Sharply Slowing Economic Growth Hits Modi’s New Term

Narendra Modi’s government is launching a mega publicity splurge this weekend to parade its achievements during the first 100 days since India’s general election in an attempt to draw peoples’ attention away from its failure to stimulate declining economic growth.

It hopes to repeat the general election’s Modi magic where the prime minister successfully steered the electorate’s eyes away from a faltering economy and promoted himself as the chowkidar or guard who would protect peoples’ security.

The government’s lists of successes will be announced at a press conference on September 7, and in subsequent events in Delhi and across the country. They are designed to burnish the image of the prime minister who has dominated the news headlines during the 100 days.

Poll results published in India Today (and below)

Modi’s popularity is at a record high. A poll published in India Today found that 71 percent of those surveyed endorsed him. He was also rated as India’s best-ever prime minister by 37 percent of respondents, far above his predecessors (below). Another poll published in The Economic Times gave him 64 percent backing.

Reports suggest that Modi will mark the 100 days at India’s ISRO space agency headquarters in Bengaluru where he will watch the Chandrayaan-2 lunar mission landing on the moon. That notable achievement is expected to be notched up as a BJP success, though it is really the result of decades of scientific work that began under Jawaharlal Nehru, India’s first prime minister.

Top of the list of achievements promoted this weekend will be the ending of the Muslim triple talaq divorce procedure and the cancellation of special rights and privileges for Jammu and Kashmir under the constitution’s Article 370. Both of these measures appeal to the Bharatiya Janata Government’s Hindu vote bank, as does the drawing up of a National Register of Citizens in Assam that has controversially – and inaccurately – named 1.9 million people as illegal immigrants.

The crisis that Modi and his colleagues are trying to blur is that the economy is growing at its slowest rate since 2012-13 after eight years of Congress rule. GDP growth fell to 5 percent in the three months to the end of June, down from 5.8 percent in the previous quarter and 8 percent a year earlier. Manufacturing growth has dropped to 0.6 percent compared with 12 percent a year ago with the auto industry especially hard hit, agriculture has fallen to 2 percent from 5 percent last year, and unemployment is rising.

Such figures contradict Modi’s claims in the election campaign that his government was producing the country’s best ever economic figures. The figures also cast serious doubt on his target for India to have a US$5 trillion economy by 2024, up from US$2.7 trillion currently that the government has been hoping would rise to US$3 trillion by next March.

Popularity ratings, however, show that there is widespread faith in Modi’s supreme ability to solve problems, plus recognition across rural India that government schemes such as those to build toilets, electrify villages, finance construction of homes and supply gas cylinders are widely appreciated, even if many are incomplete and do not work well.

Modi’s approach as prime minister has always been to launch unrealizable targets and claim exaggerated achievements. That links with a suggestion early on in the last government by Arun Shourie, a former BJP minister and strong Modi critic, that the government “believes that managing the economy means ‘managing the headlines’.”

An hour or so before the 5 percent growth figures were announced on August 30, the government grabbed the headlines by announcing a plan to merge 10 public-sector banks into four businesses, which would reduce the total number to 12 compared with 27 in 2017 before the start of a program of phased mergers.

This is seen as a worthwhile and long-awaited development for the over-indebted and often politically influenced banks, giving them stronger balance sheets and greater willingness to provide loans that will stimulate the economy. But these positive results will not come quickly and the announcement did not carry much significance for the immediate economic growth problems.

Other measures have included rolling back announcements in the July budget that threatened foreign capital flows and undermined investor confidence, and persuading the Reserve Bank of India to help with budgetary financing by breaking with convention and transferring US$25 billion from its balance sheet to the government’s treasury. Foreign direct investment rules have been relaxed for mining and retailing.

These and other initiatives will not overcome the lack of consumer demand, nor correct the damage done to India’s small- and medium-sized business by the last government’s demonetization of banknotes and complex introduction of a goods and services tax.

Private sector investment is at a 15-year low, with a lack of business confidence that is partly caused by fear of intrusive government officials and overbearing tax enforcement.

Throughout the 100 days, there have been examples of the government’s basic authoritarian approach and of repression. Corruption charges are being pursued mainly against high profile Congress politicians, while alleged crimes involving the BJP are not being tackled by the investigation agencies.

This indicates that, even though he has won an overwhelming election victory, Modi is determined to continue to destroy the Congress Party’s reputation. The most notable example is P. Chidambaram being sent to Delhi’s Tihar Jail on remand for alleged corruption involving regulatory clearances when he was finance minister.

On another level, the government is trying to reduce what it regards as dissident influence in educational institutions. This has been demonstrated in a small but significant way by the leading Jawaharlal Nehru University asking Romila Thapar, 93, one of India’s most respected and lucid historians, to produce her curriculum vitae to justify why she should remain a professor emeritus.

Kashmir repression

The greatest repression, however, is in Jammu and Kashmir since the government cancelled the state’s special status under section 370 of the constitution, reduced it to the status of a union territory partly administered from Delhi, and hived off Ladakh.

For most of the last month, as Asia Sentinel reported on September 4, there has been a communications blackout with no telecommunication or internet links. Many areas have been under curfews with movements of people severely restricted. More than 500 politicians, including heads of mainstream political parties such as Mehbooba Mufti and Omar Abdullah have been detained in hotels and other locations, separated from their families apart from rare visits in recent days.

The government claims the state is peaceful but there are countless reports of demonstrations with violent action by security forces (described here). There are shortages of food and medical supplies. In one area, “local boys used forceps to take pellets out their wounds, fearful that a trip to the hospital could land them in jail” said one report. “The J&K police have a network of men in the city hospital to keep an eye on every visitor.”

The restrictions are being slowly lifted though Amit Shah, the home minister in charge of the operations, said the Internet would remain closed for most of this month. There is now a risk of violent reactions with activists whipping up widespread street protests and clashes with the authorities.

There are also signs of criticism building up in the US Congress about the security clampdown. So far Pakistan, which claims Kashmir as its territory, has failed to garner much international support for its complaints.

The story of the first 100 days is therefore mixed. Parliament had a record session ending a month ago, passing 28 pieces of legislation, though the government was criticised for restricting the opportunity for scrutiny of proposals.

The overall impression is that Modi is determined to maintain the momentum of initiatives, though he has yet to find a way to reverse the slowing growth rate.

John Elliott is Asia Sentinel’s South Asia correspondent. He blogs at Riding the Elephant.