Thank you Narendra Modi for India’s economic “lost decade”!
India now faces a catastrophic economic “lost decade”, thanks to Narendra Modi and the BJP. India’s economic malaise has led to shocking revelations by regime insiders. A former Finance Secretary reveled that the Indian budget deficit is actually 5% of GDP, not the publicly reported 3.3%. No wonder Modi’s Budget is known as the “BJP Fudget” on Wall Street. The unemployment rate has surged to 45-year highs at 6% in a country that needs to create a million jobs a month for new entrants to its labour force.
Dr. Arvind Subramanian, India’s former Chief Economic Advisor, believes GDP growth is systematically overstated by 2.5%. If global capital markets cotton on to these sordid statistical realities, Dalal Street will face an epic crisis of confidence, an exodus of foreign capital at the speed of light reminiscent of the Asian currency meltdown in 1998. Hell hath no fury than a woman – and a leveraged EM fund manager – scorned.
Indian consumption has plunged since 2018. Two wheelers (rural demand proxy), commercial vehicles (industrial demand) and auto sedan sales (middle class household demand) have plunged 30 – 40% in 2019. Indian export growth has fallen, as has capex, business confidence and domestic electricity usage. India has even lost global market share in textiles to Bangladesh and Vietnam, a sad omen for millions of the rural unemployed proletariat.
The Air India privatisation deal was a disaster as not a single foreign bidder emerged and India has some of the highest tariffs in the world. This economy is a systemic accident waiting to happen and Modi has lit the fuse for a classic emerging markets time bomb. This is a social and human tragedy for literally hundreds of millions of innocent, deceived human beings.
India’s Auditor General has pointed out that state owned companies have borrowed recklessly off-balance sheet – possibly as much as 2% of the GDP. Contingent liabilities (off-budget) in health care and banking bailout funds are rising alarmingly. J.P. Morgan estimates India’s true public budget deficit is a shocking 10% of GDP. Corporate debt distress has surged since the IL&FS collapsed in September 2018, as the credit stress is at a six year high.
Indian household savings have plunged while debt levels have spiked. India has had no real privatisation since the last Vajpayee government (India Rising), which lost power to a Congress led coalition that included the Communists. Corruption under the Congress led UPA government surged even as its populist, reckless public spending led to its reelection in 2009. Modi has continued this disastrous Robin Hood model of economic policymaking – and now India faces its greatest debt crisis since Partition at a time when the economy is nose diving into a recession amid a global virus epidemic panic.
Modi’s new citizenship bill is odious bigotry. If Indian citizenship is offered to Hindus from Muslim majority states, India becomes no different than Israel, whose Zionist ideology offers citizenship to Jewish people anywhere in the world via the Law of Return while the Arabs are dispossessed from land occupied by the IDF since the June 1967 Six Day War. Theodore Herzl described Ottoman era Palestine as a “land without a people (India?) for a people without a land”. Now Modi becomes the Herzl of the BJP and redefines India not as a secular parliamentary democracy but as a bigoted, communal, majoritarian homeland for the Hindus.
Modi, a lifelong member of the same odious RSS whose gunmen assassinated Mahatma Gandhi in New Delhi’s Birla House for the “crime” of wanting better relations with Pakistan just five months after the horrific Partition of the subcontinent. I used to admire India because the first five words of its Constitution were that “the state is a secular socialist republic”. Yet Modi’s India, reshaped by the RSS’s communal agenda, is a nascent fascist dictatorship that has attacked every vestige of human decency and secular values.
The BJP has devalued the Supreme Court, the Election Commission, human right activists, academics and a free media. The BJP and its RSS stormtroopers have ignited the communal fault lines in Indian society, accelerated a descent into the chamber of horrors that include the Nuremberg Laws, a religious state and a potential communal civil war. Have we learnt nothing from the bloodiest wound in our history – Partition in August 1947? Have we learnt nothing from the fate of Yugoslavia and Rwanda? Does this demagogue have the right to roll the dice with the lives and destinies of 1.3 billion human beings? What a pity, what a shame, what a world!
Modi’s ignoble career is a tragic testament to Lord Acton’s observation that “power corrupts and absolute power corrupts absolutely”. This half-literate autocrat from the Hindutva “cow belt”, once denied a visa to Britain and the US as Gujarat Chief Minister at a time of communal massacres in 2002, now wants to morph “Incredible India” to a “Bigot’s Bharat”?
Narendra Modi does not hesitate to use the language of communal hate and social envy – love jihad, urban Naxals, Lutyen’s Delhi, Babar’s brood – are favourite slurs used by this maestro of Hindutva ultra-nationalism to dog whistle subliminal messages of hate to his untold millions of semi-literate, bigoted followers and acolytes. Eerily enough, Modi’s brutal crackdown echoed Indira Gandhi’s Emergency in 1975 and is a mortal threat to India’s future as a parliamentary democracy. Modi, like majoritarian demagogues throughout history, has focused on religious minorities as objects of hate and fear, Untermenschen with no real rights as full citizens. Yet in Modi’s theatre of the absurd, economics rationality has no place.
