry about who use their twisted logic to define all that is illogical going around. Just because u can write in english doesnt give u right to write any and bull article.
      Reply
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        Niladrinath Mohanty
        Jun 4, 2017 at 4:01 am
        Just an idea. Can the Directive Principles of the Cons ution be amended?
        Reply
        1. S
          S. Kumar
          Jun 5, 2017 at 12:21 am
          It is time for the Cons utional directives to be implemented.
          Reply
        2. R
          Rishi
          Jun 4, 2017 at 1:03 am
          Mr. Bhalla is brilliant in his analysis, as usual. He is an expert, neutral observer of Indian economy and India at large, so his credibility is unquestionable by sane, educated people. Only the ideologically loaded ones -- like the under-the-table-tax-collecting Congressis, the BJP-hating Vatican types, and jihadis and love jihadis, whose agendas have been stopped in the tracks by the Modi government -- will revolt against any writing that supports Mr. Modi's government and his policies. Those types are abundantly visible here. May they all obtain the necessary therapy to gain peace of mind because the Hon. PM Modi will be in power for at least another two terms.
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          1. D
            Dalit
            Jun 4, 2017 at 7:57 am
            Another hallusinating little monkey of bjp that cannot see anything wrong with his god-mody.
            Reply
          2. I
            Imran
            Jun 3, 2017 at 11:15 pm
            Insha Allah from the ashes of the Republic of India will emerge fifty new states including Khalistan, Hyderabad Nizam, Muslim Republic of India in Kerala, UP , MP, Bengal and Bihar. And also Maoist Naxalistan in the Red Corridor. Muslims Sikhs dalits and Christians of India unite to remove these oppressive Hindus from power and rebel against the Indian state. Let's reclaim the power which rightfully belongs to the strong fair skinned Muslims and not sissy vegetarian Hindus. Let's drown Hindus in the Indian ocean or kill them in concentration camps. So much so for the Hindus liking for s and Israel. Let's give Hindus of India a taste of the medicine they so much admire. Down with India Crush India Rebel against India
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            1. M
              Muslim Jihadi
              Jun 4, 2017 at 2:58 am
              And there goes the cry from a mullah just like Muslims kiIIING each other in all 70 Muslim countries. No wonder all terrorists are Muslims.
              Reply
              1. H
                Harry
                Jun 4, 2017 at 6:20 am
                Dream Jihadi dream. Dream in Technicolor. Because your worst nightmare will begin as soon as you wake up.
                Reply
              2. G
                Gagan
                Jun 3, 2017 at 11:08 pm
                It's good to see all Nehru/ hi -lickers stirred up by this article. They are marked by their hollow arguments, unsupported by any rational thinking, and just loaded with intellectual innuendos, deprived of any logic or reason.
                Reply
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                  Dheeraj
                  Jun 3, 2017 at 11:06 pm
                  The man's a charlatan and a Modi mouthpiece. He compares GDP growth and inflation numbers across two periods… as anyone knows, GDP growth figures already account for inflation (they're real growth numbers, not nominal). Mr Bhalla is out to mislead people as usual on the beck and call of his masters.
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                    Muslim Jihadi
                    Jun 4, 2017 at 2:59 am
                    I know it hurts to see the factsby the sychopants who looted the country for 70 years.
                    Reply
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                    a_D
                    Jun 3, 2017 at 10:03 pm
                    understanding of economy for this government is like काला अक्षर भैंस बराबर They have taken a robust, large fastest growing economy and broken it in not time...that even a deliberate attempt too sabotage wouldn't have succeeded Mr. bhalla you don't have to force yourself to say something good first ...when making a criticism of this government, Cows, Kashmir, Neighbors....they have lost it completely .... their attempt to stir the pot called India and keep boi ....from one election to the next...... the big crash of economy and a monster called hindutva -hooligan going out of control is juts around the corner.... a year or max two.. ing down crashing on Modi sarkkar the precipitation of all their poisonous and noxious actions
                    Reply
                    1. G
                      Gagan
                      Jun 3, 2017 at 11:10 pm
                      May I see your kaalaa-akshar? Other than the usual against the author (by Modi/BJP by implication), what exactly are trying to say here?
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                        a_D
                        Jun 4, 2017 at 2:05 am
                        dost....don't even try to understand...it's clear my comment too is काला अक्षर भैंस बराबर for you :)......but don't be sad big-wigs deemed to be running the country........people like Modi, shah, Irani are all in this boat called काला अक्षर भैंस बराबर
                        1. M
                          Muslim Jihadi
                          Jun 4, 2017 at 3:01 am
                          A_D I suppose your white supremacist Christian church spy slave owner of you brown convert some was well educated bar maid. Kala acchar for her is a drink she feeds you as your mistress supreme.
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