Indian Economic Reform, Its Conflict with Politics and Outcome

 

Indian Economic Reform, Its Conflict with Politics and Outcome

Economic reform, political instability, and conflict in India Observers consider 1991 the turning point of India’s economic fate. At this point in time, India’s economic order had already changed a lot from the time when the country achieved its independence. The reforms of 1991 did not begin India’s economic liberalization, but accelerated change and without these reforms, India would not be economically where it stands today. In the 70 years of independence, India has experienced a number of economic crises, often triggered by drought, political instability, or wars with Pakistan or China. Until the mid-1960s there had been the political dominance of the Congress Party in the federal government as well as the governments of all Indian states. This also had harmonizing impacts on economic policy formulation and decision-making. In 1967, the Swatantra Party defeated the Congress Party in nine state elections shaking Congress dominance in India for the very first time.

Increasing unemployment and poverty led to political instability. Although some people contradict the thesis of political polarization, they also see in the political events of 1967 a cause of increasing political instability. “The most striking consequence of the Congress reverses in 1967 have been a high degree of political instability in north Indian states. For the first time since independence, 9 out of 17 states, with 65 percent of India’s population, came under the rule of inherently unstable coalitions”, which also led to a sharp increase in politically motivated violence.

 

 In the elections of 1971, Mrs. Indira Gandhi was able to stabilize her position with a distinct anti-poverty campaign. With the drought of 1972, many farmers slipped into poverty. Increasing costs for agricultural inputs (fertilizer, pesticides, energy, and machines) let profits 

decline even when the drought was over. In 1974 the situation did not calm down. Inflation rose to more than 30 percent. All over India dissatisfaction with the Government surfaced. In Gujarat, warehouses were plundered and the military called in.

Mrs. Gandhi tried to disguise her mistakes through populist measures: in a 20 point program, Indian Economic Reform, Its Conflict with Politics and The outcome she promised to bring food prices down, give land to the landless, write off debts of small farmers, give secure tenure to urban poor in slums, expand irrigation infrastructure, and improve electricity generation and public transport, and much more. Few of these promises were put to action. The Government more and more was seen as a promoter of the interest of big business houses, foreign investors, and India’s middle and upper classes. Mrs. Gandhi banned strikes, cut down minimum wages for industrial laborers, and extended working hours. Private companies received tax cuts and investment incentives. Many licenses were abolished. Foreign companies saw a liberalization of the Foreign Exchange Regulation Act (FERA) allowing higher foreign equity in many sectors, tax cuts, and better conditions when transferring profits out of India. The elections of 1977 saw Congress lose.

When Moraji Desai became Prime Minister in 1977 he depended on parties that covered all ideological facets, from ultra-left to the ultra-right. The heterogeneity of the Janata Government led to its collapse after 2 years when Charan Singh left the government to form his own party. Prime Minister Morarji Desai had to resign and Charan Singh was asked to form a new government. But Charan Singh’s minority government was incapable of action. A vote of no confidence by the Congress Party brought his short rule to an end.

It was not new love of India’s voters but a hopelessly divided government that brought Indira Gandhi back to power in 1980. In the 1980s economic reforms were carried through more rigidly than earlier. A loan from the IMF accelerated this. India agreed to further reduce the importance of public enterprises and strengthen private industries. Spatial disparities were to be reduced by providing incentives for investment in disadvantaged regions. Export-orientated industries were promoted. State governments were asked to take over uneconomic enterprises with the purpose of rehabilitating them.

After Indira Gandhi’s assassination in 1984, liberalization was continued and accelerated by her son and successor as Prime Minister, Rajiv Gandhi, especially in the first two years of his tenure. Licensing in the industrial sector was further liberalized, mainly in consumer electronics. Many export restrictions were done away with or simplified. Sectors that had good export potentials were exempted from import licenses for capital goods. As additional incentives to export production, a tax discount of 50 percent was given on profits from export income. After 1988 profits from the export business were entirely exempted from taxes. Many import restrictions were transformed into tariffs and existing import tariffs were reduced. Additional sectors reserved for public investment were opened for private investment, the most important telecommunication.

In the elections, late 1989 the Congress Party was voted out of power by a coalition that brought together rural as well as minority votes – people were unhappy with liberalization and industrialization. For the third time in In India’s history a politician, V.P. Singh, became Prime Minister who did not come from the Congress Party. Singh however needed support from the nationalist Bharatiya Janata Party (BJP) and the communist parties, which agreed to support the government from ‘outside’.

The government was supported by the BJP, which presented the conflict between Hindus and Muslims in India. From the left, the Government was supported by the Communist parties, representing the class conflict. Meanwhile, to consolidate his position V.P. Singh played his trump card by announcing the decision to reserve for OBCs 27 %  job of all categories of posts under the Central Government and in its undertakings. When V.P. Singh announced his reservation policy the BJP began to see him as a threat. Straight after Singh’s announcement Lal Krishna Advani, the leader of the BJP, decided to conduct a religious procession (Rath Yatra) through major parts of India. The procession would end in October 1990 in the North Indian city of Ayodhya, which allegedly was the birthplace of the legendary Lord Rama. In 1528 Mogul ruler Babur had constructed a mosque in a place where allegedly there had been the Ram Janmabhoomi temple.

