Modi should worry less about criticism and more about India's economic crisis
Prime Minister Narendra Modi has said that pessimists are exaggerating the economic downturn India is witnessing. Perhaps, this is the leading impression in the prime minister's close circles: an echo chamber in which he is comfortable living. But few of us have the luxury of stepping out and speaking to ordinary citizens, and if Modi could do the same, he would be able to see the ground reality as well.
The numbers predict gloom.
Let's start with the fact that India's growth has fallen to 5.7 per cent. If the same figure was calculated by the methodology used before the Modi government came to power, it would stand at 3.7 per cent. I have felt the impact of these numbers closer to home.
On my way to work in Delhi, I often pass the Essex Farms traffic signal near the IIT campus. It's a busy junction, and, predictably, teeming with beggars in a city bustling with flyovers — here, I noticed, the number of alm seekers had gone up. At a market near my house in Noida, I witnessed the same. When I chatted up one of them, she informed me that she was engaged as a daily wage worker in one of the many construction projects lying half-finished in the capital. Most major construction projects in the suburbs of Delhi are waiting for funds and demand to pick up again.
It was just a few years back that construction magnates were going on an overdrive, launching housing projects. India's young population was touted as its greatest strength and the country a hotbed for realty. They were expected to do well for themselves, to buy houses to make a suburban city life. Few of my friends, who invested in these properties, are now regretting their decision while they continue to pay EMIs on home loans.
Many of them wouldn't be paying their EMIs - one of the many reasons why debts are increasing the pressure on nationalised banks.
The Indian economy is in a mess: from engineers settling for jobs with poor salaries to entrepreneurs struggling with the lack of demand, to even successful people not being able to do business in the festive months where business in India is expected to thrive. GST is killing businesses - under the scheme of things, 36 forms need to be filled every year. Many small and medium enterprises have shut down. They were only recovering from the impact of demonetisation when GST followed and halted their progress.
A friend of mine, who runs a medium-size fashion business, told me sales had plummeted by 60 per cent - this means no one is buying clothes, even though the festive season is traditionally the best time for business.
According to Reserve Bank of India's own survey, the sales of small and medium enterprises have dropped by 58 per cent and their earnings by a massive 122 per cent.
The Indian government's flagship programmes, such as Make in India, start-up India and Digital India, promised to create millions of jobs. All of them have failed to do so. A UN labour report published in June 2017 indicated that the unemployment rate in India would marginally increase in 2016-2017. A miniscule drop should not be seen as a big worry, as long as the Indian economy passes the hurdle of the new tax reform. However, the problem is much bigger. In 2016, the unemployment rate stood at 7.97 per cent - 7.15 per cent for rural India and 9.62 per cent for urban India.
In India's villages, many jobs are credited to the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which provides minimum 100 days of employment to every household.
In reality, this hardly sustains their livelihoods, so they migrate to cities and find work at construction sites or engage in other kinds of labour. Since their jobs have taken a hit post-demonetisation, the real number of unemployed is much higher.
On the other hand, for large-scale employment, manufacturing and IT sectors were seen as job creators. The former contributes 16 per cent of the GDP and employs 12 per cent of Indian citizens. The Nikkei India Purchasing Managers' Index (PMI) remained unchanged at 51.2 per cent in September 2017 - an above 50 per cent PMI indicates economic expansion, while below 50 per cent is considered contraction. Evidently, we are on the edge as these figures do not indicate a healthy informal economy.
Progress in the IT sector too looks dismal. During April-June 2017, services giants TCS, Infosys and Tech Mahindra laid off thousands of workers. This came close in the heels of a slowdown, tough visa rules by other countries and automation.
According to a report by HFS Research, automation will see the workforce decline by 4.8 lakh in India by 2021 in the services sector - a drop of 14 per cent - and there is little the government can do about it. Companies like Foxconn, the maker of iPhones, are already using robots, and this trend will continue to build.
After Narendra Modi came to power in 2014, the positive sentiment among entrepreneurs led to a barrage of start-ups being launched - 212 of them shut shop in 2016, and many of those that came up in 2017 have already bowed out.
According to a recent report, the first nine months of 2017 saw only 800 start-ups. In 2016, this number was 6,000. Instability mounts as Modi government's economic policy continues to make investors and entrepreneurs wait and watch.
PM Narendra Modi, in his speech on October 4, pointed out that Indians saved millions as LED bulb prices dropped to as low as Rs 35. He said that the same bulbs were offered at Rs 350 during the Congress regime.
The PM added that the airlines industry has seen an increase in the number of passengers. He forgot to point out that after GST's implementation, travelling by AC coaches on trains has become more expensive than economy flights.
Even if we were to believe that optimism will see us through the economic churn, there has to be some credence to BJP veterans speaking out against the government. Arun Shourie, who was the minister of disinvestment, communication and information technology under former PM Atal Bihari Vajpayee's leadership, has called demonetisation the largest money-laundering scheme. Another senior BJP member and former finance minister Yashwant Sinha has said PM Modi is running out of time as both businesses and farmers suffer, and job losses loom large.
BJP RS MP Subramanian Swamy has slammed the hurried implementation of GST. None of them holds leading portfolios in the Modi government - and the regime can shrug their comments off by calling them disgruntled, but it's time the PM paid attention to the crisis and not the criticism.
In a country of 1.3 billion people, with more than 65 per cent people under the age of 35, and a massive 600 million youth under the age of 25 to be added to its population by 2030, India’s young will need jobs.
And Mr Modi, the young are an impatient lot. It's in your own interest that you see this slowdown for what it is rather than underplaying it. You have only a year-and-half left to control the crisis.
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