Growth Will Give A Seal Of Approval To Modi’s 'Politics Of Accountability'

Barring pathological critics, everyone will agree with Prime Minister Narendra Modi that 100 crore vaccine jabs - ensuring minimum one-dose coverage to 75 per cent of the adult population - was “not just a number”. To borrow from Barack Obama’s famous election slogan in 2008, it was a reminder that ‘we can”.

The reminder was necessary. India was never short of talent. When compared to China, the biggest growth inspiration to the world, we gave birth to too many prize-winning economists. Many of them participated in the government, took to politics. Some have been waiting for their moment in the sun. But India earned the ignominious distinction of ‘the nation that talks.’

The prolonged delay in delivery has created a class - that runs India’s opinion factory - which believed in Peter Drucker’s principle that “not making a decision is a decision.” They supported Beijing’s decisive steps in Tibet but became philosophical on article 370 in Kashmir. They loved the quick transformation of China but resisted reforms in India’s coal or rail sector.

Arguably, it helped politics to remain unaccountable. Indira Gandhi was not blamed in her lifetime, for fast pedalling on Nehru’s socialist economic ideals, at the wrong time of history, and pushing India decades behind China, in its growth trajectory. Leaving P V Narasimha Rao and partly Rajiv Gandhi and Atal Bihari Vajpayee apart, the rest followed the dotted lines.

The UPA government of Manmohan Singh had literally slipped into a coma after 2008, the year of financial meltdown and implementation of the India-US nuclear deal. But their politics succeeded. UPA got a second term in 2009 with more seats to Congress.

Modi doesn’t have this advantage. On a lighter vein, he is the ‘Rowdy Rathore’ of Indian politics; pushing the boundary from the word go. “Namumkin Ab Mumkin Hai (The impossible is possible now)” said Bharatiya Janata Party (BJP), ahead of the 2019 election. This government can be blamed for anything but not taking a decision and not giving its best to implement it.

All the decisions might not have yielded desired results, but the punishing implementation schedule that the government sets for itself, makes it accountable. It’s a high-risk business. But the Modi government enjoys it in the same manner as a die-hard fan of the stock market enjoys investing.

The gain for the nation lies in the volume of reforms. BJP normally showcases Goods and Services Tax (GST), Insolvency and Bankruptcy Code, asset monetisation, as major reforms. This is probably to avoid public glare on more daring reforms like withdrawal of subsidy on diesel or limiting subsidy on cooking gas only to the poor, which were in discussion for decades.

In an electoral democracy, there have been immensely popular governments. There were also governments (like PV Narasimha Rao) that took tough decisions and were shown the doors by the voters. But managing both fronts at ease is a new phenomenon. Looking back, it seems unthinkable that diesel price was ever a political issue in India.

Winning war against pandemic

In sports, talent often buckles under pressure. Determination, application and courage win matches. Opportunities don't come easy. You have to bid for it. There will be body blows. But you have to hide excruciating pain and behave as if it never happened.

The Modi government did all that over the last one-and-a-half years. It took immense risks by announcing a nationwide lockdown in March 2020 and witnessing a wipeout of 24 per cent of GDP in the June 2020 quarter. In an aggressive bid, it tried to overdo China in vaccine exports in December 2020. The move didn’t augur well. It had taken serious body blows during Delta-wave in March-April, 2021. Last but not the least, it didn’t listen to economists and industry demanding cash-handouts.

But in the end, it takes India to the victory stand. Statistics cannot explain the pain of 4.5 lakh lives lost. But there is no escape from the fact that compared to population, casualties in India (325 per million) were nearly half of the world average (627) and a fraction of the UK (2,208) and USA (2,248).

Pandemic will not recur every day. However, for a country that had barely two virology labs in March 2020 and hospitals were running without pressure swing adsorption (PSA) oxygen plants; India became reasonably prepared to face future health emergencies. The success of a production-linked incentive scheme (PLI) in medical equipment can bring down the cost of tertiary healthcare substantially, in the days to come.

We didn’t go to anyone for the vaccine. We didn’t bow down to the vaccine politics of the developed world and didn’t give undertakings to the MNC pharma lobby. We produced our vaccines. One in every 10 of them was developed indigenously. Right at this moment, states are flooded with 12 crore doses of vaccine stock, which was roughly the monthly supply in May.

The concern over vaccines is behind us. Covid may resurface (as it resurfaced in China), but rest assured that India will respond to it way better than it did on the last two occasions. And, the recent controversy over low fuel stock in power plants is proof enough that the economy is doing better than expectations. Plants stocked less fuel anticipating low demands after the second wave.

The Indian economy was recovering way better than expected since the September 2020 quarter, forcing global agencies to change the growth projections a number of times. There have been fresh concerns after the second wave but no more. Leaving growth data, GST collections, corporate profit, exports etc aside, the biggest proof of recovery lies in employment numbers.

The latest Centre for Monitoring Indian Economy (CMIE) data shows the employment rate back to 2019 levels. As in August 2021, employees provident fund organisation added nearly 15 lakh net subscribers, 12 per cent more than July. Half of PF accounts were new, meaning fresh recruitments were raining in the organised sector.

Internal remittances were already back to the 2019 level indicating the return of migratory labour to work stations. CMIE says the project implementation rate is going up since March 2021.

This, however, is just the beginning. The pace of construction, particularly in real estate, suffered due to restrictions (some of which are still in vogue in parts of the country) during the pandemic. It will now gain momentum. Add to this, huge infrastructure spending by the government, low-level jobs will increase.

Sentiments are record high

Credit off-take by the corporate sector is yet to grow. This is a phase that began early last decade when the boom ended and investments in power, mining, infrastructure and telecom sector ran into rough weather. Sectors like cement, steel suffered from overcapacity. There are sufficient reasons to assume that this phase has bottomed out.

CMIE data shows corporate profits zoomed to record levels since last year. Flushed with cash, corporates are now looking at fresh capital expenditure. Initiatives like asset monetisation have made it clear that the government is determined to ensure fiscal balance. The reforms in telecom, disinvestment of Air India, phasing out of Ordnance Factory Board confirmed the government’s commitment to widening space for the private sector.

There are many parallel initiatives - like the PLI scheme, the stupendous success of the nation in Fintech and reasonable success on the start-up front – which are strengthening the case for India. To sum up, sentiments are now distinctly high, as is visible in the record inflow of foreign direct investment (FDI) and foreign portfolio investment (FPI).

The sentiments will improve manifold if the government sticks to its disinvestment schedule and goes ahead with the power sector reforms. This should require some initiatives on the social front to keep the popularity intact. Many are expecting Uniform Civil Code to be implemented sooner than later.

Unless BJP suffers any major political debacle, which is not in sight at this moment, India seems to have stepped into a new growth paradigm. According to the World Bank, barring the 2003-2007 period (when the country grew consistently at 7-8 per cent), growth has been unsustainable in India, hovering between 3 and 8 per cent during 1991 and 2019 period.

Unforeseen circumstances apart, as it appears now, better infrastructure, lower logistics cost and, a slew of second-generation reforms, may make growth reasonably sustainable this time around.

Moody’s have already upgraded their outlook on India as well as the Indian banking sector. “Weak corporate financials and funding constraints at finance companies have been key negative factors for banks but these risks have receded," it said. Jefferies Financial Group expected India to repeat the peak growth performance. Among other things, it expects boom time to be back in real-estate.