Advani’s objective was to re-build a Hindu temple (Mandir) at the place of the Babri mosque. The intention was to consolidate power and to take up a clearer Hindu ideology in the next election, which was still five years into the future. These multiple cleavages, which are rather difficult to reconcile dominated India’s politics in the11 months that V.P. Singh’s Government was in power.

On 25 September 1990, Advani started his Rath Yatra. The government made it very clear that he would not be permitted to reach Ayodhya. Advani, other leaders of the BJP, VHP, RSS, and about 200,000 of their supporters were arrested on 23 October 1990  in the city of Samastipur (Bihar). On the very same day the chairman of the BJP parliamentary group, A.B. Vajpayee, informed the Indian President that his party had withdrawn support to the Janata Dal Government This was the end of the Government of V.P. Singh.

Despite many serious challenges, parliamentary affairs were put on hold largely. Important decisions on trade and industrial policies were delayed. Even the work and finalization of India’s Eighth Five Year Plan, which was to start in 1990, had to be postponed.

Another Janta Dal leader Mr. Chandra Sekhar was sworn in as new Prime Minister and worked for a brief stint from 10th Nov 1990 to 21st Jun 1991. This government lasted for 7 months tenure.

1990 was a year in which violence and terror brought India to the brink of a civil war. First, the Janata Government mangled itself before finally being brought down by the BJP. The power struggles resulted in irresponsible negligence of economic decision-making. Economic challenges were not taken up but allowed to escalate. When in early 1991 India was almost insolvent, only a loan from the IMF was able to buy some extra time. However, it was foreseeable that the loan of US$1.8 billion was not enough to help India to survive for more than 6 months. Fresh credits were unavoidable.

When Congress came back to power in June 1991 Mr. P.V.Narsimha Rao became the new Prime Minister of India. India’s economy was close to collapse. He selected renowned economist Manmohan Singh as the Finance Minister of his cabinet. Needless to say that this Manmohan Singh (who later became the prime minister of India) left a significant role in shaping the Indian economy.

                                                     

During the early days of Narsimha Rao’s tenure; India’s external as well as internal debts were beyond manageable levels, the trade balance had chronically been negative for years and inflation rates were higher than ever before, especially for food and other basic items. There was no doubt that India was facing its severest crisis since independence. The collapse of the Soviet Union had deprived the country of an important trade partner, the first Iraq war led to a huge evacuation effort of Indians out of Kuwait and subsequently loss of huge amounts of remittances.

 In early 1991 foreign exchange reserves of the country were just enough to pay imports for less than two weeks. India had accumulated the third biggest international debts of any Third World country next to Mexico and Brazil. Soon after Congress was back to power it continued negotiations with the IMF for structural adjustment loans to strengthen its balance of payment. India already had loans of US$10 billion approved by the International Development Association (IDA), but these loans were yet to be paid out. Non-residential Indians became worried about the security of their savings and transferred about US$4 billion out of the country between April and June 1991. Even pledging India’s gold reserves valued at US$400 million was not enough to slow down the train towards insolvency. More fresh money was badly needed. By the end of July, the World Bank had set up a credit program for 1992–1995, which promised loans from the IMF and World Bank in the range of US$12.25 billion. Once the package was approved other donors joined in. The Aid India Consortium provided US$6.7 billion for 1991 and US$7.2 billion for 1992.

The reform centered on two economic programs that were closely tied to each other: the first was a macro-economic stabilization package monitored by IMF which aimed at improving the balance of payment situation as well as a reduction of government spending. Under the auspices of the World Bank, comprehensive economic reforms were to be carried out, covering trade, industrial development, foreign investment, privatization, and financial sector reform.

On 1 and 3 July 1991 India’s currency was devaluated by 20 percent. The government was optimistic that this would boost exports, reduce imports and bring down the trade deficit India had built up since the 1980s.

 

Hardly two months had passed since the then Finance Minister Manmohan Singh had put his budget for the year 1991–1992 before the Parliament, when in September 1991 news about deaths from starvation in Andhra Pradesh shocked India. At the same time, India’s newspapers were reporting about the third record harvest in a row. The death from starvation did not happen in drought-prone and marginalized regions of Andhra Pradesh but in the fertile and agriculturally highly developed region delta of the Godavari and Krishna rivers. The victims all belonged to a single occupational group: the weaver caste. The reasons for this tragedy are quickly listed: cotton yarn, the raw material for the weavers was more often exported instead of feeding local demand. The powerful lobby of textile mills managed to pressure through the abolition of export restrictions for cotton yarn. Between 1987 and 1990 the export volume almost had tripled, which caused an increase in cotton yarn prices by more than 200 percent. The weavers, who were just able to feed themselves and their families with a monthly income of about 600 rupees were no more able to produce under such conditions without occurring financial losses. The 300 rupees which they now had every month were not enough to buy even the very basic items for survival. More than 100 deaths were the result in late1991.

