The Modi Govt’s Arguments Against Economic Slowdown Don’t Hold Up

The Centre won’t admit that the economy is in bad shape. Will the 5% GDP growth rate get them out of denial mode?

The Modi government simply refuses to admit that the economy is in bad shape.

(Photo: The Quint)

If you’re wondering why Nehru hasn’t been blamed for India’s current economic crisis yet, it’s probably because the Modi government simply refuses to admit that the economy is in bad shape.

In fact, on 26 August, BJP’s official account tweeted: “Amid global slowdown, India remains the fastest growing economy.” Except, that’s just not true. And the Modi government has known so since May.

Between January and March 2019, India’s GDP grew at 5.8 percent year-on-year. China, in the same period, grew at 6.4 percent, overtaking India to claim the title of the world’s fastest-growing economy.

Yet, on 29 August, Amit Shah claimed in a speech, “Even today, India is the fastest-growing economy of the world.” But the fact is that in the second quarter of 2019 too, China grew at 6.2 percent while India’s growth rate plunged even further to 5 percent.

India Growing Faster Than US: A Meaningless Statistic

Later, in a tweet, the BJP boasted that India is growing at a faster rate than the US.

Yes, that’s true. But it’s an economically irrelevant comparison! Why? Because developing economies typically have a higher GDP growth rate than developed economies. And India is a developing economy, while the US is a developed economy.

Also, since talking in trillions is in fashion – while India had a $2.7 trillion economy in 2018, the US was at $20.5 trillion! The US economy grows slowly today, because it’s already huge. In fact, the last time the US' annual GDP growth was more than 5 percent was in 1984!

So, for the BJP or anyone to boast that we are growing faster than the US is a meaningless statistic – it’s like comparing apples and oranges.

In Denial Mode

On 29 August, Amit Shah said that the Modi government had made India’s macroeconomic fundamentals strong.

But let’s take a look at India’s macroeconomy currently.

• Growth of eight core industries has dropped from 7.3 percent in July 2018 to 2.1 percent in July 2019. The eight industries are coal, crude oil, natural gas, refinery products, fertiliser, steel, cement, and electricity.

• Output of coal, crude oil, natural gas and refinery products actually recorded negative growth.

• Our GDP growth rate is down to 5 percent, the lowest it has been in more than six years.

• And unemployment is at a 45-year record high.

In July 2019, Chief Economic Adviser K Subramanian downplayed the decline in the auto industry by saying that the manufacturing sector is doing well overall.

Now, data shows that manufacturing growth has slumped to a dismal 0.6 percent in April-June 2019, down from 12.1 percent in the same quarter in 2018.

But is it enough for our government and its bureaucrats to get out of denial mode?

Power Secretary Subhash Chandra Garg says, “We might be overblowing the slowdown”, while Finance Minister Nirmala Sitharaman refuses to directly answer whether India is even going through a slowdown.

Creative Thinking Option

And then there’s always the creative thinking option. BJP leader and Bihar Deputy CM Sushil Modi has come up with this justification – that economic slowdown is usual and happens every year during the months of Saawan Bhado, only this time, the Opposition is making noise since they lost the elections.

It seems the only way to beat the slowdown is by not believing that there is a slowdown!