Wednesday, March 13, 2019

Please, do not blame Modi.

This note is not from the angle of social fabric or freedom of expression. I am mainly trying to understand the BJP government's rule from the economical and related philosophical aspects. Just after gaining power in 2014, Modi announced the "Make in India" project. This is, of course, an effort to create more manufacturing jobs in India. So by 2014, a right-wing party is already admitting that opening up Indian economy in 1991 actually did not help much to create "real" jobs in private sectors for our unskilled labors. Therefore, Modi is trying to attract investments both from the Indian and foreign private investors for manufacturing jobs in India.

Well, this same call was given by the Leftists in 1990s. Their main argument was that we needed to create manufacturing jobs before investing in the services sector, so that large part of our labor force and lower class are employed. Thus, we would have a strong base to grow in the services sector later on. Leftists actually tried this approach in West Bengal (WB). There was reduction of trade union power in WB from the 1990s; that meant less strikes in industrial sector, government encouraged manufacturing units, a pro-private-investment government which was first led by Jyoti Basu and then Buddhadeb Bhattacharya. We instantly got Haldia Petrochemicals (1994), the largest petrochemical company in India and others [Jai Balaji Group (1999), Titagarh Wagons (1998), Bisk Farm (2000), Vikram Solar (2006)]. The establishment of these new projects was alleviated by the ending of License Raj (1990) [1] and Freight equalization policy (1993) [2].

So, a right-wing government by BJP wanted to reach the same goal in 2014, as wished by a left-wing government 15-20 years ago. Of course, these two government had different approaches. The left-wing government did seek private investment because the state government did not have much money. Nevertheless, it still created and encouraged government-funded manufacturing units like Thermal Power Plants [Budge Budge (1997), Bakreswar (1999)]. Soon, West Bengal became power surplus state [3] (although this masks the reality that many villages were still not electrified). In addition, WB government was still caring for labor unions, albeit toning it down to pave the way for the private investors. On the opposite side, the right-wing BJP government followed, of course, right-wing economic mentality from 2014.

BJP government dissolved PSUs like Biecco Lawrie. It handled the government undertakings (e.g. - BSNL, Air India) so badly that the companies suffered from mismanagement [4]. On top of that, as a party in democracy, BJP needed to ensure their source of party funding. Thus, enter the Reliance, Adani and co.

Although private investments were independently invited, the government favored only a chosen few like Reliance, Adani group, etc. These companies provide huge sums of money to the BJP party funds. BJP works on behalf of these small set of companies which are just looking for their return on investments. Therefore, for the sake of election and party funding, free market took a dip into the Michigan lake, and cronyism entered. BSNL was sacrificed for Reliance's Jio. "Make in India" was already all set to drown into the Indian Ocean. Then, we got two major blows: Demonetisation and Goods & Services Tax (GST).

Demonetisation had to happen, as the government-owned banks loaned out huge sums of money to the private investors to create companies and jobs. The previous neo-liberal UPA and current BJP both incurred huge debt in public banks to support private investments. So public money was lent to untrustworthy private bodies to create public jobs. Let that sink in first, read the previous sentence again. What could go wrong in this setup, right? A few Nirav Modi, Vijay Malia flew away for their aborad vacations; a few others could not pay their debts. Banks consequently had crunch of money. On top of that, student loans soared [5] because enough jobs were already not created for the services-sector based economy. Students could not get jobs or were not able to pay back their education loans. Demonetisation and GST just put the nail into the coffin.

The situation was already worse because of India's excessive reliance on the services sector. If you ask any IT employee, they can answer about it. The lower level salaries for the IT or the services sector have become virtually stagnated. In the meantime, high- and top-level employees have seen manifold increment in their salaries. Therefore, we can, of course, see the rise in Indian GDP, because the salaries do increase for the already rich. However, the lower level jobs and salaries have become dry. Thus, we enter our jobless growth period [6] exacerbated by the right-wing policies of the BJP government from 2014. When we need government encouragement to create more public sector employment, the government subdued by its private patrons.

Now, what can Modi do here? Modi himself is really not at any fault here. The whole right-wing economy should be questioned. Modi is just following whatever his right-wing economics is dictating. The poster boy of liberal right-wing people, Raghuram Rajan warned us about "Make in India" that India could have become depended on exports because of "Make in India". But, laughably, the project itself never really took off because India has already missed the train of manufacturing jobs to China. In addition, China does not have to depend on democracy to setup factories. India and Indian right-wing parties are too reliant on democratic procedures. Democracy and right-wing economics are a stark mismatch, especially at the stage of India's development phase. So if you want to really pinpoint the economic issue, it's the right-wing economic policies. It's not Modi! So, do not blame Modi, please!

[6] Mishra, Arti, and Prashant Kumar Pandey. "Growth without Job in India." 14th (2018): 385.