A ‘golden period’?
Narendra Modi has said that he wants the present period (which he defined as 2014 to 2029) to be remembered as a golden period for India. Others would characterize the period with baser metals. But there is a Modi-like conviction with which government spokespersons also speak of the present period. They highlight long-delayed economic reform (of the labour market, agricultural marketing, bankruptcy proceedings, taxation) successful tackling of Covid-19 along with fiscal restraint, path-breaking political measures like the abolition of Articles 370 and 35A of the Constitution (changing the status of Jammu & Kashmir), progressive social legislation like the abolition of Triple Talaq, and how India has stood up to China on the defence front while strengthening such formations as the Quad in partnership with other democracies. On many of these issues, those speaking for the ruling dispensation point to inaction or failures by previous administrations, usually characterized as a post-colonial Nehruvian phase that is contrasted with today’s more ‘authentically’ home-grown leadership that wants to bury the legacy of 800 years of foreign rule.
On the same issues, the government’s critics have a completely different take. They see a divisive political culture, a succession of economic misadventures, a general loss of economic momentum unrelated to Covid-19, the erosion of civil liberties, marginalization of minorities, the falling away of institutional safeguards, draconian legislation such as on ‘love jihad’ that violate fundamental rights, and selective use (or misuse) of extreme provisions such as in the laws on sedition and the Unlawful Activities Prevention Act that permit extended periods of jail without bail.
Somewhat contrarily, any and all of this can be true at the same time though individuals may have a more selective worldview. The departure that is clear to the neutral observer is that for the first time since the 1970s we have many of the elements of the standard populist-driven scenario: a leader’s direct equation with the people, the sidelining of institutional intermediation, the de-legitimization of opposition and criticism as anti-national, and the intense and divisive politicization of the public sphere.
Fitting into this broad scenario is the Supreme Court’s refusal for months on end to address even habeas corpus petitions, its selective application of high-sounding principle for the benefit of those who enjoy the government’s blessings, the rewriting of history books to suit a preferred narrative, the extension of the government’s monopoly on violence to include favoured vigilante groups, space given in the public sphere to purveyors of hate speech like Pragya Thakur, and pressures on the media to play cheerleader. All these are in line with what happens when populist leaders take control of the levers of power.
It is premature, however, to argue as many are prone to do that India has already crossed the admittedly narrow divide between aggressive nationalism and outright fascism – two terms that are sometimes treated as one and the same thing. There is in many circles today a fear of speaking out, but rule is still by popular consent. At state level, the ruling party does lose elections – though that does not mean it gives up power without attempting various post-election machinations. As Vinay Sitapati has argued in Jugalbandi, the Sangh parivar does not see the need to give up electoral democracy because it sees itself as its beneficiary. And so, it will apply pressure to conform, but allow criticism to be aired. Likewise with other institutions. The Supreme Court may have fallen short, an Election Commissioner who held out has been forced out, and so on. But institutions while under attack continue to function – and let’s face it, many of them were never perfect or entirely free of pressure.
The Manmohan Singh government tried to undermine and limit the scope of the Right to Information law which it had passed following prompting from Sonia Gandhi’s National Advisory Council, the Modi government has done it more brazenly. An environment minister in the Singh government who took his job seriously was replaced under pressure from businessmen. The Modi government has sought to formalize what was a de facto reality, that environmental safeguards were to be observed in the breach. The Central Bureau of Investigation was a ‘caged parrot’ then, now it and its cousins are more like the peregrine swooping down on unsuspecting targets. In many ways, the BJP has taken leaves out of the Congress playbook, and added some of its own.
So the situation is worse than before, but critics who think the worst has already befallen the country should take a look at how much further down the road other populist leaders have travelled – in Turkey (thousands of judges and journalists jailed), Brazil (Bolsonaro and his sons implicated in corruption scandals), Hungary (constitutional changes to ensure the ruling party’s party dominance) and elsewhere. Critics who see the present situation in India as an ‘undeclared Emergency’ should read the newspapers of 1975-77, for a reality check, and recall that this magazine was forced to shut down because of censorship. So while it could and might get worse, the tragedy that has already befallen India is that it is already clubbed with these illiberal democracies. The differentiator between India and the others could be a matter of the ruling dispensation’s self-restraint, its perception of where its self-interest lies, or perhaps lack of confidence to mount a frontal assault; not the corsets that the system was designed with.
