By Kumar David –

Prof. Kumar David

No change on Lanka but what about the economy? How much can Modi change policy?

In several essay in the last three weeks about the outcome of the Indian elections I argued five points. In the voluminous outpouring in the global, Indian and even local media about expectations for Modi’s term of office, there have been no sharp differences in respect of three of the five. In respect of the fourth many have adopted a different emphasis from that which I intend to press in this piece. The fifth item pertaining to Lanka is no longer open ended; Modi has committed himself to continuity and to 13A. I will comment on this, but my main topic today is Modi-BJP’s economic options.

A summary of the points, without repeating the reasoning in previous essays, is:-

a)     Indian democracy is secure despite the election of a right-wing party with extremist partners (RSS and Shiv Sena) and a prime minister with an authoritarian reputation.

b)     There will be no horrific anti-Muslim witch-hunt despite the triumph of Hindutva nutcases, give or take isolated incidents sparked by Shiv Sena.

c)     Foreign policy to attract Western investment capital and a core security orientation to sustain and strengthen the strategic link with the United States will remain basic.

d)     (a) to (c) are ‘no change’ predictions, but (d) is where I see a difference from the outgoing Congress government. Modi-BJP will aggressively push forward Indian style neoliberalism, promote a business and investor friendly stance, and curtail populism cutting subsidies and welfare. This will engender mass opposition; not slowly but as soon as austerity is imposed.

e)     Finally I suggested that Indian policy towards Sri Lanka will remain unchanged.

In respect of (a) to (c) there seems to be no disagreement. A few commentators have expressed “I hope you are right about the Muslims” reservations and a few have said relations with Pakistan and China may be strained. Expectations of a growth and institutional reform oriented strategy are universal, but no one has contested my suggestion that austerity for the masses, and/or concessions to Wall-Mart etc which hurt small shopkeepers, will engender a backlash. While I agree that there will be pro-business changes, I now go further; I now opine that a major transformation of the Indian economy is not at hand. Hence I partially retract (d) as stated above and amend my case in the section subtitled “Modi’s economic options” below. Finally the Modi-Mahinda meeting in Delhi has settled prediction (e) in the affirmative.

Why Modi will not embrace Mahinda

The many reasons for the new government not changing Delhi’s Lanka policy add up to a single bottom line. What’s in it for Modi and the BJP? Why antagonise Tamil Nadu, not Jayalalithaa alone but everybody including allies? The bureaucrats in the South Block have a settled policy, why should Modi dump it and drift without anchor? Post-Geneva 2014, would India’s the new government want to cut loose from the West and go a separate way – where to? If Modi cozied to Colombo’s pariah reputation, would the BJP not play into the hands of Congress waiting for anything to hang on to? Betrayer, traitor to the memory of 1500 jawans, turncoat against Tamils, imagine the chorus!

The BJP never opposed Delhi’s policy (dolts like Subramanium Swamy aside) previously, and the Vaypye Government of 1998 to 2004, to the best of my recollection, stuck to the same line. It is true that India’s Lanka policy was crafted by Congress, not the BJP, but the BJP has been content to go along with it. Are there reasons now, from Modi’s narrow or India’s wider benefit point of view to undertake a radical policy shift? I can’t see any.

At the same time, local Tamils hallucinating that Hindu Modi will empathies with saffron Sivites across the Palk Strait are dreaming atop Mount Kailash. Personal styles differ, Modi is a street fighter, Manmohan Singh was a gentleman; but policy will remain intact.

Modi’s economic options

I disagree with the deluge of Western commentators and salivating bourgeois think-tanks. We have been flooded by both for two months. They slobber that Modi will cut to a brave new universe. Previously I did opine the likelihood of Indian neoliberalism, but re-examination persuades me that Modi-BJP will retain the mixed-economy. There will be some change but no 180-degree policy reversal is possible. Margaret Thatcher style counter-revolution is out of the question in modern India.

Indian economic policy from 2005 to 2011, compared say to China, has not been a failure. Fig 1 shows that Indian growth tracked China, recovered from global capitalism’s Great Recession in a healthy upswing in 2009, and remained buoyant up to Q2-2011. Performance was upbeat compared to the Eurozone, America and UK throughout the last 15 years and remains so today despite an election losing downturn in 2012-2013. The mixed-economy based model has not failed; consciously or otherwise Chinese experience is affecting all developing nations. Politically, Indian democracy, pluralism and secularism are strong; they cannot be reversed by Hindutva obscurantism. Without an ideological overturn repression and far right socio-economic strategies are not doable.

