Why Rajiv Bajaj’s Comment, That India Is Flattening The Wrong Curve, Now Looks So Foolish

Some quotes are worth recalling for the simple reason that they went so wrong. In June last year, when India’s Covid-19 numbers were shooting up like crazy and the economy was tanking under severe lockdowns, Bajaj Auto’s managing director Rajiv Bajaj alleged that we were flatting the wrong curve – that of economic activity, and not Covid.

Barely three months later, his smart-alec statement was already under challenge, and today it looks downright foolish. Bajaj Auto itself has just reported one of its highest-ever quarterly revenue and profit growth in the third quarter of 2020-21. Maybe, just maybe, he should acknowledge that he spoke too soon.

Even as the world is grappling with its second and third waves of Covid spread, which is flattening their own economies, India is the outlier. It had indeed flattened the Covid curve, even as the economic curve is soaring upwards.

Just look at the curves of the John Hopkins University Covid tracker, and you will notice that only India has a Covid curve that looks like Mt Everest, a steep rise in the initial months, and a steep fall in the months after September 2020. The rest have curves that keep going up and down, and among the top 10 countries with Covid caseloads, five are still showing rising short-term trends.

As for the economy, all the signals point towards a robust recovery. The government now has massive monetary ammo to take growth to the next orbit when it presents the budget on 1 February.

A look at newspaper headlines today (and in the last few days) shows that peak power demand is at a new high, auto companies have reported robust demand growth, including two-wheelers which serve as a barometer of rural demand, and India Inc’s third quarter results point to a strong recovery.

The commercial vehicles sector, which was affected not only by Covid but by the government’s decision to raise axle-load limits and implement the goods and services tax (GST), which improved fleet-owners turnaround times for trucks and slowed down demand for new vehicles, is on the cusp of a huge spurt in demand.

Tyre companies are fast-forwarding investments to cope with the expected rise in demand and air-conditioner and fridge companies are also boosting investments ahead of the summer surge. Real estate offtake is spiking.

The economic recovery is already reflecting in the rise in GST collections in December (which is about collections in the festival month of November), which hit an all-time record of Rs 1.15 lakh crore. The airline industry, one of the worst affected by Covid restrictions, expects to see pre-Covid levels of demand in the coming months.

But the most interesting data point is that the government, thanks to Covid-related inability to spend the budgetary allocations of 2020-21, is sitting on a cash pile of more than Rs 3.29 lakh crore, according to an estimate by The Economic Times.

If the government now borrows even more this year (we still have two months to go), it will have a huge war chest for investing in the first half of next fiscal starting April 2021. Add any infusions from privatisation proceeds, and 2021-22 looks like a good year for infrastructure investment-led growth.

Now recall what India’s cassandras were saying earlier last year, that the government must keep spending like crazy to reverse the slowdown. The low-profile economics team of Narendra Modi and Nirmala Sitharaman ignored this advice and took the risk of conserving resources for a better time. They have been proved right, and the government will now have reasonable resources to pump into the economic recovery.

It is interesting that even though expert opinion has been highly critical of the Modi government’s handling of both the Covid crisis and its economic fallout, the average voter disagrees.

According to the India Today Mood of The Nation poll, 73 per cent of those polled thought Modi’s handling of the pandemic was either outstanding (23 per cent) or good (50 per cent). And despite loss of jobs and incomes, 67 per cent thought that he had handled the economic distress well, with 20 per cent calling it outstanding, and 47 per cent good.

Sometimes, it requires the commonsense wisdom of ordinary folks to trump the “expertise” doled out by high-profile critics. The ordinary man knows that ruling India is not easy, and understands what the government is trying to do with limited resources as opposed to what experts claim it ought to be doing.

So, Rajiv Bajaj, it’s time to acknowledge that you were wrong. And that goes for a whole host of other globally acclaimed economists and intellectuals.