Why Narendra Modi’s assurance, that he isn’t scared to be seen with industrialists, matters to economy
It is important that large businesses are taken into confidence and Narendra Modi has done just the right thing to speak in favour of businesses
Prime Minister, Narendra Modi’s reassurance to the industry on Sunday, that he isn’t scared to be seen in public with industrialists, is a booster dose to the business community that is often seen in suspicion for the fault of a few wrongdoers.
“If your intent is good and clean, you can stand with anyone and no taint will attach to you,” Modi was quoted as saying at an event in Uttar Pradesh.
Modi is right here; and his assurance—why would a politician worry to be seen with an industrialist—matters a lot for business at a time when Vijay Mallyas and Nirav Modis have almost become the dominant images in public discourse. A fear psychosis has gripped bankers and bureaucrats following a series of investigations into past business deals, discouraging even the honest officers to move files on their table.
Industry’s image is tarnished, morale is low in the wake of recurring scams, bad loan hunt by banks and Congress-led opposition attacking the Modi administration for alleged crony capitalism. In this backdrop, Modi has done the right thing taking the industrialists into confidence.
The fact is that no ambitious economy, in desperate need of capital and fresh jobs, can afford to antagonise its industry community. This is particularly true for India that is running a serious employment deficit and is yet to catch up in the global race to become world’s biggest manufacturing hub.
Perhaps, Modi has also effectively turned Congress president Rahul Gandhi’s primary charge against him—that the prime minister is favouring corporations—as a political opportunity to win the confidence of business community ahead of the 2019 Lok Sabha polls. It also points to a major flaw in Gandhi’s line of attack against corporations; many a times the Congress chief seems to paint all businessmen with the same brush. Any government policy, in favour of businesses, is seen with suspicion. This isn’t good for an aspiring economy.
Not all of them are bad and need to be seen in bad light. Even for the survival of small and medium-sized enterprises, Gandhi is fiercely bating for, it is highly imperative to have a strong line of large industries above them. This is because most SMEs and MSMEs operate as layers that supply to big companies. In other words, small entities can’t survive in an economy where large business lack confidence and government support.
Gandhi began with his suit-boot-ki Sarkar jibe, which worked till the time it became an all-out attack on the business community as a whole. For instance, Gandhi’s repeated attack on Modi for massive write off of corporate loans but not the farmer loans was a dud on two counts. First, loan waivers are bad anyway and one wrong could not be the solution for another. Second, much of the corporate loans that either turned bad or were written off were given away during the UPA-era.
The kind of bad loan addition in state-run banks that happened during UPA-I and II when the government banks completely forgot about prudent lending to worthy borrowers and found themselves vulnerable to the infamous corporate-political nexus. One of the two major reasons for the banking sector NPA crisis is the large-scale involvement of corporate-political nexus during the UPA-years (the other, of course, is the economic downturn that caught bankers off-guard after the boom years).
Also, Gandhi isn’t entirely right in saying loan waivers have been given only to industrialists. It is not just the corporations, farmers too have received an equally large amount of loan waivers by different state governments since Modi government came to power, or at least commitments from their respective governments.
Beginning with Rs 34,000 crore loan waiver announcement by Yogi Adityanath in Uttar Pradesh in 2017, several states like Punjab, Maharashtra and, most recently, Karnataka announced similar schemes which will work out to be a few lakh crores.
Modi’s reform-oriented approach in the first four years of his rule in office and policies aiming to achieve ease of doing business has been welcomed by the industry. Yes, the outcome is debatable; manufacturing as a percentage of GDP hasn’t picked up to the desired extent yet. As a share of GDP, the manufacturing sector contributed 17.4 percent in the fiscal year 2012, dropped till fiscal 2015 before showing a mild uptick. In the fiscal year 2018, manufacturing as a percentage of GDP stood at 18.1 percent. Remember, as part of the 'Make in India' campaign, the government wanted to increase the share of manufacturing to GDP to 25 percent over a period of few years, but, after four years, there has not been much progress.
However, a visible improvement is seen in services. From 18.9 percent of the GDP in the fiscal year 2012, the contribution of services to GDP has improved to 21.7 percent in the fiscal year 2018. In other words, India’s GDP growth is been largely credited to a robust services sector.
But, the government’s reform-oriented approach needs to be appreciated. In this backdrop, it is important that large businesses are taken into confidence and Modi has done just the right thing to speak in favour of businesses.
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