A spectre is haunting India – the spectre of recession. But you wouldn’t know that, if your idea of India’s economy came from PM Modi’s Independence Day 2019 speech. There was absolutely no acknowledgement of the crisis facing India Inc right now.
There was only one moment, when the truth slipped out, unconsciously. It was about one-hour into his 90-minute speech, when he made a Freudian – or should I say Keynesian – slip. He said “hamaare arthvyavastha ke fundamentals bahut hi majboor hai.” Of course, he corrected majboor (helpless) to mazboot (strong), almost immediately.
That slip is, probably, a more accurate description of India’s current economic fundamentals, as measured by the standard tools of mainstream economic sciences, such as GDP, IIP, corporate profits, employment, credit growth, export growth, among others.
The Prime Minister’s self-satisfied speech suggests that his government sees economic development entirely differently.
10% Of India Has Been Calling The Shots on The Economy
Modi’s economic vision represents a third phase in the way governments have tackled the relationship between the state and the economy since Independence. The first was the Nehruvian model of ‘State Capitalism’, where the state controlled the commanding heights of the economy. It invested in heavy industries, electricity and infrastructure and later, under Indira Gandhi, the state controlled the entire financial sector as well. Through a process of capital controls and tariffs, the state pushed ‘import substitution’, providing protection to India’s nascent private sector.
The second phase, of the privatisation of the economy and resources, began in the early 80s when Indira Gandhi returned to power. Her son, Rajiv, accelerated the process and it led to full-blown liberalisation under Rao-Manmohan in the 1990s. By now, India Inc was strong enough to compete globally, and wanted capital to be able to grow. Tariff walls were brought down, and our economic borders were opened up to foreign money, especially finance-capital.
Globalisation and liberalisation also engendered several complementary processes: it created a class of corporate sector executives, exporters, traders and small entrepreneurs, who earned big money.
Along with that, a new intelligentsia developed – journalists, academics, lawyers, writers, artists – who built public consensus about the virtue of the free market and private enterprise. These people became the buying classes. And, for about 25 years, this 10 percent of India decided which way India’s economy should move.
‘Third Phase’ of Economy, Thanks To PM Modi
Narendra Modi has inaugurated a third phase. India has 90 crore voters and only 40 crore workers. Remove those too old to work, and you still have about 30-odd crore people who have never got work for any sustained period of time. They are perennially dependent on government handouts, and things like GDP growth, industrial output, capital formation, or even demonetisation, makes no difference to them. Modinomics targets these people, not to give them jobs, but to simply connect them to government schemes and integrate them with the state.
We already saw this during Modi 1.0, which focused entirely on providing the poor ‘contact-points’ with the state. It has given bumper electoral dividends. PM Modi’s speech today extends that same vision.
The objective is to expand connections of various kinds – electricity, housing, gas, banking, direct monetary support and, now, drinking water.
This is a long-term project of creating a mass of people (read voters) whose fortunes are closely tied to the government.
What About The 3 Cr People Looking For Jobs And Not Getting Any?
What about the three-crore people who are looking for jobs but aren’t getting them? What about the mid-rung executive who hasn’t got an increment or is facing the possibility of being downsized? What about India’s small, medium and big entrepreneurs who are facing a mega slowdown?
In a sense, PM Narendra Modi has turned his back on them.
It is a clear indication that this government believes the days of middle class consumption-led growth are over. The government seems to be preparing to dial-down the aspirations of the buying classes. If cars and homes aren’t selling, the government doesn’t care. It has nothing for the 10 percent of India, which buys most of what we produce. Instead, it wants that part of India to make an effort to integrate with the less fortunate.
In a telling passage in today’s speech, the PM asked the middle and “higher middle classes” to sacrifice foreign holidays and visit tourist spots in India instead.
He appealed to them to rough it out at these tourist sites so that their children get into the habit of facing difficulties and to understand “yahi hamaara desh hai” (this is what our country is like). It was a thinly-veiled admonition aimed at the affluent.
Even the PM’s backhanded compliment to ‘wealth-creators’ drew attention to public anger against the rich, by asking people to not look down upon (“heen bhaav”) the wealthy.
Building a ‘Constant State’ of National Pride
It is a new project of redefining the relationship between the state, society and the economy. Modi 2.0 wants to build a “constant state” of national-pride, which creates a unified and homogenous people. It is an appeal to the affluent to give up current aspirations to build a strong nation-state and domestic economy. That is what lies behind the appeal to buy locally-produced goods that are made in India – “to be lucky, buy local.”
It is an emotive call to sacrifice price and quality, for supporting national industry.
One could dismiss this as naive wishful thinking, but there are many examples of public support for such ‘patriotic consumerism’, especially from authoritarian societies. A recent one is from China, in 2016, when the Hague ruled against China’s rights over territories in the South China Sea. People boycotted US goods, including iPhones and KFC, as the USA was perceived to be behind the ruling. Similar stories are told about Japan in the post-war period.
The question is, whether India’s middle class has been sufficiently ‘Modified’ to change its expectations and behaviour.
After all, these aspirations took almost three decades to develop and get entrenched in the middle class psyche. For all their support for extreme nationalism, the middle classes might find it difficult to back Modi 2.0, if it continues to pinch their pockets.
(Aunindyo Chakravarty was Senior Managing Editor of NDTV's Hindi and Business news channels. He now anchors Simple Samachar on NDTV India. He tweets @AunindyoC. This is an opinion piece. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)
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