PM Narendra Modi in a group photo with other world leaders at the 3rd RCEP Summit in Bangkok, Thailand, Monday | PTI
PM Narendra Modi in a group photo with other world leaders at the 3rd RCEP Summit in Bangkok, Thailand | PTI
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There is simply no way to get away from the fact that the clouds over the economy continue to darken — not just because of events already unfolding but equally because of the quality of the government response. Moody’s decision to put out a warning on its India rating may be nothing more than recognising the changes in economic prospects that have already occurred, since rating agencies typically react slowly and tend to be behind the curve.

What should worry forecasters (and everyone else) is the risk that the minor upswing in economic growth that most of them expect in the quarters following July-September, even if only helped by progressive changes in the base period comparator, may in fact not come about because of a downswing that feeds on itself for a variety of reasons.

There is a fiscal crisis building up, which might become apparent when the Finance Commission presents its report — especially if it seeks to claw back the tax share of the states by putting out the data on the central government’s vast unpaid bills, hidden expenditures, revenue shortfalls, and much else. The government is spending on citizen-friendly programmes to win votes, and who is to complain, but where are the steps to bring in the money to pay for the goodies?

At the same time, capital is being used badly or destroyed. The financial sector is one sink. The public sector swallows up ever more cash — the latest pile going to two bankrupt phone companies which are unable to pay salaries. The railways has taken in huge cash, but has little to show so far by way of growth in traffic and revenue. The bankruptcy process is taking its own toll. Irresponsible chief ministers cancelling energy contracts destroy capital too. Regulators who mismanage sectors, as in telecom, have destroyed capital wholesale — and the Supreme Court has not helped. What underpins the economy’s growth potential are the still high savings and investment rates, but these have little meaning if the money that is invested disappears without a trace down various sinkholes — among which one is real estate.

Also read: Private banks are also in trouble, Modi govt must act now to set up resolution capability

The big worry is continuing denial by those in charge, perhaps even a lack of comprehension. The decision to opt out of the big regional trade agreement may eventually have been out of lack of choice, but it is silly to pretend that it is a sign of bold leadership. When every country east of Dhaka is willing to sign up and India is not, it says something is wrong with India. This reflects a failure of leadership over the past five years, and a failure to reform and get ready for opening up to and integrating with the largest, fastest-growing region in the world.

The argument that past free-trade agreements have not worked in India’s favour is false; they made little difference. The fear of Chinese products swamping the market may or may not be real, but the trade deficit with China is only half the regional story; India has a big trade deficit with virtually every country in the region. The bilateral deals talked about as an alternative are non-starters. Opening up to Australia means opening up to agriculture; with New Zealand, dairying; and with ASEAN countries, on other agricultural items. As for switching from “Acting East” to looking West, trade deals with the US will be no easier, even as the country loses trade disputes at the World Trade Organization.

It is claimed that we can join later, but when the domestic lobbies that have won are the protectionists, why should they give up their hold on government policymakers? Where are the action plans and timelines to get ready for slashing tariffs, doubling agricultural productivity, and ending cross-subsidies in power pricing so that industry is not penalised? Or to get into regional supply chains when organised retailers are discouraged? The government has raised tariffs and become an anti-dumping champion, so the country is becoming more inward-looking. How then can the system open up, or become more competitive? Those that are competitive are being locked out of markets by those that are not. The losers are winning. This is no way to get to $5 trillion.

Also read: Regulating Amazon, Flipkart is a shock Indian economy can’t afford now


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25 Comments Share Your Views


  1. Just because a PM is mentally challenged,, all of you are in no better position. It is a joke of 5 trllion GDP and 15 Lacs to poor. Shseesh……

  2. What the bhakts seem to forget that the only case for protectionism is what is called ‘infant industry argument’. That means the industry is nascent and needs protection from foreign competition. That was the case in the 50s. Seventy years later, they are all still infant industries ! The ones which went out and competed, like the IT companies and some airlines, won. The others, steel, cars, scooters etc are still cribbing

  3. If the RCEP was so bad for India why did the government not leave it after 2014? If it takes the government 5.5 years to identify a bad deal, I am afraid about its capability. The length of time taken to leave RCEP shows timidity and/or lack of analysing capacity.

    Why did only India leave RCEP? Why did none of the other countries felt it was bad for them? In 1950, India was probably in a better state than all countries signing RCEP except Australia and New Zealand. if 70 years down the line we are not able to compete then the administration has to blame. And everyone knows who was running the administration for the major part of the period.

  4. Signing RCEP trade deal would have been good economics (cheaper for consumers) but bad politics. Relation with China is more than economics its a security problem. I think India would have signed if China was not a part of the group

      • Simple. Because China is not a fair player.
        Not that India competes well with fair players. The problem is structural.
        For instance, if India can throw open agriculture to pvt sector, there could be scale and technology gains–but can that happen?

