India’s economic growth has slowed down further to 4.7 per cent in the third quarter of the current financial year. This is the slowest in six years. The finance minister says that this is not a poor number and is an indication of stability, meaning she is relieved that it hasn’t got worse. Her bureaucrats have assured the country that this is as bad as it gets, and have called it a “bottoming out” meaning that growth will naturally escalate on its own from here on.
Unfortunately, this is not true. While releasing this data, the Narendra Modi government also revised the figure for the previous quarter (Q2, 2019-20) up from 4.55 per cent to 5.1 per cent and for the first quarter from 5 per cent to 5.6 per cent.
This means that the figures for the last eight quarters are 8.1 per cent for Jan-March 2018, 7.9 per cent, 7 per cent, 6.5 per cent, 5.8 per cent, 5.6 per cent, 5.1 per cent and now 4.7 per cent. This is not a bottoming out. This is eight straight quarters, meaning two full years of consecutive decline in growth. And this is even if we accept the government’s figures, which many around the world are now sceptical of. The government itself says that its full year growth for 2019-2020 will be 5 per cent and that means that Nirmala Sitharaman expects growth in the current quarter to slow further to 4.6 per cent.
Outside of the formal sector, data has been difficult to collect credibly in India.
Further, the formal sector has been hammered over the last year. It has had two consecutive quarters of negative growth in both sales and profit. The Centre for the Monitoring of the Indian Economy says that corporate sales declined by 1.2 per cent in the October-December 2019-20 quarter (having declined by 2.8 per cent before that) and profits before tax shrunk by 10 per cent (compared to a shrinkage of 60 per cent in the previous quarter). None of this is an indication of bottoming out and it would be stupid of the finance minister to herself believe what she is saying to cheer up the rest of us, that we will naturally start growing from here on.
Some of the other details that came out were that gross fixed capital formation, meaning investment, was minus 5.2 per cent over the previous year. It was minus 4.2 per cent in the previous quarter. Government expects that for the full year it will be negative, meaning less money invested this year than the last.
Electricity production has shrunk and that is one of the best indicators that the economy is in deep trouble. China’s ministers have a similar problem of poor data (though better than India’s of course) to monitor economic growth. To simplify this, one of the leaders, Li Keqiang, developed a respected method of assessing growth and it was merely to look at three easily reliable numbers: railway cargo volume, bank loans and electricity consumption.
On all three, India is trending negative. The manufacturing sector contracted again, which is astonishing given that the primary focus of economic growth by Narendra Modi himself was his fancy Make In India scheme. Not only is it not delivering, manufacturing as a percentage of our GDP is actually shrinking.
Unemployment is at 8 per cent now and has been hovering around that figure for a long time. The government has refused to release its own figures on this because they show that this is the worst performance on this front by any government in five decades. There is further trouble down the line for the government. It has refused to release the data it has already collected and now it also has the problem of collecting household data.
In Hyderabad earlier this month, enumerators from the National Sample Survey Office collecting data on how much families spend on domestic travel were confronted and stopped from working. People are genuinely fearful of the linkages between the National Register of Citizens and this is the fault of Mr Modi and Amit Shah for not having assured people. The NSSO joint director in Hyderabad said she would not be able to deliver the survey to the government in the time frame given and it is possible that it may not be delivered at all: such is the atmosphere in the country today.
Without the data, the government will have no meaningful way of corrective action. You can only do the right thing when you know what the wrong thing is.
The Narendra Modi government has put itself in a position where its ideological agenda on citizenship is now directly affecting its ability to tweak and take corrective measures on the economy. The other truth is that the Indian government has given up its focus on economic growth because it is not something Mr Modi has been able to fully understand. This explains the extraordinary focus on divisive politics by the BJP even at a time when the world’s most important man was visiting India.
The coverage across the world that we have received for the violence in New Delhi is among the worst in decades. Our reputation is mud and will need to be rebuilt. And we have to do so in a period which is going to be turbulent. Global trade has taken a hit this quarter with the coronavirus. Stock exchanges across the world have been battered. The National Population Register data collection begins in four weeks time. But several states, including incredibly BJP-controlled Bihar, have said they will reject Mr Shah and Mr Modi’s NPR scheme. The government will also face neighbourhood level agitations like in Hyderabad once the enumerators fan out, producing more turmoil.
India is in the worst position economically and socially that it has been in for a very long period. I would say this going back to 30 years ago when we had both the Babri movement and the pre-liberalisation crisis happening at the same time.
And this time, we do not have the leadership to be able to steer us through it....