NOTExt week, it will be seven years since Narendra Modi was first sworn in as Prime Minister. A lot can be said about this period, but one point stands out: The three things that in the past derailed the economy were mostly missing. The first is war. There were no big ones after the three in 1962-71, all of which extracted their prices through inflation, currency crises and recessions. In the Modi years, clashes with the Chinese had no impact on the economy. The government has been relaxed enough about the situation to continue cutting defense spending relative to GDP.
The second risk is drought, which marred the first two years of Modi’s reign. Value added in agriculture recorded more or less zero growth in 2014-16. The following years saw fine agricultural growth of over 4 percent on average – although mainly driven by livestock and fishing, not crops. In fact, with the share of crops in agriculture falling to just over half, even as agriculture’s share of GDP has fallen, droughts now have a much smaller impact on economic activity. Economic growth during the two drought years has averaged 7.5%, among the best in Modi’s tenure.
The third factor that derailed the economy in the past is oil, whose spike in prices sent India twice to the International Monetary Fund for emergency loans, in 1981 and 1991 (another time was in 1966, after the war). Oil prices also brought the country back to one of the “fragile five” in 2013. Fortune smiled on Modi as oil prices fell sharply as soon as he took office. After averaging around $ 110 a barrel in the two years before he took office, Brent prices have only averaged around $ 60 since then. This improved the trade balance, moderated inflation and allowed the government to profit by increasing taxes on petroleum products.
In other words, Modi seemed blessed with what Napoleon wanted for his generals: luck. But luck has run out on Modi, and so it seems to make administrative sense. The once-in-a-century pandemic has been raging for more than a year, reducing the government to a muddled mess. It has wreaked deadly havoc, caused the largest increase in unemployment in living memory and now threatens to halt recovery after a ruinous year that saw a record drop in economic activity.
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Other countries have suffered and spoiled as well, but as the Modi government has let its citizens down on vaccines, test kits, oxygen and hospital beds, it has come under heavy criticism in the international media. The Prime Minister’s reputation for getting things done – and there is a long list of accomplishments to back it up – has been battered, which he surprisingly failed to do after similar chaos reigned in the wake of demonetization. in 2016. minister.
The numbers suggest a peak in the second wave of the pandemic, giving authorities and on the frontlines some leeway. But as scientists warn of a possible third wave, that wave may already be here, but invisible – in the vast rural areas where toll undercoverage has hidden the extent of the devastation from view. Under-counting may be deliberate or simply the result of a lack of medical infrastructure and administrative capacity. Who should count if people just get sick and die out of sight, and their bodies are buried in the sand or thrown into rivers? Some reported documents suggest a doubling of the usual death rate, implying a much more gruesome toll than official figures.
Can Modi recover? Yes, if he shows that he can steer a ship in a storm, don’t hide in his cabin and give advice. He and his style of operation have become the subject of biting satire. Senior ministers are responding, even as the intimidated courts and the media have turned outspoken. The country is in a difficult mood to apprehend. Is it sorrow with resignation or anger? Either way, Modi faces headwinds.
By special arrangement with Business Standard.
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