        • Why not? What are we waiting for?

          And China is not a fair player for everyone, not only for India.

          As I have repeatedly said, Indian are cry-babies, always finding a reason for not doing things that need to be done. For example, who is preventing India from trying to solve the pollution problem that bedevils North India every year after the monsoons? Have you heard any committee of scientists being setup to stufy the problem? No.

          Surely this is not China’s faults.


  5. Suppose the govt had joined RCEP. Do you think Ninan would have applauded? He’d have written a nasty piece saying how Modi sold off the country’s interests in order to show himself as a great world leader! He would have pointed out that none of India’s FTAs had got the country much, look at the trade deficit with these countries! These Lutyens Delhi journalists like Ninan, Siddharth Varadarajan, Raghav Behl, Nidhi Razdan do not have a view of their own. Their view is just opposite of what Modi’s is. They are just waiting to jump onto Modi’s throat. That’s fine, because in a democracy there have to be many voices, but when journalists turn biased, it becomes a bigger threat to democracy, because Truth disappears. Shekhar Gupta is probably the only objective–as objective as it gets. That is why I urge him not to let b.s creep into his publication.

    • Ramesh: maybe there is a simpler explanation as to why everyone in the Lutyens’ gang is against Modi. Because he’s been wrong on almost every count. Demonetisation. GST. Vodafone. You name it.

      As for the permanent trade deficit: stop being a cry-baby and learn to compete.

      If you take the analogy of the Indian cricket team. Till the arrival of Gavaskar they were getting beaten everywhere. Then slowly over the decades they improved and now under Virat Kohli they are champions.

      Suppose we use your logic. Then the Indian team should’ve not even played the West Indies etc. in the 1950s and 60s because they were sure to lose. Would it have made sense?

      Stop being cry-babies! Unfortunately this starts from Modi. See his blocking the OCI card of Taseer. Childish.

      • Thanks. That Modi is wrong on “every count” is a Lutyens’ position. Many, including myself, don’t believe Demo was a washout. GST would have faced teething problems, no matter when introduced. Vodafone–there are many issues, I don’t know which you are referring to.
        But what’s odd in your post is, for GST, you want the govt to wait, wait, till it is perfected. But for RCEP you want to jump into headlong. Yes, one should stop being a cry-baby and learn to compete. To take your cricket analogy, a new team first spends years playing first class matches before jumping into international matches. How many years did Sri Lanka and B’desh spend playing friendly matches before getting into international cricket?
        I’d criticize this govt and the previous ones for not doing enough to make the Indian industry competitive. But the reality is, it is not competitive. There is no tearing hurry to get into RCEP and getting butchered in the market.
        As for blocking Taseer’s OCI–well, they are all like that. Trust you know of how many books and movies Nehru banned. His daughter banned Rushdie. Others have done too. All govts, central and states, have always denied ads to newspapers that are against them. To single out Modi is not correct.

        • RCEP is being discussed since 2012. And don’t worry. Our criticism is not only anti-Modi. Congress is equally to blame. It’s the Indian mentality. As I said, cry-babies.

          So you don’t want to believe economists on the damage done by Demon. Nothing in life is a washout. But the damage done is still being felt today.

          You cannot roll out the GST in a country the size of India by just snapping fingers. It takes time and preparation. Not for ever as you are saying. And if I remember correctly, Infosys was paid a princely sum of $400 million for its implementation. This itself was wrong.

          Coming back to the cricket analogy: I hope 3 generations of practise are enough! We have been waiting since 1947 for Indian industry to get competitive.

          Probably it is already happening in the air sector with the birth of IndiGo and SpiceJet. Having done well in India, now they are flying internationally. Who would have thought that an Indian company (IndiGo) would fly to Chengdu in China?

          And can we please bury the ghosts of Nehru and Indira Gandhi and live in the present? I think you (and other BJP supporters) don’t realize that this decision of Modi (yes, it’s a personal decision) to annul the OCI card of Taseer will potentially cost India a lot of dollars in foreign investment? Who wants to invest in India with this kind of mentality? Of course you will say who needs foreign money! Sirji India is hurtling towards bankruptcy.

          • On the point of Demo, please see the video of the interview by Jyoti Malhotra of economist Surjit Bhalla. He says, quoting Gita Gopinath, that the effects of Demo dissipated very quickly. Many economists, and industrialists, have noted that the accretion to tax payers, a durable benefit, is at least partly attributable to Demo. If you want to shut one eye and see everything only half…sigh….I guess we will have to live with it.
            You seem to have mistaken that I am against India competing with the world now. We ARE competing, as you yourself pointed out. A measured integration with the world is better than jumping headlong. In any case, it is the remit of the govt in power to take a call. Constantly, snapping at its heel will not be helpful.
            On Taseer, you are just being too pessimistic. Are you saying that because his OCI card has been cancelled, investors will stop coming to India? Is that what happened to Saudi Arabia after Jamal Khasshogi? I’m NOT saying ‘who needs foreign money’. I’m saying , it is not going to stop coming–at least not for this reason.
            On India’s bankruptcy, just take a look around and tell me which economy is doing very well. Today’s milieu is very different. A huge number of problems have converged to cause this economic slowdown. Lutyen’s Delhi will want us to believe that it is all Modi’s doing. Rubbish!

