Will India's economic downturn spur course correction, or will Hindu nationalism enable the decline to perpetuate itself?

That India’s optimistic future is overtaken by concerns about the road ahead. Bangladesh’s rise seems more imminent than India’s. Will economic decline spur course correction? Or, will Hindu nationalism enable the decline to perpetuate itself?

Rahul Mukherji and Ronja Gottschling January 07, 2020 09:30:15 IST
Will India's economic downturn spur course correction, or will Hindu nationalism enable the decline to perpetuate itself?
  • India’s optimistic future is overtaken by concerns about the road ahead.

  • Will economic decline spur course correction? Or, will Hindu nationalism enable the decline to perpetuate itself?

  • If the government somehow fails to pilot the ship of the Indian economy, we should expect ever more exclusivist actions such as aggressive implementation of the CAA along with the NRC.

Editor's note: In a speech whose precise origins have, perhaps mercifully, been forgotten by history, Prime Minister Rajiv Gandhi proclaimed: “mera bharat mahaan” [‘my India is great’]. The prime minister’s nationalist pitch was undone by the venality of his regime: critics were to mercilessly lampoon it in the late 1980s, adding the prefix, “kilo mein nau sau gram, phir bhi…” [‘there are 900 grams in a kilo, but still…'].

Yet, the impulse behind that speech was to drive the course of Indian political and cultural life for two decades. For an emerging youth cohort, the largest in India’s civilisational history, the idea of Indian greatness was key. As economic crisis were beaten back, and high growth registered, it seemed possible for India to be something other than a nation mired in poverty, backwardness and strife.

Prime Minister Narendra Modi’s rise, in 2014, marked the culmination of an era of optimism: the gates of a new millennium, it appeared — even to many who did not share his Hindu-nationalist ideological moorings — had finally been opened.

As India heads into the 2020s, though, there’s reason to believe we are heading into a new age of anxiety. Economic growth has been crippled; many economists argue recovery will take years of painful reform. Ethnic and religious tensions have sharpened. Even India’s core Constitutional values and institutions, many commentators have argued, are besieged.

In this series, Firstpost examines what the 2020s will mean for India: for everything from politics and the economy, to our culture and communities.

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Few in India recognise that ethnic nationalism is spurred by economic decline. Economic decline and ethnic nationalism are two elements that can render a combustible chemical reaction to the detriment of the nation and the citizen. Ethnic and nationalistic appeals are often deployed to distract the citizenry away from economic hardship. India is clearly in economic decline. Gone are the days when policymakers and entrepreneurs would look at India’s economic rise with wonder at Davos. Scholars such as MIT’s Yasheng Huang and Harvard’s Tarun Khanna had even prophesied that India could take over China. And, Nobel Laureate Amartya Sen had argued persuasively about the advantages of the argumentative character of the Indian nation and its ability to live with pluralism.

That India’s optimistic future is overtaken by concerns about the road ahead. Bangladesh’s rise seems more imminent than India’s. Will economic decline spur course correction? Or, will Hindu nationalism enable the decline to perpetuate itself?

Hindu nationalism has arrived like a whirlwind often in contradistinction to the idea of a secular India enshrined in the Constitution. The BJP’s Hindutva agenda had overtaken its professed economic agenda by 2019, in stark contrast to the 2014 campaign. Terrorism and the threat from Pakistan became the rallying cry. For example, in a clarion call at Latur in April 2019, the Prime Minister asked the youth to vote for the BJP as a vote dedicated to the Balakot airstrike. Whereas Mr Modi rarely used the term “terrorism” in 2014, the same was deployed numerous times last year. Soon after coming to power again in 2019, the BJP turned a special status state — Jammu and Kashmir — to a union territory directly under the supervision of the central government. Did it matter that this was the only state in the Indian Union that enjoyed a Muslim majority?

Will Indias economic downturn spur course correction or will Hindu nationalism enable the decline to perpetuate itself

Representational image. Reuters/Danish Siddiqui

The project of isolating Muslims and attacking secularism as a fundamental ethos was pursued systematically through 2019. First, the infamous National Register of Citizens (NRC) was resurrected to ensure that illegal immigrants be held and detained. Just the cost of rolling out such a measure at a nationwide-level could exceed a year’s budget of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), and this does not even include the cost of detention camps. Added to this came along the Citizenship Amendment Act (2019), where treatment of Muslims seems to be at odds with secularism enshrined in the Indian constitution. Even the BJP’s coalition partners such as Nitish Kumar and Naveen Patnaik are opposed to implementing the NRC in their respective states.

