Dear PM Modi: Crack This Quiz & Fix the Economy

Let’s answer a small quiz on what critical actions are required to pull India’s economy out of its current funk.

State Bank of India says that GDP growth could fall to around four percent when the July-September number is revealed.

(Photo: The Quint/Shruti Mathur)

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India’s economy today can be described by a four-letter word. Oh c’mon, it’s not what you are thinking… Even the sarkari (government-owned) State Bank of India says that GDP growth could fall to around four percent when the July-September number is revealed, that’s what!

And as usually happens in an acute crisis, everybody and her aunt is offering solutions. Fix this, increase that, cut here… If anything, Prime Minister Modi is getting buried under a million “miracle ideas”. But sadly, too many good fixes also become a bad thing, because only a bit of this and a bit of that gets done, and the problem never goes away.

So let’s answer a small quiz. I will throw ten options at you. All of these are critical actions required to pull India’s economy out of its current funk. At the end, I will ask you one final question. Check if you’ve really got it figured out in your head. Here goes.

One: Restart the flow of credit, which has shrunk to inhuman levels. Its growth is down to 2.7 percent for industry, the lowest in 12 months. And after clocking over 20 percent between April 2018 and February 2019, credit growth to services has plummeted to 7.3 percent, the lowest in 24 months. NBFC disbursements are down by a gut-wrenching 36 percent.

Two: Stop celebrating the growth in nominal FDI, from $ 42 billion to $ 62 billion over the 2009-19 decade. As a share of the GDP, it’s fallen from 3.4 percent to 2.3 percent. Ask why it’s not crossed $ 100 billion this year; and then, without any song and dance, remove all the frictions and hostilities that are keeping foreign investors at bay.

Three: Do everything possible to ensure that Vodafone and Airtel continue to remain solvent. If even one files for bankruptcy, it will be a stunning certificate of demerit for India’s “fabled” rules of business governance.

Four: Try to understand why our exports have collapsed. Yes, collapsed! In the noughties, we ranked a healthy tenth in global exports, growing at 20 percent every year, nearly twice the world rate. But over the last five years or so, we’ve slipped to almost the 33rd spot, even as annual exports have stayed flat at around $ 325 billion.

Five: Don’t get blindsided by our “spectacular” rise in the World Bank’s Ease of Doing Business (EODB) index. Yes, the Modi government needs to be patted for pulling India up 79 places (from 142nd in 2014 to 63rd in 2019) on its watch. But equally, we should acknowledge that the bulk of these gains have come from easier building permits, electronic trading platforms and improved insolvency resolution. On the meatier issues of “protecting minority investors” and “enforcing contracts”, we’ve either slipped or stayed stagnant. So our “victory” is a bit pyrrhic.

Six: Never forget that we’ve slipped – yes, slipped – ten spots on the global competitiveness index. Why? Because we’re poor at adopting ICT (information, communications and technology), despite all the digital brouhaha. Our workers suffer from poor health and skills. And our women continue to remain out of the workforce.

Seven: Acknowledge that we’ve “copped out” of the RCEP (Regional Comprehensive Economic Partnership). Yes, it’s all very good to whip up a “pro farmer, pro small industry” rhetoric to sell this internally, but the harsh truth is that our manufacturing sector is simply too trussed up and uncompetitive to survive in this dynamic trade block of three billion people producing a fifth of the global GDP. But we cannot become a magnet for multinational investments, or reach the $ 5 trillion GDP milestone, if we keep dodging. We must dare to reform our hidebound economy and join RCEP, sooner than later. As I’ve said, staying away is a dreadful cop-out.

Eight: Arrest the rising tide of protectionism, which, in turn, is riding on the bogey of “economic nationalism”. It’s a matter of deep concern that next to Donald Trump’s whimsical, quasi-literate tariff wars, India has imposed the maximum number of trade restrictions in the past three years. This is poison. If we regress into the high-cost, inefficient, autarkic 1970s/‘80s, we would have frittered away three decades of competitive gains.

Nine: Don’t kill the messenger when Moody’s Investor Services cuts India’s sovereign outlook to negative, citing “lack of intent for reforms and a prolonged economic slowdown”. Let’s square up to the truth, rather than smear the harbinger of bad news as “somebody with an agenda”.

Ten: Finally, learn from that stark, unprecedented, never-occurred-before duality that has, well, become reality today (I for one never thought it would happen in my lifetime) – business confidence has dipped to its lowest point in six years (it’s at 103 now as compared to the earlier low of 100, recorded in that “abysmal UPA” year, circa 2013), even as the stock market is at lifetime highs. As I’ve said, it’s perhaps a first for me in the last three decades.

In fact, I’ve often poked fun at the fact that India’s business leaders yo-yo in tandem with the stock market, thereby implying that they usually outsource their intelligence to the Sensex (ouch, sorry!). If the Sensex is leaping, excited, animated, India’s business community experiences a concurrent orgasm. Or so it used to be. But today, that causality has snapped. The Sensex is flirting with stratospheric levels, while business people are wallowing, jilted, in break-up blues. Why?

So here’s my final question: Imagine that Prime Minister Modi summons you and asks: “You’ve read the ten options given above to fix our economy. I, too, have received these, plus dozens more. But I need to concentrate all my energies on one, just one, option. It should be the most powerful stimulant, one that could heal several other ills. Tell me, which one should I pick?”

Dear reader, which one would you pick for PM Modi to act on? Take a deep breath, and click on (your call).

As for me, I have no hesitation in picking Number Ten.

Today, India’s entrepreneurs feel ‘othered’, their mistakes criminalised, their failures magnified, and their resources circumscribed.

But if they are feted as “wealth creators”, as per Prime Minister Modi’s own clarion call from the ramparts of Red Fort on 15 August, their self-esteem shall get reignited.

And, lo and behold, India’s economic gloom will dissipate.