President’s address and the reality check

President’s address and the reality check
NDA’s growth claims an object of ridicule
By
Faraz Ahmad
The Budget Session of Parliament commenced today with President Pranab Mukherjee’s address to the joint session of Parliament claiming India’s growth rate trajectory at 7.4 per cent, highest in the world, a claim made earlier by Prime Minister Narendra Modi, relying on the manipulation of figures by his master spin doctor, Finance Minister Arun Jaitley.
No doubt the President or the Governor in the case of the states, only reads out the speech prepared and approved by the Government of the day, which in this case is Modi’s NDA government and insofar as that, the President merely spelled out what the Government chose to state. But it is sad that the office of the President was demeaned by making patently false and bogus claims. Don’t believe me. See what Modi acolytes like Ruchir Sharma and Deepak Parekh have to say.
In his article in the Sunday, February 22, 2015 edition of the Times of India, Sharma, a big time Modi fan wrote: “The new and not-so-funny numbers show that the Indian economy grew at a pace of 6.9% in the last fiscal year, a claim that is fantastic in the extreme. Many Indian economists have set out to show that the new growth numbers for the economy as a whole simply don’t add up, as a sum of the parts. Every piece of data — from the tepid increase in corporate revenues to imports, credit, rail freight and auto sales — points to a much lower growth figure, probably closer to the old estimate of 5%.” Mind you, Sharma even questioned the conservative estimate of 6.9, leave alone 7.4.
Sharma mocked the scotch gulping hoi polloi at not being outraged by this complete travesty of truth saying, “Surprisingly, for a country obsessed with its GDP growth rate, there is not much outrage at this travesty, either in public or at cocktail parties. In the past, India’s habit of revising economic data was confined to relatively minor tweaks, but this latest update is a wholesale rewriting of history. In the international financial community, no one had questioned the veracity of India’s economic numbers, until now. This makes India look bad even compared to China, which many analysts have long suspected of massaging GDP figures to show steady growth.”
This is the same Ruchir Sharma, who as the head of Emerging Markets Equity Team of Morgan and Stanley, not too long ago was singing paeans of Modi. In the Wall Street Journal of May 14, 2014, two days before the results of the Indian general elections were announced Sharma had presumed Modi’s marvellous victory and said, “A country finds itself at a crossroads: Growth is slumping, inflation is hitting double digits and the government is under fire for the general malaise as an election approaches. In one of its few redeeming acts, the government appoints a tough inflation fighter as the new head of the central bank, but it’s too late. Months later, voters choose a new national leader, a controversial former state governor from extremely modest beginnings whose business-friendly agenda stirs hope of economic revival, but whose rhetoric makes a large minority uneasy.
“This is the setting in India today, where Raghuram Rajan took over the central bank nine months ago, and Narendra Modi appears almost certain to be announced on Friday as the new prime minister—although with little Muslim support—offering a message of “better days ahead.” The circumstances are strikingly similar to those in America in 1980, after Paul Volcker took over the Federal Reserve and Ronald Reagan won the presidency—with few black votes.
“Reagan went on to achieve much of his promised revolution, because his steadfast free-market vision was matched by a genial gift for turning enemies into allies. Reagan said he would cut taxes, red tape and the size of government. While debate about his legacy lingers, most people would agree that Reagan was a transformational leader who helped his country exit stagflation and enter a new era of prosperity.
“India now stands at its Reagan-Volcker moment, if Mr. Modi can master a few Reaganesque traits. His first move should be to back Mr. Rajan as firmly as Reagan backed Mr. Volcker. Warned by advisers that Mr. Volcker’s sharp rate hikes would make a brutal slump even worse, Reagan responded, “If not now, when? If not us, who?” Even as unemployment rose to more than 10% from 7.5%, and the clamor for lower interest rates grew, Reagan stood by Mr. Volcker and his battle against inflation. Reagan was rewarded with a disinflationary boom and a landslide re-election in 1984.
“Over the past five years, India’s inflation rate doubled to more than 10% due to mismanagement by the Congress Party, which has indulged in runaway spending on social programs and created an environment in which business is afraid to invest because of regulatory uncertainty and a backlash against crony capitalism.
On the day of the results Sharma again rose in defence of Modi condoning his past in the following words: “Some say Mr. Modi is getting away with a pogrom, but he has grasped the global pattern well and positioned himself as a man who delivers, with the prosperous ends justifying his crude means. He has won over the business community and the middle class with promises of smaller government, encouraging private and foreign capital and focusing on fast growth rates rather than government welfare spending.
“Mr. Modi’s mantra as a candidate and chief minister of Gujarat—”minimum government, maximum governance”—has created hope for a major government streamlining. In India, a transformational leader would reverse populist Congress Party policies, including rural income supports that have discouraged poor farmers from moving to more productive factory jobs in the cities, retarding industrialization. In a rapidly industrializing economy, manufacturing usually accounts for 25% to 35% of GDP, but in India it accounts for 15%, leaving much room for progress.”
Then there is Modi’s fellow Gujarati business honcho Deepak Parekh billed not so long ago as India’s prospective Ambassador to the United States of America. Soon after this Government came into being last year, his son fulfilled a typical passion of colour conscious Indians by marrying a white English American. And Parekh was so enthralled by his son’s singular achievement that the wedding celebrations extended to several days, attended by India’s Creme de la crème including political big wigs of Modi’s government. Apart from the HDFC Bank which he chairs Deepak Parekh i heads or is a member of several important government panels, virtually steering the government’s pro-reforms policies.
Articulating the concerns of the corporate world whom Modi has been bending backwards to please, Parekh expressed his dissatisfaction with the pace of reforms and sought further relaxation of “administrative controls” to improve ease of doing business. Deepak Parekh in fact warned that impatience has begun creeping in among businessmen as nothing has changed on the ground in the first nine months of this government.
The HDFC boss, a virtual spokesman of India’s corporate bosses said, “I think there is still a lot of optimism among the people of the country and among the industrialists and entrepreneurs that the Modi government will be good for business, for progress, for reducing corruption. They think this government means business on all these fronts,” but added, “However, after nine months, there is a little bit of impatience creeping in as to why no changes are happening and why this is taking so long having effect on the ground.”
Parekh concluded, “The optimism is there but it is not translating into revenues. Any industry you see, when there is a lot of optimism, the growth should be faster.” Given Parekh’s personal prevarications, one couldn’t expect him to be more critical of Modi’s promised fairyland.
And Raghuraman Rajan whom Ruchir Sharma wanted this government to give a free hand has made the most damning observation against Modi leaving no scope for speculation by citing Hitler’s example and saying that, “Hitler provided Germany with an extremely effective administration — the trains ran on time, as did the trains during our own Emergency in 1975-77. His was a strong government, but Hitler took Germany efficiently and determinedly on a path to ruin, overriding the rule of law and dispensing with elections. It is not sufficient that the trains run on time, they have to go in the right direction at the desired time,” the RBI Governor said.
The economic inclusion, he added, should mean easing access to quality education, nutrition, healthcare, finance and markets to all citizens for ensuring sustainable growth. And these are no leftists, nor AAP variety. It’s a wake- up call to Modi-Jaitley duo obsessed with fudging the GDP figures through manipulation of the stock market. But I am near certain they are so drunk on power that they would dismiss all this criticism with the wave of their hand.
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