As a true leader Prime Minister Rao together with his able finance minister Manmohan Singh started analyzing the situation. Mr. Rao took entire charge to disburse his political obligation with his coalition partners while Manmohan Singh was given full freedom to formulate new and effective policies for the upliftment of people and to mitigate the risk elements of the Indian Economy.  The foundation stone of building new developing India started.

The impact of devaluation was felt. To remain able to pay the country’s import bill prices for petrol, LPG, and aviation fuel increased by 20 percent. Reduction of subsidies started with abolishing fertilizer subsidies causing an increase in manure and fertilizer prices by 40 percent. Consequently farmers’ staged protests all over India and compelled Government to cut the increase to 30 percent. Similar to other developing countries high energy costs also in India contributed much to inflation, which strikes most ruthlessly poorer sections of society.

But Rao’s problems began 18 months later and gradually worsened with the passage of time. Corruption and the even more terrible mishandling of the destruction of the Babri Masjid became his blight. The country blamed him personally when, in April 1992, the news broke of a massive stock market cheat involving the huge diversion of funds from banks and the treasury. As if this and other scandals that came to light fast were not enough, his foreign minister and a former chief minister of Gujarat, Madhavsinh Solanki, was asked to resign because he had carried and given the Swiss government an unnamed letter portentous that the Bofors corruption investigation “did not enjoy much of a priority with the government of India”. Poor Solanki could never recall the name of the person who had given him that strange letter. In March 1993, dreadful serial blasts took place in what was still called Bombay, and Rao’s authority was further worn. Under these conditions, it was no shock that Congress lost a series of state assembly elections during Rao’s time.

In the 1996 general election for the first time, the BJP, with 161 members, became the largest party in the Lok Sabha. The Congress tally had dropped from 244 in 1991 to 140 five years later. Its scouts gave former Prime Minister V.P. Singh a chase that put into gloom even the strange scenes in Bollywood films. But he managed to get away from them every time. Since no party staked a claim to form the new government, President Shankar Dayal Sharma invited BJP leader Atal Bihari Vajpayee to do so and prove his majority on the floor of the House. As was to be expected, this turned out to be “a 13-day wonder”. Vajpayee resigned to fight and win another day. Meanwhile, the UF had chosen the then Karnataka chief minister, H.D. Deve Gowda, as its leader. He now became prime minister of a government that depended upon the Congress party’s support “from outside” for every minute of its existence. Congress withdrew support to the Deve Gowda government in April 1997. The powerful bosses of the political parties comprising the front chose I.K. Gujral, a thorough gentleman projected to reign while the bosses would rule. This agreement was also short-lived. For, in November, Congress also pulled the plug on Gujral. Fresh elections were scheduled for February-March 1998, which were to produce several surprises.

 

      

                           

The Congress tally remained what it was two years earlier. The BJP’s strength rising to 182 was a surprise, however. Moreover, since the saffron party had collected no fewer than 24 allies, Vajpayee was in power again as the head of the National Democratic Alliance.

Mr. Atal Bihari Vajpayee as prime minister for six years between 1998 and 2004, Atal Bihari Vajpayee is credited with bracing the Indian story in the global economy. India opened its economy in 1991 when Prime Minister Narasimha Rao and Finance Minister Manmohan Singh formed a colossal partnership. After the defeat of the Rao government in 1996. Vajpayee continued the old set economy background due to compulsion for signed up old financial accords and agreements.

When Atal Bihari Vajpayee assumed office in 1998, India's telecom sector was static and lacked almost any drive. Though the first mobile phone call had been made in 1995, nothing much had happened thereafter. Vajpayee introduced the new telecom policy and opened up the sector.

The domination of the government-owned telecom companies ended and private players infused life in the waning sector. Vajpayee government waived off a fixed fee that the companies were asked to pay for using spectrum. Under the new policy, the companies had to share their revenue.

Vajpayee introduced a win-win telecom formula. The government got more revenue from the profits made by the private companies. The new policy reduced the cost of telecom companies owned by the government. The old telecom department was turned into a corporation - BSNL. The government's monopoly on international calls brought to an end.

Atal Bihari Vajpayee dreamed of a highway network to join the corners of the country. This is the fifth-largest highway project in the world. This project looks like an urban center link program but it was actually a policy to give Rural India admittance to Urban India.

A total of around 6,000 km of the highway was constructed - completed in 2012, six years after the original deadline of 2006. It generated thousands of employment scopes for Rural India. It was designed at facilitating greater and faster access to produces of the villages and agricultural farms.

Vajpayee undertook the task of disinvestment as a mission. His was the only government to have a separate ministry for disinvestment. The former journalist and economist Arun Shourie was made the minister for disinvestment. The PSUs like BALCO, Hindustan Zinc, IPLC, VSNL were freed from government control.

It was Vajpayee a government that made it legal accountable to bring the fiscal deficit under control. The Fiscal Responsibility Act was passed in 2003 making it compulsory for the government to keep the finances in good health. The move suddenly improves public sector saving, which is crucial for investment by the government in development projects. Further, a higher fiscal deficit makes international loans costlier.

