Next week, it will be seven years since Narendra Modi was first sworn in as prime minister. Much can be said about this period, but one point stands out: The three things that in the past have derailed the economy have been mostly absent. The first is war. There have been no major ones after the three in the 1962-71, all of which extracted their price through inflation, currency crises, and recessions. In the Modi years, the face-offs with the Chinese have had no impact on the economy. The government has been sufficiently relaxed about the situation to continue shrinking defence outlays in relation to GDP.
The second risk is drought, which marred the initial two years of Modi’s rule. The value added in agriculture registered more or less zero growth in 2014-16. Subsequent years have seen handsome agricultural growth averaging more than 4 per cent — though mostly spurred by livestock and fisheries, not cropping. In fact, with the share of cropping in agriculture falling to a little over half, even as the share of agriculture in GDP has fallen, droughts now have a much smaller impact on economic activity. Economic growth in the two drought years averaged 7.5 per cent, among the best in Modi’s tenure.
The third factor that has derailed the economy in the past is oil, whose soaring prices sent India twice to the International Monetary Fund for emergency loans, in 1981 and 1991 (one earlier occasion was in 1966, following war). Oil prices also reduced the country to one of the “fragile five” in 2013. Fortune smiled on Modi because oil prices fell sharply as soon as he assumed office. After averaging about $110 per barrel in the two years before he took charge, Brent crude prices have averaged only about $60 since then. This has improved the trade balance, moderated inflation, and allowed the government to cash in by raising taxes on petroleum goods.
In other words, Modi has seemed blessed with what Napoleon wanted for his generals: Luck. But luck has run out on Modi, and so it would seem has administrative acumen. The once-in-a-century pandemic has raged for more than a year, reducing the government to a confused mess. It has taken a deathly toll, caused the largest surge in joblessness in living memory, and threatens now to cut short the recovery following a ruinous year that saw a record plunge in economic activity.
Other countries too have suffered and bungled, but as the Modi government has failed citizens on vaccines, testing kits, oxygen, and hospital beds, it has suffered withering criticism in the international media. The prime minister’s reputation for getting things done — and there is a long list of achievements to support that — has taken a beating, which it surprisingly did not after similar chaos ruled in the wake of demonetisation in 2016. We now have a visibly diminished prime minister.
The numbers suggest a peaking of the pandemic’s second wave, giving those in authority and on the front line some breathing room. But while scientists warn of a possible third wave, perhaps that wave is already here, but invisible — in the vast rural areas where under-counting of the toll has hidden from view the extent of devastation. The under-counting may be deliberate, or simply the result of a lack of medical infrastructure and administrative capacity. Who is to keep count if people simply fall ill and die out of sight, and their bodies are buried in the sand or tossed into rivers? Some records that have been reported suggest a doubling of the usual death rate, implying a toll far more horrific than the official tallies.
Can Modi recover? Yes, if he shows that he can steer a ship in a storm, not hide in his cabin and give advice. He and his operating style have become the subjects of biting satire. Chief ministers are talking back, even as cowed courts and the media have become outspoken. The country is in a mood that is hard to fathom. Is it grief with resignation, or anger? Either way, Modi has to deal with the headwinds.
By Special Arrangement with Business Standard.
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