India: ‘Mistrust Economy’ or ‘Modinomics’?

DESPARDES — When Narendra Modi was first elected in 2014, many hoped he would focus on the economy over social issues.

Five years hence, the world’s third-largest economy is in spotlight for almost everything else newsy– there has been significant progress on building a Hindu temple at Ayodhya’s Babri mosque; Revoking Kashmir’s special status; and a project to disenfranchise all “foreigners” in the border state of Assam has been concluded and may be extended to the rest of India. Also, a national law effectively banning religious conversion may not be far off. Meanwhile, violence from and lynching by self-styled “cow protectors” have increased geometrically on global watch.

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During these years– and lately with speed (during PM Modi’s second stint), effectively and efficiently the BJP-run government in Delhi has moved forward on the core aspects of its ideological agenda: the banning of cow slaughter, the building of a temple at Ayodhya, combating the perceived demographic threat to Hindus from migration or conversion, and denying autonomy to India’s Muslim-majority state of Jammu and Kashmir.

These issues have taken a toll on trust and confidence among the liberals across socio-economic divide and has inextricably entwined with the country’s national politics making it divisive and polarized, and therefore the status of secularism at stake. The Modi-wave in 2014 marked the rise of the right-wing BJP’s Hindutva doctrine and their absolute power in India, observers say.

All these are happening though while a slow, dilatory and timid approach of Modi’s government at structural economic reforms make a growing number of international players anxiously wait to land at world’s second largest consumer society worth trillions.

Being the world’s largest so-called “secular” democracy, and its millions of millennials –all feel the heat though. Add to it the marginalization of nearly 200m Indian Muslims whose socio-economic growth is becoming an existentialism issue, some independent observers say.

The speed and energy with which the BJP’s social agenda has been implemented stands in sharp contrast to the country’s economy that brings all communities together, experts say. “Mistrust abounds”.

Last week, Moody’s downgraded India’s economic outlook from ‘stable’ to ‘negative’ and forecast that the slowdown will be long-lasting.

Banking crisis due to uptick in bad loans, a rising energy usage and price, a thud in employment base, and timid efforts at structural reforms in taxation, banking, finance– all of these generally considered a medium to long-term measures specially in the region– are turning out to be “Shining India’s” show-stopper.

The fundamentals of Moody’s forecast were effected over several years, these experts say, and “exuberance with BJP social agenda at the cost of slackness with structural reforms did the rest”.

Following Moody’s forecast, this week’s Bloomberg report that India’s factory output has witnessed its steepest decline in eight years comes as no surprise to independent observers. It dovetails Moody’s downgrading the outlook from stable to negative– the economic growth has hit a six-year low it said.

That India’s factory output has shrunk to the lowest level in eight years and the banking crisis has hit a new benchmark– is a hallmark of an economy under stress. The NY Times dubbed it “Mistrust Economy”.

An American business and financial professional of Indian-origin (who didn’t want to be named) considers the situation ‘Modinomics” at work.