Indira Gandhi's government had conducted the first nuclear tests at Pokhran in 1974. But following Rajiv Gandhi's emphasis on nuclear disarmament, India had overlooked its nuclear program. The nuclear powers including China, in the meantime, had taken their nuclear technology to the next level. India clearly lagged behind.

It is no surprise that following nuclear tests by India, China showed greater intent to engage with India commercially.

For decades after Independence, the governments at the Centre had failed to find a mode to give a big increase to school education and check drop-out rates. Atal Bihari Vajpayee government came up with a simple yet novel scheme called Sarva Shiksha Abhiyaan or campaign for universal education. Vajpayee government introduced the idea in 2001 with the aim of achieving the goal of widespread literacy in India. Atal Bihari Vajpayee government also made education a fundamental right of all children between six and 14 years. The result was that the school drop-out rate was reduced by 60 percent in just five years.

 In spite of doing some development, the Vajpayee-led NDA government could not supervise the food distribution system efficiently. Possibly the single biggest failure of the NDA government was its apathy to the millions of tonnes of food grain always lying (rotting?) in Food Corporation of India godowns. Even as thousands of farmers, jingling under drought in several parts of the country, were howling for food. The disaster was that Indian exporters were joyously allowed to export wheat, sugar, and other food items in this situation.

The NDA government should have appointed a retired general and a team of ex-Army Supply Corps officers/jawans to supervisee an infallible seasonal program to deal out food almost free to the poor throughout the country with the help of not district bureaucrats, but various NGOs with good credentials, such as the Ramakrishna Mission.

Even the construction of additional small flour mills with packaging units attached could have been thought of to exchange grain into highly subsidized flour packets for a cluster of villages. Such a scheme under the civil supplies and rural development ministries, if publicized well, would not only have been an excellent example of good governance, but of humane governance, and would have brought tremendous goodwill to the NDA. The financial liability of this program just wouldn't have been criticized either by the media or by the Opposition.

Incongruously the biggest defeat of his political career came when Prime Minister Atal Bihari Vajpayee was at the crest of his reputation as a statesman and a leader with pan-India appeal. An election that was thought to have been won simply by Vajpayee turned out to be the worst moment in his illustrious public career.

Never a gambler, the 79-year-old leader decided to call the elections six months ahead largely at the assertion of his senior colleagues who spoke of so-called "feel good" and "India shining" factors.

The astonishing electoral reverse could ultimately mean a sad end to a very renowned career that saw the rise of a Gwalior school teacher's son to the leadership of a billion people. Wise parliamentarian, warm and persuasive leader, and an insightful poet, Vajpayee has been described as the reasonable and tolerant face of the "hardline" party.

After the 2004 general elections, the Indian National Congress astounded the incumbent National Democratic Alliance (NDA) by becoming the political party with the single largest number of seats in the Lok Sabha. In a surprise move, United Progressive Alliance (UPA) Chairperson Sonia Gandhi affirmed Manmohan Singh, a technocrat, as the UPA candidate for the Prime Minister post. Despite the fact that Singh had never won a Lok Sabha seat, his substantial goodwill, and Sonia Gandhi's proposal won him the support of the UPA allies and the Left Front. He took the oath as the Prime Minister of India on 22 May 2004, becoming the first person of Sikh faith and the first non-Hindu to hold the office in primarily Hindu-majority India.

Manmohan Singh's The government has continued the realistic foreign policy that was started by P.V. Narasimha Rao and continued by Bharatiya Janata Party's Atal Bihari Vajpayee. The Prime Minister has continued the peace process with Pakistan initiated by his predecessor, Atal Bihari Vajpayee. The exchange of high-level visits by top leaders from both countries has dyed his tenure, as has reduced terrorism and increased prosperity in the state of Kashmir.

Efforts have been made during Singh's occupancy to end the border conflict with the People's The Republic of China. In November 2006, Chinese President Hu Jintao visited India which was followed by Singh's visit to Beijing in January 2008. Major progress in Sino-Indian associations was the reopening of the Nathula Pass in 2006 after being closed for more than four decades. In 2007, the People's Republic of China became the biggest trade associate of India, with two-sided trade projected to exceed US$60 billion by 2010. 

Singh's government has worked towards stronger ties with the United States. He visited the United States in July 2005 initiating discussions over the Indo-US civilian nuclear agreement. This was followed by George W. Bush's successful visit to India in March 2006, during which the statement over the nuclear agreement was made, providing India entrance to American nuclear fuel and technology while India will have to allow IAEA scrutiny of its civil nuclear reactors. After more than two years for more negotiations, followed by approval from the IAEA, Nuclear Suppliers Group and the US Congress, India, and the U.S. signed the agreement on 10 October 2008.

Dr. Singh, along with the former Finance Minister, P. Chidambaram, has presided over a period where the Indian economy has grown with an 8–9% economic growth rate. In 2007, India achieved its highest GDP growth rate of 9% and became the second fastest-rising major economy in the world.

Singh's government has continued the Golden Quadrilateral and the highway upgrading program that was started by Vajpayee's government. Singh has also been working on reforming the banking and financial sectors and has been working towards reforming public sector companies. The Finance Ministry has been working towards relieving farmers of their debt and has been working towards pro-industry policies. In 2005, Singh's government introduced the VAT tax that replaced the complex sales tax. In 2007 and early 2008, inflation became a big problem globally.