All the weaknesses and failures apparent today cannot necessarily be laid at Narendra Modi’s door, which many are prone to do. Many chief ministers have been mini-Modis for some time, and there are laws at state level that are worse than any passed by Parliament. Many issues that have boiled over now have a long history that pre-dates Modi. Like the setbacks on the border, where China now occupies vast areas in Ladakh, constituting India’s biggest loss of territory since 1962.This reflects the fact that India’s strategic balance with its two hostile neighbours has suffered as a consequence of consistently squeezed defence budgets. That in turn sprang from a steadily weakening economic performance after 2011, while Covid-19 has shown up the many deficiencies in the country’s health infrastructure even as it has sent the economy reeling into its first formal recession.
The recurrent crises in the financial system as well as Corporate India’s sustained under-performance also have their origins in the early part of the decade that has just ended, even as cronyism has flourished all the way – sometimes more visibly than at other times. The transition from entrepreneurial to conglomerate capitalism, which Harish Damodaran has written about in this magazine (October 2020), began before Modi’s advent even as it has flourished under his benign gaze.
Still, an effective opposition might have been able to play on current failures, and puncture surreal claims by the government’s cohorts that present the setbacks as victories or signs of strength. But India does not have such an opposition – the Congress is hobbled by poor leadership as well as public memory of its shambolic record in office. The absence of a credible alternative has given the government a free run to set the agenda for public discourse. The media, usually assigned the role of watchdog, is sharply polarized too. As has become the case in many countries, including the United States, your choice of what you watch or read, and what you are prepared to believe, is more an expression of your political inclination than any autonomous reality.
To return to the original problem, can one take a position between the two camps on whether India is doing well or badly? How is one to fit the facts to the sharply contrasting narratives? Is this indeed a golden age, or a transition to growing illiberalism, declining economic performance and setbacks for national security? In a world where the majority of those who voted for Donald Trump in the US presidential elections believe that the election was stolen from him, the problem is to some extent one of alternate realities and post-truth predilections.
The best judgment that one can offer is that the situation isn’t as good as the government says it is, or as bad as the critics say. There is hardly a claim that the government makes which is not an exaggerated version of the facts on the ground. And the critics are right in asserting that the country has taken the wrong turn on the road to the future. But you have to be politically blind-sided to not see that the Modi government has many qualities and achievements that its critics are reluctant to acknowledge. Besides, one has to simply compare the energy and drive of the government that is now in its seventh year, with the scandal-consumed Manmohan Singh government at the same stage showing signs of premature rigor mortis, to see the obvious.
Where the Modi government has fallen manifestly short is of course on its performance when measured against what was promised. Even setting aside such unreal promises as bringing back money from illegal overseas stashes that is equivalent to Rs 15 lakh per head, or providing 20 million jobs to the young, the government has never got close to achieving what it seems to have initially assumed would be a breeze: double-digit economic growth. Two brief years of 8+ per cent growth were a gift of declining oil prices. Nor will it be able to double farmers’ incomes by 2022, or get manufacturing to become 25 per cent of GDP by the same year. And Covid has put paid to the latest pipedream of growing the economy to $5 trillion by 2025. It was never an achievable objective anyway. The real sign of failure is that merchandise exports have hovered around the $300 billion mark since 2011-12.
If Modi has over-achieved, it is on a front where he never made any overt promises, though the faithful understood the meaning of his advent. For though he has been prime minister for only half the time that he was chief minister of Gujarat, he has changed India far more than he changed Gujarat – partly because Gujarat had begun the change earlier (i.e. one version of the ‘Gujarat model’). Some corners of the country are still to be conquered by the BJP. But in the part of the country that lies north of the Vindhyas, and in some states to its south and east, what is increasingly common is the hounding of Left intellectuals, and crude violence against the lower castes, patriarchal attitudes, openly communal utterances and draconian laws targeting minorities – all of which have attained a degree of political sanction that was probably unimaginable seven years ago.
