Modi’s promises on Indian economy fall flat

India under Modi is in a crisis on all fronts: its image has been torn worldwide after revocation of Article 370 on held Kashmir and taking eight million Kashmiris hostage, it is enveloped by escalating Hindu-Muslim riots and its economy is on the downslide. While the Kashmir issue and the Citizenship Amendment Act have occupied most of the media reports, the situation of the economy is greatly under-reported.

As it is, Indian banks were forced by the political government, in collaboration with corporate tycoons, to lend huge amounts for politically motivated development projects. Analysts say this created a humongous pile of Non-Performing Assets (NPA) of more than 150 billion dollars (till end 2018), which could easily cross 200 billion dollars by mid-2020. Some commentators feel that the “NPA black hole” could “suck in the country’s entire banking system.”

The Belgium based International watchdog, CADTM (Committee for Abolition of Illegitimate Debt) in June 2019 stated that the corporate debt in India was spiraling up and it might not be long when it reaches alarming levels. “Metal, power, and telecommunications account for 40pc of the unserviceable debt.”

According to Rebecca Bundhun, India urgently needs to find solutions to address the credit crunch in the country that is hurting businesses and crimping growth in Asia's third-largest economy. She quotes Mahesh Singhi, the founder and managing director of Singhi Advisors, an investment bank based in Mumbai, as saying: “The crisis needs to be tackled on a priority basis…If left unchecked, we are looking at massive layoffs across industries, triggering a large-scale job [market] crisis, contraction in consumer demand and an investment slowdown.”

As reported by India Today, more than 12,000 farmers committed suicide in Maharashtra between 2015 and 2018. The National average of reported cases is 16,000 suicides every year, which means about 40 farmers a day.

The collapse of private banks, aviation sector and finance corporations in 2018-19 eroded confidence of investors. Big names like Ambanis, Tatas, Mittals and Mallyas’ empires are collapsing as total debt held by these families is almost 200 billion dollars. Air India, with a debt of 14 billion dollars is for sale, with no buyers. Five sectors, finance, telecom, steel, aviation and energy were considered pillars of corporate India but these have become liabilities.

According to former chief economic adviser Arvind Subramanian, India has overestimated growth between 2011 and 2016 about 2.5 percentage points annually. This would lower the reported average national growth to somewhere around 4.5 per cent. How the Indians were fooling the world with an astronomical growth rate!

Former Indian finance minister Yashwant Sinha recently warned that India's economy is in a "very deep crisis", witnessing "death of demand.” He said the official data showed that India's second quarter GDP growth had slumped drastically to "4.5 per cent" and is at its lowest in over six years. "No matter what the powers that be say, the fact is that we are in a very deep crisis. All this brave talk that the next quarter will be better or the quarter after that will be better is not going to happen. They (the government) are trying to fool the people by saying the next quarter will be better," asserted Sinha. "This type of crisis takes a long time like three to four or even five years (to subside). It cannot be resolved at the drop of a hat or by wielding a magic stick.”

He said India's economy right now was witnessing what is called the "death of demand" and that the "starting point of it" was the agriculture and rural sector. "There is no demand in the economy and that is the starting point of the crisis. They (government of the day) are least bothered about what is happening to our farmers, people living in rural areas, now that is where the death of demand started from.

The demand first dried up in agriculture and rural sector, then it dried up in the informal or unorganised sector, and ultimately it travelled to the corporate sector," he said.

The collapse of corporate India could have serious repercussions: Realisation worldwide is emerging that Indian economy is in deep recession and FDI will remain very risky. Countries now have to weigh their options and analyze if India was a bad idea to invest. The FDI by global investors may have to rethink their strategy of pouring in capital in the hollow basket of corporate India.

These trends could accentuate the domestic Indian chaos when common Indians learn that Modi has not only imposed his Hindutva agenda but also played havoc with the Indian economy.