The vital National Rural Employment Guarantee Act (NREGA) and the Right to Information Act was approved by the Parliament in 2005 during his term. While the efficacy of the NREGA has been successful at various degrees, in various regions, the RTI act has proved crucial in India's fight against fraud.

India held general elections to the 15th Lok Sabha under the sitting Singh, who became the first prime minister since Jawaharlal Nehru in 1962 to win re-election after finishing a full five-year term.

Manmohan Singh, the economist attributed with playing a key role in ushering in economic reforms in The 1990s, demits office of Prime Minister after 10 years, leaving a mixed inheritance of achievements and failures. Scams that surfaced during UPA II may have undone the good work of the 81-year-old leader, who had achieved the distinction of serving two tenures as Prime Minister, the longest after the first PM Jawaharlal Nehru's 17 years in office. A renowned economist, his governments also delivered a robust 8.5 percent GDP growth for most of his tenure but the scams- 2G, CWG, and Coal block allocations-and the resultant policy paralysis of the government thwarted his performance.

The alleged dual power center in the Congress in the form of power vesting with party Chief Sonia Gandhi also came to trouble him with critics attacking him as the weakest Prime Minister the country has had. The highlight of that term was also the strong stand that the normally soft-spoken Singh took on the Indo-US civil nuclear deal in the face of strong opposition by the Left parties, which were then part of his government. Putting his foot down on the issue, Singh asserted that he will not go back on the international promise even if it means the fall of his government. Left parties pulled out support to his government but it survived in the confidence vote with the help of the Samajwadi Party and BSP.

Adding to the woes of his government was Anna Hazare-led anti-corruption a campaign that acquired extensive dimensions at the cost of Congress.

Widespread corruption and mass demonstration had opened up opportunities for the leaders who love to do fishing under troubled water. A leader like Narendra Modi seized the opportunity to polarise the local population along religious lines and intensified decades-old prejudices against Muslims. He was, in fact, accused of giving Hindu mobs a free hand, although such allegations were never proven. Modi’s image as a “protector” of Hindus was consolidated during the Gujarat riots, which broke out in February 2002, less than five months after he was appointed chief minister of the state in place of another BJP member. Riding on this Hindu nationalist wave, Modi led the BJP to win in the Gujarat elections in December 2002, and then again in 2007 and 2012. But midway through his second tenure, he began displaying ambitions to budge to the national stage. A shrewd leader, Modi knew India was not yet ready to recognize a leader with a marked majoritarian bend. Consequently, he recast his persona – from being a Hindu nationalist leader to a stalwart of economic development. Instead of wooing Hindus, he began courting big businesses and sought to lock fresh investment in local industries.

He facilitated business deals made single-window permission the trait of his administration and twisted rules on acquiring land for business projects. Backed by expert image builders, Modi pursued visible transportation projects such as road and canal building and electrification which disguised the serious deprivation the countryside was tormenting from.

Well before the general elections in 2014, Modi eliminated all rivalry within the party and built a drive centering on his twin slogan “development and change”. A highly publicized Gujarat model, which was much more talked about than understood, became the keystone of his political podium, as he underplayed his Hindu nationalist politics. This enabled him to secure the support of a significant number of liberals. While many metropolitan elites bemoan the coarseness of Modi’s speech, calling out his theatrics, diversions, and inaccuracies, most voters, even those who are not traditional voters of the BJP, admire him for specifically this: his speaking style. To them, he comes across as a straight-talking, simple-hearted, purposeful man who does not shy away from making swift decisions in the national interest.

The 2014 elections broke records in terms of levels of voter participation, election expenditure, and the number of political parties fielding candidates. The outcome marked a break from the past 30 years of India's electoral history with a single party – the Hindu nationalist Bharatiya Janata Party led by Narendra Modi – achieving a parliamentary mass on its own, without depending on coalition cohorts.

As a Prime Minister, Narendra Modi is exerting his duties since 2014 to date of writing this papers (July’2021). History will judge and assess him as successful or not in the coming days. But by and large, his method of administration could not lift India into the next level so far.

In his first calendar year as Prime Minister of India, Narendra Modi gave attention to economics. Through high-profile trips abroad and motivated proposals at home, Modi maintained an air of energy and program, but the results were modest. Meanwhile, domestic politics became more polarised, contributing to two high-profile election defeats for the Bharatiya Janata Party (BJP) in state elections.

Modi’s brand of personal skill was one of the year’s staples. In January, Barack Obama became the first US president to visit India twice while in office. The two countries announced agreements on implementing the 2008 India–US nuclear deal and carbon emissions. Over the year Modi took 16 foreign trips, soliciting investment and technical cooperation from Japan to Silicon Valley, wooing the Indian diaspora, and finalizing defense purchases with traditional suppliers France and Russia. Enduring efforts to encourage the BRICS countries (Brazil, Russia, India, China, and South Africa) saw the dawn of a new development bank with funding of US$50 billion provided equally by all five members.

