#91 Hope And Despair In India🎧

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- RSJ

If you haven’t been living under a rock, you would have come across this Andy Mukherjee column in Bloomberg over the last weekend. Titled ‘Why I’m Losing Hope In India’, it is a searing and despairing piece on how India is losing its window of opportunity for growth and prosperity. By Mukherjee’s own high standards of writing op-eds, it is a tour de force.

Predictably, the reactions to it have swung between extremes. There are those for whom Mukherjee has voiced, in limpid prose, their anxieties and disappointments with how things are turning out in India. For others, this is another elite, wringing his hands and pandering to his own discredited lot, as a new and different India takes shape. The few belonging to neither camps have praised the piece for raising pertinent issues but have taken exception to the deep pessimism pervading it.

Now, there are occasions when we too receive mails berating us for our pessimism about India. It is a criticism we fail to comprehend. You can contest the interpretation of facts or the logic underlying an argument. That’s understandable. It is difficult to argue on why someone shouldn’t feel a certain way. Also, like we have mentioned it a few times, the reason we write this newsletter is because of our optimism about the people of India. That by putting out our point of view regularly, we will have a public that will demand better policies from its representatives. We like to think Mukherjee feels the same way. There is no reason to question his pessimism so long as his arguments support it.

So, do his arguments merit his pessimism? Or is he projecting his biases and adding to the constant drumbeat of gloom that’s the par for the course among analysts living abroad who cover India?

Anantha Nageswaran in his blog – Why it may be the wrong time to give up hope on India? – has a factual riposte to many points that Mukherjee makes. He goes overboard a bit in defending the indefensible like demonetisation, handling of migrant issues during lockdown (quoting Bibek Debroy on some 1979 statute to absolve the Union government) and some unconvincing GDP comparisons with China by scaling them to non-financial sector debt. But these aside, he makes a good case for remaining hopeful about India. If you keep an open mind about these things, it is an interesting perspective on how many within this government might be looking at our economy in these times.

I have three problems with Mukherjee’s columns where his love for rhetorical flourish or a lack of economic understanding comes in the way of a reasoned argument.

* Mukherjee believes there’s a structural demand deficiency in India and the consumption led boom that sustained our economy has plateaued. For some reasons he believes all the recent reforms in farm or labour sector or the work that he praises this government for in areas like affordable health, formalisation of finances, providing for cooking gas, sanitation, and clean water, will only debottleneck the supply side. Not much will turn on the demand side. I don’t understand why he thinks so. It is true this government’s economic response to the pandemic has been largely supply-side focused. But that’s different from the demand generation potential of many of these ideas. You could argue with the economic merits of PLI (production linked incentives) or the atmanirbhar policies but in the short run it will boost employment and demand. The investment in public infrastructure in pre-covid era like on building national highway network or the work done under PM Grameen Sadak Yojana is good for solving structural demand issues. Like we have argued in the last edition, it is early days, but the speed at which demand has bounced back in many sectors after lockdown was lifted has surprised all of us. This isn’t a sign of structural demand deficiency.

* There have been many other columns of Mukherjee where he points to the problem of India’s stressed financial systems. This is widely understood as a problem. He mentions this here too. But what’s the solution? Is it a stringent bankruptcy code like that was put in place in February 2018? We have argued here that the IBC is a good reform that needs some runway before it can be made more stringent. Trying to be too harsh about insolvency guidelines will likely lead to that familiar policy issue in India – operation successful, patient dead. Besides, the root cause of many of these NPAs are in discretionary power of the state, the difficulty in getting projects off the ground in India and consistency in policy making. None of this is a financial sector reform. A lot of this precedes this government. My limited point here always has been to cheer every minor reform in these areas without being overly critical of it. It takes a lot to get reforms going in India. It is one of the reasons the farm bills need to be supported.

* Mukherjee also, surprisingly, goes for some convenient north-south divide narrative. The south, in his opinion, is better governed, faster growing and has therefore remained immune to the strongman charisma of the PM. The north, on the other hand, appears a bit of a basket case in the column. To quote Mukherjee:

“Sadly, I don’t see northern India’s economic pessimism — or its caste enmities, religious hatred and deep-seated misogyny — making way for a less toxic, more aspirational politics.”

Firstly, these have been features of north Indian politics for ages, aided and abetted by every large political party in these states. It isn’t a BJP created political environment. Secondly, you can argue the north isn’t as progressive on many metrics as the states of the south. But they aren’t regressing. On almost every parameter, social or economic, the northern states have continued to make progress. Of course, much needs to be done. But to ‘blame’ northern states to have been taken in by the PM and his brand of “chest-thumping nationalism and an atavistic yearning for a pre-Islamic past” isn’t exactly the most constructive way of taking this debate further.

These points aside, there’s a lot there in the Mukherjee article for us to reflect upon and debate with those who think all’s well with us. It isn’t whether we should be losing hope in India. The real question is what we can do to keep our hope about India alive. There are no full stops in history. Every phase, however interminable it might seem then, is transient in the long run. Public policy advocacy, like we never tire of repeating, is a marathon. We run on hope. 

HomeWork

Reading and listening recommendations on public policy matters

* [Podcast] The Diplomat’s Asia Geopolitics podcast host Ankit Panda (@nktpnd) speaks to Abhijnan Rej, The Diplomat’s security and defense editor, about how a Biden administration in the United States is likely to approach South Asia.

* [Article] Business Standard on India’s lost decade

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