Fig 1. India is on the right track

The growth polygon in fig 2 shows that the GDP growth-rate shrank all over the world in 2012 compared to 2010 (the 2012 polygon is entirely inside the 2010 polygon) but India did better than the other BRIC economies except China. None of the Western economies even crossed the 3% circle in 2012. (This informative graphic is from the web, but I can’t locate the URL now). What I am emphasising is that the mixed-economy model has not failed despite setbacks in the last two years.

However, certain serious but contingent circumstances undermined the Congress government. What were the reasons for the setback? I would assert that it was not the model per se but contingent factors such as snowballing high-level, high-visibility corruption, inflation, a fall in the exchange rate and the impact of Manmohan Singh’s image as a eunuch and ineffective leader. The fall in currency value and inability to control the fiscal deficit contributed to inflation. Out-of-control corruption of the politically powerful hit the headlines. Non-governance issues such as weak long-term investment planning, retroactive taxation, absence of dollar investment bonds and coalition partners pulling in different directions, derailed the government. Jettisoning of the mixed-economy in favour of a full-blooded turn to neoliberalism is not a course that Modi-BJP should, can, or I believe intends to take. What we will see is a more robust and muscular style of leadership, some whip cracking against big time corruption, but I expect only a carefully managed turn  away from populism and subsidies, towards business friendly policies and neoliberalism.

Fig 2. The BRIC economies have maintained their advantage

Modi versus the masses

There is however one structural feature from which there is no getting away. Figures 3a and 3b are based on IMF numbers (2013) and forecasts (2018).

India is not the worst among debtors and like the others in the graphic the future, looking ahead five years, is grim for all. It is in fig 3b, the IMF’s forecast of fiscal outlook prepared before the 2014 elections, that sinks India. It is the only country in the sample, with the exception of Russia, where the fiscal deficit will not drastically pruned. The IMF boffins, for once, seem to have factored in political reality and understood that no Indian government dare face the masses on the streets. Modi is hamstrung; he will not commit political suicide. At the same time, these BJP leaders are business friendly and right-wing, it goes against their marrow to raise taxes or milk the upper classes for revenue to bridge the deficit. This cup will not pass; Modi will have to drain it to its bitter dregs; this will be Modi’s Gethsemene and cruxififtion.

The curious story of corruption

It is said that corruption in India is worse than Lanka; that is both true and false. The number of Lok Sabha members arraigned on corruption or murder charges is a horrendous reflection on Indian democracy. But you know what! The Indian judicial system is not a laughing stock at the beck and call of the regime, nor is law enforcement a lick-spittle stooge; that’s why so many are arraigned. The propotion that would be prosecuted or convicted in mother Lanka if conditions were similar beggers the imagination. And we would have to add to the list, rapists and drug peddlars. Misdemeanour among members of parliament and state/province legislators is widespread in Lanka; a lot more would be behind bars if our judiciary had half the self-esteem of its Indian counterpart, or law enforcement could do its job without prostrating itself at the sandals of UPFA politicos.

There is however another dimension to corruption in India that is dynamite; bukshe-raj is all-pervasive. All-pervasive low-level corruption is driving people to mutiny and rage. Stand in line to book a long-distance railway ticket, you want a certificate or document, you want an interview; well, oil a palm at evey step. Corruption in India is endemic, pervasive and has soaked down, down, down. The intellectually challenged Indian press lacks the courage to place this in perspective. Headlines, newspaper sales and TV revenue are in spalshing billion rupee political scandals, not social analysis. What’s the difference between India and UPFA politicos? Not just a few zeros at the end of a bribe! Paradoxically, much publicised high-level corruption is but the demiurge of the real demon dirving the Indian public to fury. All pervasive low level corruption is what actually infuriates the public; blaring headlines exposing filthy-rich scoundrels merely a doppelganger.

This hydra-headed monster  of all-pervasive low-level corruption is not running as fast or as loose in Lanka. In India, neither Modi nor the Aam Admi Movement will tame it any time soon.