Farmers Movement Archive

Why NDA govt is getting its fundamentals wrong

When Dr Manmohan Singh saved India from a financial disaster in 1991, the entire country thanked its stars. He had brought the Indian economy from the precipice of disaster and we were confident that the worst was behind us. The good doctor, perhaps, did not realise that in the subsequent century, six successive years of economic mismanagement will lead to a situation where every credible global rating agency will be ranking India among the lowest rung of the investment grade.In 2021, three decades after the economic marvel unleashed by Manmohan Singh, the country is back to where it was.How did this happen?The primary reason is that the NDA government is getting its fundamentals wrong. It ignores the edifice and the foundations of the economy and, instead, focuses on whitewashing and embellishments. You may use the most delicate upholstery and the latest drapery, but if your house does not stand on a strong foundation, it will soon develop cracks.Let me elaborate on how the government is focusing on embellishments rather than fundamentals.The economy fell to minus 8 per cent in 2020. So, if it goes up by 11.5 per cent in 2021, it is going up above the 2019 levels by only 3.5 per cent. The annual growth in two years is thus only 1.75 per cent. This piece of datum comes from Kaushik Basu, former Chief Economist of the World Bank.But the tragedy is that the government does not rely on economists any longer. It does not rely on a Kaushik Basu, a Raghuram Rajan, a Manmohan Singh, an IG Patel, an Arvind Subramanian, or a Rakesh Mohan. Instead, it relies on Wikipedia references.The Economic Survey presented by the Finance Minister is littered with errors and quotes juvenile anecdotes. To a considerable extent, it also speaks of the calibre of the ruling government.When Covid struck, India’s manufacturing and service economy floundered. It was only the primary sector that kept going. Crops were sown, tended for, and harvested. Our mandi mechanism delivered despite labour shortfalls and despite the pandemic. And what did the government do to help it? It hurried through farm laws to destroy the edifice of the agriculture market system that had been carefully nurtured for over six decades. Instead, it started vilifying the farmers by terming them as 6 per cent beneficiaries. Well, if the 6 per cent (according to your data), helped India overcome a crisis as big as the pandemic, then you must salute them, not destroy them.The government also massively mismanaged the Covid situation. As a young student, a book that had a tremendous impact on me was John Steinbeck’s The Grapes of Wrath, which captured the plight of poor farmers moving from America’s rust belts to the supposed halcyon lands of California.In India, the reverse happened as we experienced a reverse exodus. People moved from their employment (proverbial California) lands back to the misery of their rust belt villages. This reverse migration was the single biggest setback to the Indian economy during the past 50 years. Yet, the government has failed to acknowledge it, leave alone address it.Instead of helping the farmers who helped tide over the economic fallout of the Covid pandemic, and instead of assisting daily-wage workers, middle classes and professionals who suffered the most, the government decided to look the other way.It started a facetious exercise of self-appreciation by quoting the stock market buoyancy. The reasons are simple. The bank deposit rate of 4 per cent is less than inflation, which is7 per cent. So, instead of putting money in the banks, people are rushing to the stock market.Also, governments are providing liquidity injections.Thirdly, there is a massive inflow of foreign portfolio investment, which I understand is to the tune of around Rs 2 lakh crore in the preceding two months. Do remember, however, that portfolio investments are notoriously fickle. Also, recall that even Nasdaq has appreciated by 90 per cent since March 2020.The Union Government also started promoting monopsonies. What is a monopsony? A monopsony is a situation where there is only one single buyer. If coffee farmers in Colombia and cocoa growers in the Ivory Coast are suffering, it is because of these monopsonies. The NDA government is now desperately trying to create a similar monopsony in the Indian agriculture sector.This takes me to the beginning of the 20th century — the Great Rat Massacre in Vietnam. When Vietnam was suffering from a proliferation of rat population, the French colonial masters of Indo-China came up with what they considered a solution. Anyone who would kill a rat could claim a reward. The evidence required was the submission of the tails of the dead rats. People came in scores with hundreds of rat tails. While the government thought it was succeeding, the rat population exploded. Why? Because people would chop off the tail and let the rat live so that the rats could breed and reproduce, thereby ensuring a steady income for the rat tail hunters.The NDA government reminds us of the failure of the French Governor-General in Vietnam. The government is consciously avoiding looking at the GDP, the fiscal deficit, and indicators that matter. Instead, it is busy counting the rat tails!

The Tribune

2021-02-04