But India’s associations with its neighbors remained strained. Although a boundary dispute with Bangladesh was resolved and those with China were put on the back burner, ties with Nepal deteriorated dramatically. And ties with Pakistan continued to be turbulent. Talks were scheduled and canceled, low-level hostilities intensified, reduced then spiked again. Contact resumed at the Paris climate talks and Modi’s surprise Christmas Day visit to Pakistan earned gushing headlines. But, as some pointed out, this was preceded by a trip to Afghanistan, where Modi personally delivered Indian-made weapons systems, raising hackles in the Pakistani defense establishment.

Nationally the priority was on economic policy. Modi promised a pro-business agenda and wanted to deliver on deregulation, facilitating investment, and reducing spending. The budget was praised by businesses as making modest steps in this direction.

Yet more pushy proposals requiring statutory or constitutional changes failed to pass the upper house. These included a bill making it easier for companies to declare bankruptcy, another to ease land acquirement for public projects, and the preamble of a national General Sales Tax. In the end, the actions of the much-respected head of the central bank received more favorable attention than those of the prime minister.

One divisive area in the government’s economic policy has been social welfare spending. The government firstly proposed to cut the preceding government’s signature employment guarantee program by restraining its application to poor districts but shelved this in the face of opposition. Yet outlays for the program have been whittled down and reports of beneficiaries not receiving payments have become common. This is pinpointing of the government’s approach to social welfare generally.

The government’s challenges in parliament stanch from the fact that the upper house is elected by state legislatures, a majority of which are controlled by opposition parties. The BJP’s losses in two crucial states, Delhi and West Bengal, that had won in the national election, bode poorly for its ability to pass legislation in the future. In Delhi, the BJP lost to a new ‘good government’ party, while in West Bengal it was defeated by lady Mamata Banerjee led TMC. The elections indicated the potential for an alternative to the BJP that is not led by the once-dominant Indian National Congress.

The Congress itself remains in a permanent state of crisis. The party is still led by the Nehru-Gandhi family, contributing to organizational paralysis. Party elections are never held and new leaders rise only with the favor of the Gandhis, while their critics leave the party.

Adding to its woes, the Modi government was accused of intimidating its opponents, in both parliament and civil society. Former Congress prime minister Manmohan Singh as well as Sonia and Rahul Gandhi were prosecuted for corruption. And, citing security concerns, the government implemented new restrictions on non-governmental organizations receiving funds from foreign sources.

The conflict occurred over many issues. Conflict over caste quotas, eating beef — which many Hindus oppose for religious reasons — and religious conversion was especially challenging as in many cases the tensions stemmed from demands by BJP supporters. Modi was slow to comment in most instances, but there has been robust resistance from opposition parties, civil society, courts, and even officials. Leading writers returned honors bestowed on them to protest the government’s tolerance of sectarianism. The courts stepped in on more than one occasion to uphold civil liberties. And the West Bengal election, fought partly over religious conflict, showed the potential for an explicitly anti-sectarian political program to win.

At the same time, there has been a marked decline in popular belief in democracy in India, even compared to other countries. As revealed by the World Values Survey, India has seen a 30 percent increase over the last two decades in those who do not express faith in democratic methods. The great peril is that the impatience to ‘get things done will lead to more support for the kind of authoritarian impulses that seem to be on the rise elsewhere in the world.

Here in this context, one obvious question shall arise in people’s minds that how and why such disasters happen. As per common educated mindsets of people, some reasons are described below.

Unlike his earlier predecessor, Narendra Modi is not an educated person. Perception and reality are different. PM position is the top job of a country, which demands an educated candid person. Whatever decision PM will take, will have far-reaching consequences to its citizen.

Derived from a poor tea selling family background Narendra Modi lacked adequate education which is essential for the PM’s job. For example, if a patient goes to a cobbler for his cataract operation what shall be the consequence a person can definitely imbibe. Similarly, the weird acts and attitude of Narendra Modi and his statements into the global summit along with the other global leaders always had proven shameful for any Indian.

The reputation what India earned during the tenure of Manmohan Singh is disappearing now. Multiple Video Conferences that have been aired so far, have implanted a very dismal picture of Narendra Modi as a top leader of the nation.

An educated person can easily understand the depth of knowledge of the opposite person with whom he interacted. Until recent times ( prior to Modi’s regime), India as a country used to attract global attention for its vast stature and economy. Adjoining neighboring countries like Nepal, Bhutan, Bangladesh used to give respect to India as a big brother. But this situation is changed now. Small countries like Nepal and Bangladesh are now challenging India’s authority and supremacy in the South East Asia region. GDP contraction, increasing level of poverty, Chinese invasion, Covid19 the pandemic situation had aggravated India’s position.

Let us analyze the factors which dragged India down during Narendra Modi’s regime. How incapable leadership of Narendra Modi brought catastrophe to India can be expressed as under

 

1.  Demonetisation.

This would be at the top of any list for its sheer lack of success and the widespread havoc that it inflicted on the economy. While being taught now as a cautionary tale in business schools overseas, it enjoys the unique distinction of having failed on every one of its stated objectives (combating terror funding, fake notes, and black money) while having wiped out jobs. Studies by noted economist Arun Kumar and the Centre for Monitoring Indian Economy continue to illustrate that we are not out of the woods yet.

