By Phrangsngi Pyrtuh
Modi-economics is a highly valued brand today and is universally accepted as a panacea ( Gujarat model) to the problems of the economy. The chanting of accha din ayaan hein (good days are here) of Modi sarkar is getting shriller. The road map of the good days has been spelt out during the swearing in ceremony of the newly elected parliamentarians. PM Modi emphasized about taking everybody along including the Opposition (after mocking it) and the Chief Ministers of opposition ruled states (with a Governors loyal to the Government) to uphold the federal structure of the Indian political structure. However the Modi government seems to be speaking two set of languages, one of which runs similar to the previous UPA government. The other is embedded on the growing disenchantment of the people against various incumbent factors with corruption forming the medusa’s head and anyone seen brave enough to slay it is seen as the hero of which Modi has undeniably slipped easily into that role, thanks to continuous media and advertisement blitzkrieg of the NDA. Various steps unveiled to tide the supposed crisis in the Indian economy includes tackling corruption, unprecedented job creation, enhancing social and economic welfare and eventual dismantling of social safety nets since they are an unnecessary burden on the state exchequer.
Tackling inflation (which for most part is part of the main problem of corruption) is seen as the sine qua non of all problems in the society and has appealed to the electorate on which the NDA hurled itself to power. These are issues that the common man understands for which Modi promises to deliver. His resolution and determination to end corruption and usher governance and his vision to expand the Gujarat model are simply too difficult to resist. But election rhetoric remains just that while the ground reality is something else. Till a few months back (before the elections) the then opposition BJP had opposed everything under the sun including railway fares and freight charges with Modi even expressing his displeasure in his ubiquitous tweet “rant” against the UPA government in 2012. But upon assuming power the railway passenger fares were hike by 14.2 % and 6.5 % for freight rates.
The rail hike was one of the highest in recent times though the previous UPA government had proposed the same in the interim budget ( 10% and 5% respectively) but fails to implement so on account of stiff opposition. The BJP as the principal opposition party has successfully derailed many policies of the previous government but which it is now executing at lightning speed and these are according to PM Modi “bitter pills” that the country must endure in the short run for early economic recovery. The railway hike which was necessary to revive the sector however is a classic case of missing the wood for the trees. The solution lies elsewhere as AAP Convener Arvind Kejriwal claims as he shoots a letter to PM Modi where he pointed out on the rampant corruption in the railways which is responsible for its total bankruptcy.
Raising railway fares et al would only benefit those at the helm. If anything corruption within the sector should have been a priority and once this is minimized according to Kejriwal there would be no need to go for a hike. Thus the fear that exists to urgently fix the derailed growth story so as to appease the financial and capital markets may have long term repercussions and trade off. The proposed hike on the gas price is another “bitter pill” that awaits Modi’s consent although he has been surprisingly quiet on the issue before the elections (even as the BJP opposed the same during the UPA regime). These are contradictory languages and what is worrying is that there are two languages from within the BJP one of which is completely controlled by one man.
Policy paralysis and the graft issue had halted the growth story and the media assumes that the Gujarat model is at the pinnacle of all solutions. What the media fails to highlight is that there are external forces that even Modi and his pet model have little power to control. The volatile global factors and reckless international liquidity have had minimal effects on the Indian economy particularly during the financial crisis of 2007. This is because of the somewhat protectionist policy of the UPA government buoyant from pressure of its allies. While the Congress and the BJP both speak the language of the financial market that is unfettered liberalization of the economy the BJP government is more polished and well versed when it comes to its execution. The skyrocketing markets and the sensex have become extremely bullish awaiting Modi to unveil his economic package to remove whatever restrictions that existed on FDI and capital flows.
The neo-liberal policy and prescription as far as the problems of India are concerned is misplaced. We have in fact exacerbated the Indian growth story owing to the faulty neo-liberal policies that allowed the uncontrollable factors to have a firm grip on the Indian economy. For instance proponents of neo-liberalism (of which the UPA and NDA are part of) argued that the current economic crisis such as the balance of payment problems, falling value of the rupee and the large fiscal deficits are all attributed to the excess domestic demand, and not world recession or trade liberalization, which generates inflation and thus the answer lies in reducing the fiscal deficits (by curtailing expenditure) to remove inflationary problems. As Prabhat Patnaik argued it is fiscal profligacy and widening current account deficit that has in fact led to a slump in aggregate demand which is the exact opposite of neo-liberal arguments. However it is not expected that Modi the darling of Corporate India to see the other side of the story as indication of the railway hike manifested. This is unfortunate indeed!