If people did not see this coming, they should have because it was stated baldly in the BJP’s election manifestos. The scrapping of Articles 370 and 35A were promised, though not the clever, technically correct but politically unscrupulous constitutional method by which it would be done: Partner a local party in state government formation, pull down the government at the appropriate time and impose central rule so that the governor technically speaks for the state government, and Parliament acts on behalf of the state assembly. Hey presto, due process has been followed in changing the state’s relationship with the Centre while piling on the ignominy by bifurcating and reducing the state to two union territories – with no one from the state having been consulted let alone any consent taken. The BJP’s erstwhile partner in the state is left to ponder the Leninist maxim of shaking someone’s hand being preparatory to catching him by the throat.
It has been the same story with the seemingly innocuous (though objectionable for differentiating on the basis of religion) electoral promise of offering citizenship to all non-Muslims from neighbouring countries. Few if any foresaw that this would be part of a larger national scheme that could potentially render tens of millions as stateless people. The matter got complicated in Assam, where the majority weeded out of citizens’ lists comprised Hindus, even as the scheme affected relations with a friendly government in Bangladesh. Covid has provided some respite, but don’t be surprised if the government presses ahead with the issue – especially after prosecuting (and thereby neutralizing) those who led the agitation against the new citizenship law for complicity in the Delhi riots, and having been blessed by the Supreme Court’s accommodating stance.
Forget political correctness in this new environment of an open Hindutva agenda, and the Advani-era tactic of hiding one’s real objectives behind such accusations as pseudo-secularism and vote bank politics. Both have been discarded as the real objectives are laid bare: to capture the biggest vote bank of them all and to dump secularism, pseudo or otherwise. The acceptance of Hindutva as a legitimate state objective, indeed an obvious state objective, is now a part of the mainstream (though by no means universal) opinion in important parts of the country. The Constitution’s primacy given to individual rights is being attacked through a changing ground reality because de jure change is more difficult, even as the Rashtriya Swayamsevak Sangh’s preference for group rights finds more frequent utterance. Naturally from Modi’s point of view, who has engineered this seismic shift, this is a golden age.
The political reality is that Modi and the Bharatiya Janata Party (BJP) have gone from strength to strength, so that India is once again a single-dominant party democracy, with the BJP replacing the Congress of old in pole position. What the critics miss is that this cannot be entirely because Modi knows how to sell a line to the public, or because the opposition is clueless or neutralized, or because he has communalized the polity such as to suit the BJP – though any and all of these are true.
The fact is that programmes introduced by the two Modi governments, or which they have adapted from previous governments and expanded in scope and scale, have touched the lives of countless millions. Whether it is Jan Dhan banking, or Ujjwal gas connections, free toilets through Swachh Bharat, free housing, free foodgrain distribution during Covid, and free medical insurance, cash transfers to farmers or now the promise of universal tap water, Mr Modi has delivered the substance of a social welfare package in large measure while showing that he is also undertaking development work through the ambitious highway programme, unprecedented investment in the railways and other such.
In every instance delivery may not match bombastic claim. Only 30 per cent or less of Jan Dhan accounts are active, and the official claim that virtually the entire country is free from open defecation is not reflected in the results of independent scrutiny. Gas cylinders are not re-ordered in many homes with subsidized Ujjwal gas connections, and the medical insurance and water programmes have just begun to get rolled out. Indeed, even the claim of exceeding the country’s targets under its climate change commitments, which include the development of non-fossil fuel energy, may end up proving to be an over-claim though there can be no doubt that the programme has been sharply accelerated. So no one can deny that there is a substantially improved delivery of benefits, and in many cases sharply scaled-up targets. What Modi has done is to up the game. Voters can see it.
The government’s simultaneous record of misadventures discounts these achievements. Demonetization simply did not achieve its initially stated goals of tackling unaccounted money, counterfeit notes and terrorist funding. While the government’s lawyer surmised in court that one-third of the demonetized money would never come back, and while some ministers claimed privately that half the currency in circulation would disappear because it constituted unaccounted wealth, the fact is that virtually all the demonetized currency notes came back to the Reserve Bank and were replaced with new notes.
Evidently, the inventiveness of the country’s money-laundering machines checkmated the government, while the scheme had a definitional problem in that it saw black money merely as a stock of cash, not a continuous flow of illegal transactions that continue after a quietus. Government spokesmen point to the subsequent spurt in income tax filings and collections as proof of delivery. For sure, but against that must be placed the havoc caused to hundreds of millions of ordinary people because of the instant disruption of economic activity – something that should have been foreseen. The Modi government is not prone to admitting its mistakes, but the fact that demonetization is frequently missing from lists of government achievements is indirect admission that it did not work as intended.