2. The betrayal of farmers

Farmer suicides rose sharply during the Modi government’s tenure. In its final budget, the BJP on the demand of minimum support price plus 50%, gave a version that satisfied no one. In parallel, the Modi government imported wheat and pulses without thought – leading to the prices of domestic produce crashing. Add to this – the ill-advised venture to amend the land acquisition Act of 2013; to forcibly acquire the land of farmers.

Farmers have resorted to all manner of agitations to catch the BJP government’s notice. They have marched and held large-scale protests thrice this year. They have brought the mortal remains of their brethren, who committed suicide, to alarm this government into action. The children of those farmers who took their own lives held peaceful protests hardly a kilometer away from parliament. Not a single envoy from the BJP Government was designed to meet with any of them or even acknowledge their attendance.

3. The dubious rewriting of the Rafale deal

The prime minister and his followers changed the terms of a deal to acquire fewer jets for three times the price without following the stipulated procurement procedure. When cornered with questions, the government chose to harass the opposition and mention rules of privacy which was contradicted by the French president in an interview to an Indian channel. The Rafale controversy attracts questions also because of the assortment of a private party as an offset partner – one who lacked any qualifications in this regard, except for obvious proximity to the Prime Minister.

4. Media Incarcerate

There has been the enslavement of certain sections of the media which simply clog on any criticism no matter how mild of the prime minister and the BJP president. If a channel is less than pliable, it is blacked out for 24 hours, its premises are raided, or the offending journalists are inexplicably made to go on vacation or removed outright.

5. Fading of institutions

The parliament is a nuisance to this government which prefers to rule by fiat and ordinances. The prime minister rarely attends parliament, and when he does it is more to give electoral speeches than to discuss a legislative agenda or answer questions raised on the floor of the House. The promised Lokpal is so artfully forgotten that an enraged Supreme Court has to direct action. A daring chief minister quickly upon assuming office withdraws all criminal cases against himself and no one blinks. Electoral transparency is promised while bringing in unaccounted funding through regressive and opaque electoral bonds. The CBI is in the throes of a battle for credibility. The list goes on.

6. The cultivation of hate

There has been a spiky increase in targeted attacks on Dalits and members of the marginal community. What makes these attacks inimitable is the state support to the attackers when ministers garland them or respectfully attend their funerals. The memo of support is lost on no one. In fact, the only lucid yarn running through this government’s term has been the bothering of a certain section of India. People who are set apart to be followed by the prime minister share only one other thing in common. They are insolently communal and abusive. Almost as if they have official sanctions.

7. The Maltreatment of Kashmir

This government deserves the credit of having separated the Kashmiri people from the rest of India through a poorly thought-out engagement policy. For the first time, since 1996, by-elections could not be held in the district of Anantnag and had to be delayed because of the tense situation. Eight-month-long curfews destroyed the local economy. Worse still, there was a marked increase (72%) in the number of our soldiers martyred in just the first three years of the BJP’s term. The extremely incompetent handling of Kashmir deserves a study unto itself.

8. A draconian Aadhaar and the unsuccessful attempt to reject citizens a fundamental right to privacy

For months this the government argued in the Supreme Court against citizens having a fundamental right to privacy. It argued for close watch and labeled privacy an ‘elitist concern’. In parallel, it struggled to explain why it ordered the mandatory linking of Aadhaar to all possible services from railway tickets to school admissions. The Supreme Court ultimately had to step in and severely curtail the domineering designs of the project.

9. Erosion of India’s control in Asia

A small island nation like The Maldives feels confident in spurning India, Nepal has no compulsion about engaging with China as does Sri Lanka. Until five years ago, India enjoyed a pre-eminent position in the subcontinent with its voice wanted on resolving matters within these countries. It is clear that that control has been eroded because of a foreign policy lacking any rational objectives, except to promote the Prime Minister’s cult of personality.

10. Jobs

When the government has to revise the attitude for calculating GDP to make its numbers appear artificially higher, when capital flight on an unparalleled scale takes place, when companies turn to external lenders to finance operations, you know the government has failed to create jobs.

The main opposition Congress Party listed out what it called the major failures of the government, including a waning economy, rising unemployment and inflation, and COVID-19 mismanagement. Congress leader Rahul Gandhi said the government needs to have the right intention, policy, and willpower to fight the coronavirus and not just a monthly talk (Maan Ki Baat). This government is hurtful for the country as it has betrayed the faith of the people of India. It is betraying the trust and the inherent faith the people reposed in prime minister Narendra Modi,” he said. “This is a deception of the worst kind heaped upon 140 crore Indians by a government they are chosen based on countless promises. After seven years time has come to do stock-taking. Time has come to ask why the country is suffering,” he said.

The Congress also came out with a 4.5-minute video, “Bharat Mata ki Kahani”, listing out the “failures” of the government in the last seven years.