          • Surjit Bhalla? The government’s economist. Who takes him seriously?

            Put his opinion against the opinion of other eminent economists and see what comes out. Now who is with Eyes Wide Shut :)?

            Measured integration with the world? Sure. Let’s wait another 1000 years. You and I won’t be there.

            I think you need to update your BIOS as to what democracy means: you are still in the world of DOS. It is the duty of journalists to examine and criticize the government of the day. If you and Modi had your way, the whole team of the New York Times would be behind bars as almost daily there is an article critical of the personality challenged Trump (who i s much like our own Modi – narcissistic).

            And you give your real standard at the end: if you want to compare India with Saudi Arabia, fine. I think we don’t have much to discuss. And let me remind you that Saudi Arabia has one thing that India doesn’t: oil. India has only the huge internal market to attract foreign investment, but this government is doing its best to keep everyone out.

            And it is not only Modi’s fault. Congress also has contributed to it. It’s the Indian mentality.

  6. Correct. Neither is it going to happen with sloganeering which seems to be the only response of this government. Big on slogans and zero on action.

  7. One sentence in Dr Manoj Joshi’s column in ToI sums up our predicament : The government’s policy that privileges the building of its political supremacy, over the need to lead a larger economic transformation of the country.

    • Duh. And why not? After his second landslide win didn’t Modi govt express the idea that there should be simultaneous elections for both Lok Sabha and Vidhan Sabha? But this was greeted with howls of protest. If we are going to have elections every three months, all effort will he on gaining political supremacy rather than economic transformation….hard decisions costs votes!

      Will all the cribbers here agree to pay more for their electricity, water, rail fare…..that’s what is happening in China.

      The public in China (the aam aadmi) subsidizes industry so that their manufactures are ultra competitive.

      On the other hand in India half the electricity generated is stolen (not metered) and remaining is distributed to residential areas at lower rates and to industry at higher “commercial” rates.

      Similarly we have rail freight subsidizing passenger fares.

      The Modi govt tried to do away with yhr Congress passed law on land acquisition which makes land acquisition terribly difficult and prohibitively expensive. But tjis bill was defeated by Congress in the Rajya Sabha.

      If we don’t have competive factor markets: land, labour, capital…..then we can kiss goodbye any hopes of becoming a manufactures exporting nation.

      • One more cry-baby.

        Congress is responsible for all that has gone wrong with this country.

        The great Modi was stymied by the Congress after 2014 otherwise he would have done wonders and in 4 years taken India beyond China. Such is his magic.

  8. So, Ninan’s contention is that if other countries do something, we should also follow suit, or else there is something wrong with us! Never heard a stupider statement. India is not any “country to the east of Dhaka”–we are very, very different. Maybe Ninan should wear glasses and look at a map. Truth is,
    India is not opposed to RCEP in-principle; India’s stand is that the deal is not fair to it, its concerns have not been addressed. That is a fair point. In any case, it is the remit of the govt in power to judge whether a deal is fair or not. Ninan wants India to be part of the deal for the sake of not being left out and that’s preposterous. That is Lutyen’s Delhi talk, motivated apparently out of dislike for Modi.
    The reality is that Indian manufacturing is not competitive. We have to pull up our socks and make it competitive and then join groups like RCEP.
    More than anything else, I have a disdain for “articles” that make sweeping statements without any substantiation. For example, this piece says, “The argument that past free-trade agreements have not worked in India’s favor is false; they made little difference.”. Where is the data to support this ? In fact, Ninan himself says that India is running a trade deficit not just with China, but with other countries too. So what has worked in India’s favor?
    Shekhar Gupta and T N Ninan are good friends. Shekhar bought his first car from Ninan. But Shekhar would be well advised not to let personal friendship interfere with his editorial judgement., if he wants The Print to get somewhere.

    • As one says in Hyderabadi Hindi: phenko! You seem to be good at it.

      So you want India to wait till it is competitive? How long? Another 1000 years? But this exactly is India’s problem. Wait for ever.

      The advantage of competing is that it forces you to compete and raise your level. Otherwise you collapse.

      But this is anathema to Indians. The forever children.

    • So ‘India is very very different’. How and is there any data to support this? The truth is that the government protects inefficient Indian industry at the expense of the vast majority of poor consumers. Consumers who in addition to being taxed also have to pay an additional premium to buy shoddy goods and services. Protecting Indian industry hasn’t made it competitive in the last 70 years. Repeating follies of the past is insanity.


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