The mass protests prove that millions of Indians want their country to remain secular, that Modi’s cult of communal hatred is an insult to the liberal, tolerant, pluralist essence of Hindu civilization across the millennia. Just as the terrorists of 9/11 and Daesh stained the reputations of Muslims worldwide, so Modi has done his best to gut Brand India’s “soft power” image in the world and soiled the legacy bequeathed by Gandhi, Nehru, Bollywood and software wizards in Silicon Valley.
What next in Modi’s India? Re-education camps for arrested intellectuals like the historian Ramachandra Guha? Mass torchlight parades in Ayodhya to celebrate the destruction of centuries old mosques and temples? Police stormtroopers in university libraries and hospitals? Book burnings and Big Mac lynch squads? A new gulag archipelago to imprison “urban Naxals” and other anti-national opponents of Hindutva? History has witnessed the endgame of this sort of disgusting, state sanctioned communal hysteria before in the breakup of Yugoslavia in 1991, in the Rwanda genocide in 1994, in the primordial violence of India’s own Partition in August 1947.
Modi’s India must not degenerate into Milošević’s Yugoslavia. Yet those who refuse to learn the lessons of history, those without shame, basic decency or respect for human rights, are doomed to repeat them in the path to national ruin. It is now darkness at noon for Modi’s India. Joseph Goebbels was so right – a lie, repeated often enough, becomes the truth.
The political crisis in India will exact an incalculable economic toll at a time when GDP growth has plunged from 8% in early 2018 to a mere 4.5% now, the public sector’s deficit (New Delhi, state and public owned companies) is a horrific 10% of GDP, the shadow banking system has imploded with a vengeance and millions of workers face unemployment in a nation that has to find jobs for 12 million young people every year. Modi’s promise to turn India into a $5 trillion economy is a cruel joke.
Modi has been a disaster for the Indian economy as he has inflicted a succession of macro shocks – rupee demonetization in 2016, a botched GST in 2017, a shadow banking crisis in 2018 and dubious populist moves on Kashmir and the Citizenship Amendment Act that have triggered mass unrest, violence, fear and uncertainty.
The BJP government’s economic policy making is erratic, punitive and arbitrary. True, the BJP government inherited a corrupt, stressed banking system from its Congress predecessors. Yet Modi forced out two RBI governors of global stature because they dare to upset his political apple cart and pressured banks to initiate absurd “loan melas” that will only increase systemic risk as the economy slows and the credit crunch bites.
Modinomics is clueless about a potential resolution of India’s shadow banking crisis. Even abolishing 86% of the currency in circulation was a populist own goal designed to win the UP state election – but at a draconian cost in human suffering and economic distress even in 2020.
Even though India got a $50 billion windfall from the crash in oil prices in 2014-16, Modi has allowed state owned companies to go on an off budget borrowing binge. India faces a Turkish style budget crisis with the Centre/state/SOE budget deficit at a shocking 10% of GDP. This makes the Indian rupee one of the most dangerous currencies in the emerging market FX constellation, the Turkish Lira of South Asia – the Pakistan rupee is of course, the desi Argentine peso.
Modi’s “Make in India” policy has been a dismal failure. The BJP government increased tariffs on imports, a blow to Indian integration into global supply chains. India succumbed to domestic BJP vote bank pressures not to join an Asian trading bloc. Modi’s Economic track record is a dismal failure while his Hindutva/regressive social and autocratic vision for India is odious as it undermines the state’s secular DNA and pits religious communities against each other.
Modi’s current anti-immigration stance is tied to upcoming state election in West Bengal just as his populist, anti-black money agenda in 2016-17 won him the UP, India’s largest state. The crisis in the Indian economy will only deepen since the policy responses have been so feeble, contradictory and even self-damaging. This is reflected in a plunge in consumer confidence, investments, retail sales, capex and job creation. India now faces an economic lost decade that began in November 2016 and whose colossal social, political and financial cost will be paid by India’s citizens long after this despicable, vitriolic demagogue retires from the world stage to the dustbin of history where he rightfully belongs.
About the author
Matein Khalid has 25 years of experience in international capital markets as an advisor to family offices and fund managers. He has worked for investment banks/hedge funds in New York, Chicago, London, and Geneva. In addition, he has been the CIO of a technology fund in San Francisco, a royal investment office in Dubai and a public insurance company listed on the DFM. Matein has four degrees in finance, economics and international relations from the Wharton School, University of Pennsylvania. He writes capital markets advisory columns for Khaleej Times, Gulf Business and Oman Economic Review and was awarded ICAEW prize for excellence in financial journalism, December 2011. He was also selected by MENA Fund magazine in MENA Power List, 50 most influential fund managers in the Middle East.