<![CDATA[All talk aside, does Narendra Modi have a real solution to India's economic woes?]>
Back in 2014 when Narendra Modi was first elected, he set out to transform the underperforming Indian economy. He promised to replicate the success of his home state, Gujarat, across the republic, creating a surge of jobs and opportunities for all.
Instead, five years on, following a deeply divisive election, a National Statistical Office survey shows India faces rising poverty, especially in rural areas, as well as an unprecedented drop in consumer spending.
The 2017-18 survey reflects how acutely two poorly conceived policy initiatives " a bungled goods and service tax and demonetisation " affected small-town India.
In light of the weak economy, Modi and his BJP cohorts switched strategies for this year's election. The 2019 campaign was fought on an aggressively Hindutva and anti-minority platform. They also ramped up the perceived threat of Pakistan and terrorism, launching a cross-border air strike on Balakot in February. In August, shortly after the election, New Delhi ordered a brutal lockdown of the majority Muslim state of Jammu and Kashmir.
Meanwhile the economy remains deeply troubled.
Manufacturing is haemorrhaging. The slogan "Make in India" has been forgotten despite the vast opportunities presented by the US-China trade war, many of which have instead been scooped up by Vietnam and other Asean nations. Indeed, the decision to pull out of the RCEP trade deal underlines India's inability to compete globally, reinforcing the nation's inward-looking stance.
Indian Prime Minister Narendra Modi. Photo: EPA
The once booming auto sector " estimated to constitute some 40 per cent of manufacturing output and 7 per cent of overall GDP " is in reverse with a staggering 23 per cent year-on-year decline. Motorbike sales also plummeted 16 per cent between April and September this year.
Nonetheless, Modi remains ambitious, outwardly at least. He claims the economy will be worth US$5 trillion by 2024 " almost double its current US$2.7 trillion. To achieve this target, India will require at least 9 per cent GDP growth per annum " unlikely given Moody's, the global credit rating agency, recently cut the country's growth forecast to 5.6 per cent for 2019.
The financial sector is also in free-fall. Multiple scandals, defaults and closures " including Punjab & Maharashtra Cooperative Bank and the shadow bank, Dewan Housing Finance " have shaken the industry badly.
Indeed, the thousands of poorly regulated shadow banks (non-bank providers of financial services) are now regarded as a major threat to the economy, not unlike the situation in China. Moreover, given the parlous state of government coffers, the chances of a bailout are almost zero.
Of course, India is fortunate in having some of the most experienced and brilliant CEOs, such as Microsoft's Satya Nadella, MasterCard's Ajaypal Singh Banga and Google's Sundar Pichai. Surely, they would be ready to assist in the event of a major credit and/or fiscal crisis.
Unfortunately, the dominance of Hindutva ideology appears to be have engendered resistance to outside ideas, as evidenced by the exclusion of Raghuram Rajan, the former governor of Reserve Bank of India, and Nobel laureate for Economics Amartya Sen.
The price of onions has soared in India. Photo: AFP
Of course, not everyone is suffering. Some players are doing exceptionally well. Telecom operator Reliance Jio " which is owned by India's richest man, Mukesh Ambani " continues to overshadow competitors with its free data and voice call packages. The British partner in its rival, Vodafone Idea, recently slashed the value of their 45 per cent stake to zero.
The Adanis experienced a dramatic 611 per cent surge in profitability earlier this year at their mining and infrastructure corporate vehicle, Adani Enterprises. They are now expanding into airport infrastructure having secured a 23 per cent stake in Mumbai International Airport Limited as well as a series of modernisation contracts across the country.
Adding to the overall gloom, though, is a recent spike in the price of onions " a critical ingredient in virtually all Indian cooking. Climate change has led to unpredictable weather patterns and heavy rains have ruined local harvests, prompting authorities to release government stocks and ban imports. As a result, prices have been suppressed, angering farmers in Maharashtra, where the BJP suffered a significant drop in support in last month's state polls.
Fluctuations in onion prices are hardly new. Of greater concern is the BJP's failure to manage such simple but highly critical supply and demand issues. Inevitably, this raises troubling questions about the capability and competence of their administration.
India is important for Southeast Asia generally. Unfortunately, it's not clear Modi's BJP government has a solid grasp on what it takes to lead this Asian giant.
This article originally appeared on the South China Morning Post (SCMP).
Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