Some eight months after demonetization came further disruption in the form of the goods and services tax, long in the works but finalized in a rush and therefore done imperfectly in both design and execution. The price of it being anything other than a ‘good and simple tax’ is being paid now at leisure by the government which has suffered on the revenue front, in part because of the continuing problem of large-scale evasion for which there is no easy solution. The price is also being paid by countless tax-paying entities, especially medium-scale enterprises and some small ones as well, which have found the paper-work and compliance challenges burdensome. In addressing these, the government may have created further distortions in the tax.
There has been much chopping and changing of the initial package, some of which was inevitable in such a complex enterprise, but the slashing of many rates in the run-up to the 2019 election and the inversion of tax rates along the supply chain have only added to the revenue problems. Major changes to GST rates and to the administration of the tax remain to be undertaken. So far, instead of the boost to tax revenues and to economic growth, the tax has delivered the opposite.
The third avoidable disruption was the nationwide lockdown in the hope of preventing the spread of Covid-19, announced typically with a few hours’ notice and without understanding the phenomenon of migrant workers who, without jobs and income, presented apocalyptic pictures as they trudged for hundreds of miles to the assumed safety of their village homes, even as state governments initially tried to block their movement, thus making matters worse. The Mao-style disruption that these measures caused, affecting hundreds of millions of lives, and the seeming lack of contrition except for a fleeting reference, remind one of Nietzsche’s insight that power is never exercised in innocence.
Yet the remarkable fact is that neither Narendra Modi nor the BJP has suffered politically as a consequence. The party swept to a massive victory in the UP assembly elections held shortly after demonetization, and its alliance has been swept back to power in Bihar in the wake of the migrant crisis. One could speculate on the reasons: the power of identity politics, the prime minister’s carefully constructed image of a selfless, tireless provider of people’s welfare, the weaknesses of a divided opposition, money power, and more effective booth-level mobilization. Taken together, it is clear that the BJP has become an unparalleled election machine. The various opposition parties are yet to mount a response.
Yet the BJP is far from unbeatable, at least in assembly elections. In a straight fight, as was the case in the Rajasthan and Madhya Pradesh assembly elections, the party lost narrowly to the Congress, and more convincingly in Chhattisgarh. It did so in Maharashtra too, where (as in Punjab) it has also lost a longstanding ally. And the maverick Aam Aadmi Party has been able to more than hold its own in Delhi. On the national stage, though, Modi’s sun shines brighter than all others.
The problem for the country is that, as we have seen before in the case of Indira Gandhi, a leader’s popularity graph does not have to be matched by economic performance. And so it is turning out to be with Mr Modi, both generally and in the Covid pandemic. True to form, the government claims successes in its tackling of Covid, on such indicators as the rapid ramping up of testing, manufacture of protective equipment and provision of hospital beds for Covid patients. All those are true, and deserve acknowledgement, but the alternate reality in the parallel universe is that for every million people India has recorded more deaths than other countries in Asia – and this is despite the harsh lockdown.
The country coming closest to India’s figure of 95 deaths per million by mid-November was the Philippines, with 71 deaths, followed by Indonesia with 56. Comparisons with Europe and the US, which the prime minister has made and where India comes across better, are less valid because of India’s younger age profile (Europe has many more vulnerable senior and super-senior citizens in old age homes that have proved to be hotspots for the infection), levels of urbanization, and other factors.
In terms of economic impact, too, India’s performance (despite the sharp drop in rate of GDP contraction in the July-September quarter) during the pandemic has been among the worst – certainly among the developing countries, and matched in the developed countries by perhaps only the United Kingdom. China, in sharp contrast, has seen continued growth in this period. But don’t expect the government to acknowledge these realities or make such uncomfortable comparisons.
And so the economy has slipped from the world’s fifth largest to the sixth rank, and is in danger of slipping another notch. Bangladesh (that country full of Amit Shah’s ‘termites’) has done the once-unthinkable and overtaken India on per capita income. That is when the numbers are calculated in nominal dollars; on the purchasing power index which corrects for exchange rate distortions, India is still comfortably ahead. Among the large economies, India’s has suffered the most on account of Covid-19. Its stock market may have soared to all-time highs in late November, but the employment rate (a more reliable indicator than the unemployment rate, since it also takes into account those who have dropped out of the job market) has slipped to its lowest ever level and more than neutralized what was once hyped as the country’s demographic dividend. Over-all productivity will inevitably take a hit, while the haves and the have-nots are further apart than ever before.