The GDP growth in the first quarter (April-June) of 2020 over the first quarter of the previous year has been minus 24 percent according to preliminary official estimates. But most knowledgeable people believe that even this is an underestimate of the actual contraction brought about by the lockdown. In fact, a former chief statistician of India, Pronab Sen, believes that the actual contraction would have been about 32 percent. Others put the figure even higher.

The most important facet of the lockdown was that the lakhs of workers who lost their jobs directly and most of who started trekking back to their villages hundreds of miles away were not given any relief by the State. There was no universal food or cash transfer to the population from the State unlike in most other countries. The 5 kg of additional food grains per head per month promised to about 80 percent of the population reached only a fraction of them because of the rigid insistence upon identity proof; and no universal, or even extensive, cash transfers were even promised.

This brings us to the crux of the matter. The adversity staring the Indian economy consists not in what we have just experienced, but in what lies ahead. During the lockdown, lakhs of workers who lose their employment and hence incomes, have to run down whatever savings they have accumulated until then, or to borrow from others, in order to uphold even their subsistence level of consumption. When the lockdown gets lifted, they have to reload their depleted stock of resources or pay back the debt they have incurred; therefore if they get employment after the lockdown, they do not consume their entire income but only a fraction of it, in fact, a smaller fraction than they would normally consume.

If one delays the purchase of a car, say, or a scooter or children’s toys in a certain period because of being restricted to the home, then that does not mean that one buys two scooters or two cars or two baskets of children’s toys when this confinement is over. So, the pent-up demand argument is a minor one that does not negate the tendency towards over-production arising from the need to forego consumption for paying back debt or rebuilding one’s resource stock.

The second mitigating factor has to do with the fact that inventories are run down during the lockdown, which has to be replenished after the lockdown is lifted. This creates some additional demand when the lockdown is lifted, but even this is a minor factor that would not offset the tendency towards overproduction.

In fact, Narendra Modi has proven himself a liar through his multiple statements which went viral by electronic media. Here are some clippings attached.

In support of my article, I attaché here with some crucial economic data collected from various sources  (mentioned below). This will open up your eyes to the real economic situation of present India vis a vis its earlier position.

Conclusion

Structural adjustment was not merely an effort to modernize the country’s economy and tie it closer to the world economy. The reforms meant a new division of labor between state and private engagement in the economy. The idea of a ‘mixed economy’ which was established by economic elites in the years before independence, was diluted by Indira Gandhi in the mid-1970s and later by Rajiv Gandhi in his liberalization attempt in the 1980s was entirely given up after 1991. The 1980s saw an opening of many sectors to private investors that earlier had been reserved for the state. In the 1990s the state was actually withdrawing from these activities. Economic reform, social development, and conflict in Indian politics seemingly ruined people’s aspirations. Especially India’s big business houses benefited from the licensing mania. They could afford to employ whole sections specializing in navigating the jungle of laws, regulations, and procedures. They had advantages over smaller companies who drowned in the flood of forms and regulations. As they were wealthy enough to make things happen they were not only protected by the system in place from international competition, but also from internal rivals.

Structural adjustment was not merely an effort to modernize the country’s economy and tie it closer to the world economy. The reforms meant a new division of labor between state and private engagement in the economy. The idea of a ‘mixed economy’ which was established by economic elites in the years before independence, which was diluted by Indira Gandhi in the mid-1970s and later by Rajiv Gandhi in his liberalization attempt in the 1980s, was entirely given up after 1991. The 1980s saw an opening of many sectors to private investors that earlier had been reserved for the state. In the 1990s the state was actually withdrawing from these activities. Economic reform, social development, and conflict in Indian politics seemingly ruined people’s aspirations. Especially India’s big business houses benefited from the licensing mania. They could afford to employ whole sections specializing in navigating the jungle of laws, regulations, and procedures. They had advantages over smaller companies who drowned in the flood of forms and regulations. As they were wealthy enough to make things happen they were not only protected by the system in place from international competition, but also from internal rivals.

Economic expansion in India was restricted because of widespread poverty and the limited purchasing power of the masses. To perform well internationally, technological modernization was needed as high import restrictions of earlier decades had delayed modernization. Many factories were far from state of the art, and without technological modernization, export orientation for industrial products was hardly feasible.

Concentrating on big business development also meant a slow expansion of employment while neglecting agriculture and small and medium enterprises. Consumers felt the consequences of this old economic structure as consumer items were costlier and of lower quality compared to international standards.

How a bad leadership can bring disaster for a country that can be a topic of discussion for the future economy students. Still, all is not finished. Good governance and a candid dynamic leadership like (Lee Quan Wee of Singapore) will definitely emerge to save India in near future. With this hope and aspiration, I conclude my articles here. While drafting this article, I took multiple references from different journals, books, research papers, media, and websites. I sincerely acknowledge those contributions as listed below.

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Above article is written based on the various under mentioned inputs

·   Research paper of Eberhard Weber | World Bank Report | Economic Theory & Development- Kaushik Basu | Article written by McCartney |The Print |The Wire|Aljazeera|Indiainfoline| The Mint|The National Herald | The Hindu| Modilies.in | Australian Institute of International Affairs.

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