This Article is From Oct 27, 2020

The Myth Of Modi The Economic Reformer - by Ramachandra Guha

During the Constituent Assembly debates, Dr BR Ambedkar remarked that "the love of the intellectual Indian for the village community is of course infinite, if not pathetic". Well, the hopes that our free-market columnists place in the redemptive powers of Narendra Modi are infinite, if not pathetic too. After the new farm bills were passed in parliament last month, there has been a veritable deluge of articles praising Modi for having (at last) awakened his better instincts and revealed himself to be a real reformer (as these columnists had wished for all along).

Anyone who had any illusions about Narendra Modi's economic wisdom should have abandoned them altogether after the demonetization of large currency notes in November 2016. That was a daft move from which the Indian economy has not yet recovered. It was daft in terms of its economic logic, though it made some sense politically and personally, the first by diminishing the cash hoards of parties other than the Bharatiya Janata Party shortly before a crucial state election in Uttar Pradesh, the second by making Modi out to be a zealous messiah determined to wipe the contagion of black money from India forever.

For those still willing to suspend disbelief, the ham-handed execution of the Goods and Services Tax should have opened their eyes. Lest there were still a few free-market thinkers left who were willing to give Modi the benefit of doubt with regard to economic matters, at least the brutal lockdown so early in the pandemic should have given them pause. Alas, it hasn't; hence, these recent articles hoping, against all the evidence, that Modi will yet turn out to be the Indian Thatcher or the Indian Reagan who shall boldly unshackle the economy from the reins of the state and set our country off on a glorious march towards prosperity.

What Narendra Modi really stands for became nakedly clear after he won a second term as Prime Minister in May 2019. With an impressive majority at his command, he could have - if fostering economic growth was indeed a major priority for him - focused his attention on education, health, jobs, and investment. Instead, he used - or abused - his majority to abrogate Article 370 and enact the Citizenship Amendment Act, the actions of a majoritarian bully obsessed with showing minorities their place.

If our credulous free-market columnists had cared to study the life and career of Narendra Modi before he became Prime Minister, they would have seen that it has always been animated by three things. These are the promotion and consolidation of Hindu pride, the capture and consolidation of political power by the Bharatiya Janata Party, and the promotion of himself as a personal brand embodying Hindu pride and BJP dominance. The fostering of economic growth has been, at best, his fourth priority, although the suppression of free thought and the taking of retributive action against his critics has surely run it close.

When Modi started out as a pracharak, an ordinary worker, of the Rashtriya Swayamsewak Sangh, it was the consolidation of Hindu pride that mattered most to him. When he shifted to the BJP, the growth of his party began to matter more. After he became Chief Minister, it was his personal brand promotion that took centre-stage. Once he moved to Delhi as Prime Minister, the last has remained his top priority, although the other two have remained very important to him as well: certainly far more so than promoting economic freedoms or economic prosperity. As the nutty experiments with demonetization and the arbitrary lockdown show, he will always sacrifice economic growth for the consolidation of political power and the assiduous promotion of his own image. Modi's contempt for economic rationality is also displayed in the way he has discarded top-class professionals and substituted them with worshipful sycophants instead.

I should say at once that I am myself a qualified believer in the virtues of the free market. For the 20th century abundantly demonstrated that for the state to occupy the commanding heights of the economy invariably yields diminishing returns. The idea that a wise committee of experts sitting in the Indian (or Soviet) planning commission, deciding how resources would be allocated throughout the country was the best way to generate growth and prosperity, was naïve if not foolish. For economic development takes place in a much more spontaneous way, by allowing individuals and firms to identify market opportunities and seek to fulfil them.

While allowing entrepreneurs and entrepreneurship to flourish, for the market to function best, the state must intervene in two crucial respects. First, its law and rules must be transparent, providing a level playing field, so that no one firm starts with an unfair advantage over another. Second, the state must provide necessary environmental safeguards, for while the market can generate jobs and growth, left unregulated, it shall pollute the air, the water, and the soil, thus undermining the sustainability of the growth process itself.

Notably, this is precisely what the Modi regime has not done. It has not made any attempt to dismantle the complex web of compliances which stifle small businesses. Meanwhile, its broader regulatory framework has favoured companies run by people known to be close to the Prime Minister and his party. The opacity of electoral bonds and the packing of government agencies with pliant bureaucrats have led to a form of capitalism that is cronyist rather than competitive in nature. At the same time, the Modi Government has, from the time it took office in May 2014, sought to systematically dismantle the environmental safeguards that previously existed. More recently, under cover of the pandemic, there has been a savage assault on the forests and tribals of central India by coal companies close to the government.

The Modi Government is contemptuous of economic expertise, disregards environmental considerations, and blatantly favours some capitalists over others. All this is entirely in character, for the fostering of economic growth per se has never been a priority for this regime. Capturing electoral power by any means; threatening and intimidating minorities; promoting one's personal brand; and ruthlessly suppressing dissent - these have always taken precedence over generating jobs, enhancing productivity, or facilitating innovation. That the Indian economy had perceptibly begun to slow down well before the pandemic began was no accident: rather, it was the direct consequence of the priorities that the Prime Minister had chosen for himself, his party, his government, and his country.

I myself oppose Hindu majoritarianism for reasons of history and morality, because defining citizenship by religion is antithetical to the ethos of the Indian freedom struggle and the ideals of the Constitution, and because I am myself opposed to the idea that one faith is superior to another. But even those who think of themselves as hard-headed pragmatists should realize that Hindu majoritarianism is bad for our economic prospects as well. At a recent conference organized by the Federation of Indian Chambers of Commerce and Industry, Nobel Laureate Joseph Stiglitz said that "the source of economic prosperity of the last 250 years is one of tolerance". Stiglitz continued: "Politics of division is an antithesis of what needs to be done. Modi has tried to divide your country, Moslems against Hindus, and that is going to undermine your society and economy no matter what else happens. This fundamental division will weaken India forever."

And so it shall.

(Ramachandra Guha is a historian based in Bengaluru. His books include 'Environmentalism: A Global History' and 'Gandhi: The Years that Changed the World'.)

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