& occasionally about other things, too...

Sunday, July 30, 2017

Modi's India - I

He came, he saw, he conquered

In July 2017, I returned to Bombay after three years, on my third trip to the city that shaped me, after immigrating to Canada in 2008. It was my first trip to Modi’s India. Narendra Modi had swept the Bharatiya Janata Party to power in 2014 and during the last three years steadily, and with supreme confidence, consolidated his and his party’s hold over India. Three years later, the entire Hindi-speaking belt and more states are under the BJP’s control either directly or in an alliance. From my conversations with a cross-section of people, I gathered that he is assured a two-thirds majority in the 2019 general elections.

Whether one likes him or not, Narendra Modi is the most important leader that has emerged in the 21st century in India. He has no competition, not in his own party, and definitely not in the opposition. Rahul Gandhi continues to flounder (apparently he’s lost 27 consecutive elections), and with him, the Congress, having recently secured a lone victory in the Punjab, which all agree was a vote against the Badals and not one in favour of the Congress. The party is has been reduced to a fringe outfit with a presence in Karnataka, and Puducherry in the South; Himachal Pradesh (besides the Punjab) in the North; Mizoram and Meghalaya in the North East.  

What about the other opposition stars? Arvind Kejriwal remains Quixotic and unpredictable, although he won an impressive victory in Delhi, many of his comrades have left him. Mamata Banerjee has replaced the CPM in West Bengal, and from all appearances, is unshakeable in Kolkata despite BJP’s rather desperate attempt to foster communal tension. It’s the turn of the Communists to rule Kerala for now, but the Left is in shambles in India. With Nitish Kumar doing what comes naturally to socialists – conveniently consorting with the communalists when it suits their needs – the BJP, by all accounts, has never had it so good in terms of the geographical spread of political power.

People who claimed to be in the know confided that the Modi government has initiated several policy decisions that will have a great impact on the Indian economy. Among the measures that are being touted as Modi’s major achievements include the demonetisation of high denomination currency in 2016, which definitely caused chaos including reported deaths of over 50 Indians who stood in queues to exchange their unusable money for usable ones.

However, after the demonetisation decision, the BJP won a spectacular victory in Uttar Pradesh and brought in a firebrand Yogi Adityanath, a rabid proponent of the militant Hindutva ideology, as the chief minister of India’s most populous state.  Modi’s supporters claimed that India’s poor and dispossessed had welcomed Modi’s demonetisation decision and its stated purpose that it’d reduce unaccounted money (black money) in the economy. The move was expected to usher in a new era in the Indian economy and turn India into a cashless society; however, cash was still the king in Bombay, Dehli, Baroda and Poona that I visited during my trip.

Soon thereafter, the Modi government also implemented the Goods and Services Tax (GST), which has once again caused consternation in a sizeable section of India’s entrepreneurial sections. Again, Modi supporters have rushed to defend the decision claiming that only those businesses that are unwilling to be transparent are opposing the GST.  Undoubtedly, there are tangible benefits to the GST, as has been seen in many developing countries globally, and especially in Canada. It may be pertinent to recall here that the previous Indian government had consulted Canada rather extensively on the implementation of the GST.

However, the idea of a single tax regime that the GST was to bring about in the Indian economy remains elusive, although to be fair, it’s still rather early to judge the impact of the new tax. A close friend, who has been a small entrepreneur and an importer, was ambivalent about the impact of the GST on his kitchen appliances import business. He was happy that octroi duty (which reeked of rampant corruption) had been done away with, but the overall tax had increased substantially on imported appliances, which cater to the high net worth consumers.

Had this affected his business, I asked. Not really, he said, the number of high net worth consumers in India is steadily rising. This is the cumulative effect of 25 years of economic liberalisation.

The other measure that Modi supporters claim will give long term benefit to the Indian economy is the repeal of obsolete laws which continue to keep the economy shackled to the bureaucracy and slowing the pace of economic reforms. As per the latest news report over 1,100 (out of over 1,800) laws have already been repealed, and the Modi government continues to stay on course to repeal all the obsolete laws before its term ends. Undoubtedly, this will provide a major impetus in the future for economic growth.

Notwithstanding the concerns over the compromise of privacy, the implementation of the Aadhaar card for a billion plus Indians will assist the government administration in streamlining its services to the people, when implemented completely. The Aadhaar card is similar to Canada’s Social Insurance Number card, but with a photograph. Its stated objective is to usher in transparency by linking bank and tax information to it. It’s not complete and will take a long time to become an effective administrative tool for the government.

The global business and investor community and foreign governments have greater confidence about the future of the Indian economy than ever before. At a Canada – India bilateral business conference held in Bombay in early July, the Export Development Canada (EDC) informed the participants that it’d actively seek project finance opportunities in India, which is a clear departure from its previous practice and policy. In the past it focused primarily on transactional finance, assisting Canadian exporters in entering the Indian market. Representatives of other Canadian as well as multilateral agencies expressed confidence in the Indian economy and the way the Modi government is handling the economy. There was a consensus that the new banking regulation ordinance will finally begin to resolve the vexatious issue of bad business loans. One representative of a Canadian company claimed that no other economy in the world provided such a long-range growth and returns potential as India.

The media, by and large, is supportive of Modi personally and also of his government. What I noticed is a sudden rise in the number of right-of-center intellectuals who have begun to regularly put up a sophisticated defence of both Modi and his government’s policies, while minutely examining the shortfalls of his opponents. I didn’t have access to television at home, and therefore missed the firebrand journalism of Arnab Goswami (a phenomenon that has captured the Indian mindset and set the political agenda). I read the Times of India between July 3 and July 25; it continues to be the pro-establishment newspaper that it has always been, but hasn’t completely abandoned its values and sold its soul as I feared it’d have. It did a remarkable news report on how the common Indian Muslim is feeling insecure in Modi’s India. 

Politically and economically, it’d seem, Modi is unassailable. And he made it all look so easy. He came, he saw and he conquered. 

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