Yesterday I heard a BJP spokesman, Sambit Patra, blithely claiming that when the NDA government of Atal Behari Vajpayee demitted office in 2004, the GDP was growing at 8.4 per cent and when the UPA regime under Manmohan Singh lost the elections in 2014 the GDP growth was down to 4.8 per cent. He made an attempt to wring some humour out of the reversal of growth figures, which would have been quite neat but for the fact that it is an outright lie.
The fact is that the Vajpayee NDA government had an average GDP growth of 6.1 per cent, while the two Manmohan Singh UPA tenures had an average GDP growth of 9.4 per cent and 7.4 per cent respectively. It’s in the final year of UPA-2 that growth did drop down to 4.7 per cent, but let’s not forget that GDP growth calculation was tweaked in 2015 by the Narendra Modi government to add 2.2 per cent to GDP growth. Applying this methodology to the previous years we get a GDP growth of 6.9 per cent for the last Manmohan Singh year, a figure higher than the two first years of Mr Modi.
Yet Mr Modi thinks his government is doing better and claims: “India’s economic success is the hard-won result of prudence, sound policy and effective management.” It seems there is a little more than that. Take GDP growth for instance.
Few argue that the “real” GDP growth is 7.4 per cent, as his government is claiming though there have been serious misgivings on how the GDP calculations were tweaked to jump growth a further 2.2 per cent. The problem here is the use of the term “real”. In the real world, the number that matters is the “nominal” GDP growth rate, which is a measure of current market prices. For much of the past decade India’s nominal GDP growth was in the 10-15 per cent range and corporate profitability growth was also in that range. Since inflation used to be in the four-eight per cent range, real GDP was in the six-nine per cent range. The present nominal GDP growth is 5.2 per cent and instead of inflation we have a deflation of 2.2 per cent giving a real GDP growth of 7.4 per cent.
But India’s crisis is not that of inadequate GDP growth. We are doing well, irrespective of regime, for the past decade and a half because we are on a demographic pathway, which automatically confers growth. But Prime Ministers and political parties like to appropriate this because otherwise they have done little to make the economy more efficient and expand enough to generate jobs and create a labour demand that will push up wages. The Modi government has abysmally failed to create new jobs.
Consequently, the PM has typically embarked upon creating his own facts. He often refers to his flagship job creation programme, the Pradhan Mantri Mudra Yojana. The Micro Units Development and Refinance Agency (Mudra) claims it has disbursed 3.22 crore loans amounting to Rs 1.43 lakh crores. The PM then makes the rather far-fetched assumption that every such loan would have created at least one job each. Thus, he gets an astounding figure of 32 million jobs created by just Mudra alone. But at least 60 per cent of these loans are in the sub Rs 50,000 category — small loans that are used for trade and micro manufacturing.
But where does most of this money go? They have mostly been given for purchasing vehicles for goods and personal transport, starting or expanding saloons, beauty parlours, gymnasium, boutiques and tailoring shops, etc. All investments incapable of creating many new jobs. But the PM thinks or wants us to believe that all is hunky dory. Maybe because Gujarat gets the highest average in small loans — over Rs 55,000 each. The next average loan size is in Maharashtra where it is Rs 37,000. Can anybody other than the nation’s PM believe that this would have created 32 million jobs?
Then came the big self-goal — demonetisation — an act that sucked out 86.4 per cent of the cash in market. He gave three reasons for doing this. He said he was ridding the nation of “black money”, counterfeit currency and terror financing. Mr Modi is going to speak to the nation and I am pretty sure he will, aka George W. Bush announced “Mission Accomplished”. I however believe like the Americans are still in a highly fractured and fractious Iraq more than a decade after that announcement of a victorious conclusion to an inglorious invasion, the government will still be fighting these scourges for a very long time. The reason is that the deed was not as much meant to do a job but to score brownie points with a disenchanted nation and to regain the lost support.
The PM’s “surgical strike” on black money has devastated the economy. Now look at the scale of damage caused. India has a work force of close to 450 million. Of these only seven per cent are in the organised sector. Out of these 31 million about 24 million are employed by the state or state-owned enterprises. Of this vast reservoir of over 415 million employed in the unorganised sector about half are engaged in the farm sector, another 10 per cent each in construction, small-scale manufacturing and retail. These are mostly daily wageworkers and earning less than the officially decreed minimum wages. At least 22 crores daily workers have suffered loss of jobs. When you render such gigantic numbers jobless you devastate the economy.
Tens of lakhs of small farmers, particularly vegetable and fruit growers have lost standing crops due to fall in demand. Small farmers are predicted to suffer a slowdown of growth from 20.6 per cent to 8.8 per cent of growth. This covers almost 70 per cent of the farm sector. About two crore small retailers are also expected to suffer consequential losses due to a sudden fall in demand.
Some facts are already in hand. Two wheelers are the bellwether of the rural economy. The market grew 16 per cent April-October to 11.34 million. That growth fell six per cent in November to 1.34 million and the industry expects it to fall by a huge 35 per cent in December, lowest level in six years. Clearly the “surgical strike” was in fact a carpet-bombing of the economy.