The good-to-poor mix of outcomes can be explained through the relative complexity of the tasks attempted: Building a highway or a toilet is easier than reforming a sector, which is easier than changing the structure of the economy. Chief ministers deal with the simpler tasks, whereas even politically successful prime ministers can fail when confronted with the interplay of complicated levers that steer economic activity. Political smarts are no use when you have to figure out how to tackle inflation without aborting a recovery, and soak up excess liquidity while keeping interest rates in check, especially when you have got rid of your best economists and prefer political conformists – part of a general disdain for expertise that seems to be an inalienable part of populist regimes.
Inevitably, non-government forecasts of the economic growth to be achieved in the coming decade are now tinged with pessimism. Many expect growth of no more than five per cent (lower than in the last three decades); some fear it may drop further. In part, this may be on account of yet another blunder by the Modi government: its decision to stay out of the Regional Comprehensive Economic Partnership (RCEP), which takes in all 10 Asean member-countries plus the big boys of the region: China, Japan, Australia, South Korea and also New Zealand. It is the world’s largest trading bloc, and will put Indian exporters at a disadvantage with all the 15 RCEP signatories when it comes to accessing the region’s markets.
The Modi government was never enamoured of free trade agreements, and has argued with little evidence that the FTAs signed so far with countries in the region have worked to India’s detriment. Even if true, it begs the question of why India did not get ready to take advantage of the FTAs. The argument that China has blocked market access has merit, but it is not a sufficient explanation because India has a trade deficit with every country in the region. The primary issue therefore is Indian competitiveness, and the correctives lie within the country and with domestic policies. The point about RCEP is that it allowed for country variations in tariff cuts, was not as intrusive as the aborted Trans-Pacific Partnership would have been, and that the proposed tariff cuts would roll out over 20 years – more than enough time for any country in the region to get its act together, were it so inclined.
Even as it has turned away from RCEP, the government has reversed the outward direction of trade and tariff policy that was introduced as part of the 1991 reforms. It has been raising tariffs for the past three years, and has now taken the next step of offering incentives for import-substituting production at home. While varying in detail, this is no different in essence from what India tried for four decades till 1991, only to have built an uncompetitive industry that survived behind high tariff walls and short-changed consumers. The justification is that India has a large domestic market attractive enough to attract foreign investment, some of which will cater to export markets. This is true up to a point, and some tariff-jumping investment has already taken place. But no domestic market can be as large as the world market, and foreign investment is less likely to come into an economy that has a tariff disadvantage when accessing markets in the region – which happens to be the fastest growing in the world. Despite all the disparagement of Nehruvian policies, the government has adopted an industrial policy more Nehruvian than anything else.
The strategic consequences of insufficient growth have already become evident. But India has so far been favourably viewed by much of the world because it has been a largely liberal democracy, in comparison with many other countries in South and East Asia, including most notably China. Investors will continue to come if there is money to be made here, and fear of excessive dependence on China will encourage many partnerships with, and investments in, India. But at this important juncture, India is losing its traditional advantage of being seen as an open society and a liberal democracy.
For instance, India has slipped on the Democracy Index, constructed by the Economist Intelligence Unit, from 41st to 51st position, in a ranking of 165 countries. Pakistan is ranked 108th. Bangladesh and Sri Lanka also score worse than India. The country’s score has dropped from 7.23 to 6.90 on the basis of parameters like electoral process, civil liberties, political culture and the functioning of government. India thus remains in the ‘flawed democracy’ category. A score above 8.0 would have qualified it as a ‘full democracy’, and one at 6.0 or lower would have relegated it to ‘hybrid regime’ (like Pakistan whose score is 4.25). The worst category, 4.0 or below where China is placed, would qualify a country as ‘authoritarian’.
Freedom House in the US scored India better with data for 2019, reported in 2020: 34 out of 40 for political rights, and a predictably more troubled 37 out of 60 for civil liberties, making for a total score of 71 on 100. That was down from 75 in the previous year, but still qualified the country as ‘free’. The two other categories are ‘partly free’, which is where Pakistan fits with a score of 38, and ‘not free’. There are separate scores of 28 for both ‘Indian Kashmir’ and ‘Pakistani Kashmir’, which therefore are considered ‘not free’.