Do such exclusivist propensities have something to do with economic decline? The economy is moving farther and farther away from the government’s claim of reaching the five trillion-dollar mark by 2024/25. This ambition would require continuous 8 percent average growth during the next four years. What have we achieved instead? India’s growth between July-September 2019 fell to 4.5 percent from 5 percent in the previous quarter. This is a six-year low.

Economists are debating the significance of the new methodology for comparison with the previous years. The new methodology was deployed to measure GDP beyond 2011/12. The current government’s former chief economic advisor Arvind Subramanian has noted that the new methodology of calculating India’s growth overstates the figure by about 2.5 percentage points. For example, whereas the government reported an average growth rate of 6.9 percent between 2011/12 and 2016/17, the same figure was likely to be between 3.5 and 5.5 percent. While there is plenty of debate on India’s plausible rate of growth – it is not clear how much the new figures are overstating the case.

As India’s growth dipped so did the sales of cars in India. Passenger vehicle sales dropped by 41 percent in August 2019 compared with the previous year — an unprecedented and astonishing slowdown that would have eliminated at least 3,00,000 jobs. India’s automobile market was thriving with domestic and foreign investment in recent years. It is hard to buy the government’s view that more persons are gravitating towards public transportation in a rapidly growing aspirational economy.

What gives even greater credence to declining economic well-being is the 3.7 percent decline in an average Indian’s consumption between 2011-12 and 2017/18. Such was the hue and cry regarding this dip that the government did not even release the report of the National Sample Survey Organisation. Thereafter, 214 economists including Nobel Laureate Angus Deaton unsuccessfully petitioned the government to make this data public. The 2019 Laureate Abhijit Bannerjee has publicly endorsed that such a decline is unprecedented and worrisome. Why will firms invest and spur growth if people do not consume?

The Periodic Labor Force Survey (PLFS, July 2017-June 2018) pegged the unemployment rate at 6.1 percent. This was almost double the customary figure of 3-3.5 percent. This figure at a 45 year high was kept from the press till the BJP was elected in 2019. It was claimed that the new methodology renders the data incomparable. The Acting Chairperson of the National Statistical Commission PC Mohanan and another independent member JV Meenakshi resigned in protest.

It is well known that MGNREGS was launched in 2005 to reduce rural poverty through the right to work enacted by the Parliament. Every Indian living in rural India has a right to 100 days of work. Early on in his tenure Mr Modi had opined, that this scheme was well suited for the Congress’s regressive development model that did not create jobs in the market. His government would generate employment in the real economy where there would be little need for such doles. In the early days of the BJP, delayed wage payments discouraged workers. Even in November 2019, the Central Government had delayed wage payments to the tune of rupees 5,812 crores.

Those early optimistic assumptions of the Modi regime are faced with declining consumption and rising levels of unemployment. The government has changed course and rededicated itself to the right to work. However, MGNREGS expenditure at Rupees 48,766 crores in 2019/20 is about Rupees 20,000 crores less than in the previous year. Moreover, the earlier stipulation of spending more on wages than on equipment is now reversed, with the possible consequence of employing fewer persons through the scheme.

At a time when consumption and employment are at a dismal low, Rathin Roy, Director of the National Institute of Public Finance and Policy and a former member of the Prime Minister’s Economic Advisory Council, has pointed to the low level of tax collection and government resources. The poorly implemented Goods and Services Tax may have contributed to this fiscal disarray, among many other factors. To partly plug the gap the Reserve Bank of India, in an unprecedented move, agreed to grant the government a dividend of Rupees 1.76 trillion ($24.6 billion) to bail it out of fiscal distress. This historic decision occurred when a loyal civil servant replaced two accomplished economists as Governor of the Reserve Bank.

We have only described economic distress at last year’s end without going into its causes. What should the government do? Should it improve the material condition of the economy by generating jobs and raising consumption that will feed into investment and growth? Or, should it continue to loudly proclaim that the Indian nation needs to spend a greater effort in excluding Muslims rather than serving a plurality consistent with the millennial idea of India — that had earned the country some respect in the comity of nations as an emerging power. If the government somehow fails to pilot the ship of the Indian economy, we should expect ever more exclusivist actions such as aggressive implementation of the Citizenship Amendment Act along with the National Register of Citizens. Whether such exclusivist aggression will spell doom for the BJP, will depend largely on whether or not the people of India vote for the idea of a plural progressive and culturally rich India.

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