The two rankings have a common message: India still scores well on its political and related freedoms, which are the strengths that it inherited from its Constitution and its political trajectory since Independence. But it is losing ground under the BJP. Specifically on press freedom, Reporters Without Borders in 2020 ranked India two notches down from 2019, to 142nd out of 180 countries. Fifteen years ago, the rank was 105, which then slipped to 122 a decade ago – highlighting the point that India’s slide into illiberalism, like its economic slowdown and the weakness of its institutions, is not a purely Modi phenomenon. On media freedom, India has scored poorly over the years because of Web censorship, arrests for innocuous social media postings, violence against journalists and media blackouts in places like Kashmir. The Modi government’s readiness to pressure the media has not helped.
What about economic freedom (ease of business, if you will)? If one sets aside the World Bank’s rankings, which are being reviewed though reportedly not for India’s ranking which has improved sharply in recent years, an alternative listing is done by Canada’s Fraser Institute. In its annual report ranking 161 countries on 42 data points, ranging from sound money to openness to trade, and from property rights to the legal system and regulation, Fraser ranks India for 2018 at 105th (the same as Brazil), down from a best rank of 93rd in the previous year. The country’s absolute score improved from a momentary dip to 6.17 in 2014 to a high of 6.68 in 2017 before falling back to 6.52 in 2018.
Finally, since China looms increasingly large on India’s horizon, what about comparative power rankings? While there are several rankings in this broad area, most of them seem to be out of date. Since the essence of the situation is that the two countries have been rising at different rates of acceleration, a useful categorization would be to look at the different elements of coercive and non-coercive power. China has been gaining in the former because of its economic size, military capabilities, technological prowess and its willingness to use any and all of these such as to assert its will and way because of relative superiority. In comparison, India has been gaining more in non-coercive power because of its economic achievements, growing international linkages with large and middling powers, the influence and role of its diaspora, and its potential role as a swing power in Asia.
Sub-optimal economic legacies are typical of strongman leaders. As one has written elsewhere, the Russian economy under Vladimir Putin is smaller now than in 2008. Mr Erdogan’s Turkey has a currency that has lost 60 per cent of its value in five years. Hugo Chavez, Lula da Silva and Peron were populist leaders who scored initial successes in Venezuela, Brazil and Argentina, but their legacies have little to commend them. Mr Modi can still avoid being in such company, but the macro-economic ratios (like a much higher debt-GDP ratio, which will constrain future fiscal policy) and systemic blocks like the still-troubled financial sector are getting stacked against him.
He has time on his side. The last three prime ministers who served full terms started out in their early 70s. Modi started out younger and fitter than all of them. But he is now into his seventh year as prime minister, into his 70s, and set on a course of his making. His fans may continue to celebrate the triumphs of Hindutva while believing that Modi will deliver on other fronts, but through its entire history the Sangh Parivar never gave any primacy to the economy – as the Chinese communist party, secure with its political monopoly, has done since Deng. The BJP has never had a clear economic ideology. Until Mr Modi arrived, it was only a confused mélange of swadeshi, state intervention and small-town free market. Its only qualified economist, Subramaniam Swamy, was too much of a maverick to be mainstream. Both Atal Bihari Vajpayee and L.K. Advani used to cheerfully admit that they did not understand economic issues.
Mr Modi is far more focused on economic goals and even more on the delivery of welfare measures. Also, unlike most Indian politicians he has a feel for technology and what it can help achieve. But he too has delivered primarily on the Sangh Parivar’s objective of making aggressive Hindu nationalism the country’s leitmotif, aided by a hard-nosed application of state power. In his and his acolytes’ eyes, the India that he eventually hands over to his successor may therefore have been marked by a ‘golden period’. But if the country’s primary institutions of governance find it difficult to play their role, if law and order are not impartial, and there has been sustained economic under-performance along with growing disparities in wealth and economic opportunity, the gold may end up with the colour of dust. A mid-course correction is called for, in objectives and style of governance, but powerful leaders rarely manage one after they get into a comfort zone bubble and don’t like or listen to criticism.