Commentators would suggest that for the Modi government, a lot rests on the Union Budget that the Finance Minister Arun Jaitley is due to present on February 28. The financial press is clear: this is apparently the time for this government to prove conclusively its "reformist" credentials. The argument is that this is necessary after a period in which both domestic and foreign investors have felt frustrated that the Prime Minister's evident love of bombast and rhetoric has not translated into sufficient policy change. So, this Budget is supposed to be a declaration, to Indian big business as well as to the ever-watchful foreign business interests, that Modi and his team are really there to support them.
Many would argue the opposite: that in actual fact, so far all the Modi government has done - in terms of substantive economic policies - is to support big business in various ways.
Thus the ordinance brought in to kill the Land Acquisition Act (which was passed unanimously by both houses of Parliament under the UPA government only a short time ago) is clearly a move that pushes business interests against the rights of farmers and small holders, who will now be even more prey to unjust displacement and inadequate compensation for the forcible takeover of their land. In other, quieter, moves, the central government has relaxed the most basic requirements and provided clearances for a host of dodgy projects that were held up because they did not meet the required environmental norms. This will benefit private business and allow greater profits even as it will have major consequences for the well-being of people, as Indian citizens will suffer more from polluted and degraded environments.
But the nature of capital is that it is always hungry for more, and clearly what has been done thus far is not enough for the prospective investors. This is why, despite grandiose declarations of interest and much positive body language emanating between Modi and various global leaders, there has thus far been precious little in terms of actual investment commitments. Investors are waiting for something more tangible: evidence that their funds will land in areas already made fertile not just by loud promises but by actual public investment in infrastructure, in proactive industrial policy and (perhaps most of all) clear likelihood of higher demand from a growing domestic market.
In all this, there is some contradiction, both in investor requirements and in the Modi government's own approach.
A vibrant economy requires rising incomes, not just among the relatively few rich, but for the bulk of the people. But this government's strategy is predicated on making the Indian economy appear to be competitive by keeping workers' wages low and denying them the most basic protections.
Private investors presume that infrastructure will be made available through public investment, but this government still persists in the futile hope (that should have been thoroughly demolished by the UPA experience) that Public Private Partnerships will provide the much-needed infrastructure without the government having to spend too much.
Economic growth requires most of all some degree of social stability and at least some public perception that all citizens benefit to some degree from the inclusiveness of growth – but this government has been making vicious cuts in the most essential social programmes and cutting back on essential public spending that directly affects the poor.
The basic economic approach of the Modi government is clear, and it is essentially a bumped-up version of the strategy followed by the state government of Gujarat when Modi was Chief Minister. It is one in which large corporate players are offered large explicit and implicit subsidies as well as a range of other incentives in the hope that their consequent investment will generate GDP growth. It is a model that valorizes income growth above all else, regardless of the nature or implications of that growth for human lives. So it underplays ecological degradation, human displacement and worker insecurity as necessary if slightly unpleasant by-products of the growth process. And it has little patience for those aspects of democracy (such as concern for the marginalized or recognition of dissenting views) that make such a growth process "messy".
This was a model that worked in the state of Gujarat only to the extent that it could rely on exploitation of the state's natural resources and other geographical advantages, as well as allow a significant increase in the debt burden of the state. Even so it was unsuccessful in improving the lot of the workers and peasants of Gujarat, with real wages among the lowest in the country despite rapid aggregate growth.
Given this approach, it should have been easy to predict what is in store in the coming Union Budget - more of the same in terms of open and disguised subsidies to the rich and further compression of social spending that benefits the poor and indeed the bulk of the population. But the recent election results in Delhi may have created some doubts.
Depending upon what lessons are drawn by Modi and his economic team, we could well see some attempts to placate (or at least provide the right noises) the great majority of citizens. The problem is that this will have to be done while continuing to deliver – or even increase the level of incentives - for private capital.
This is a tough call, made tougher by the fact that real economic growth is unlikely without more active public investment and a broader base for the domestic market. The promised "acchhe din" may still be far away for India's citizens - and the irony is that they may not be within reach even for the Modi government.
Renowned economist Dr Jayati Ghosh is the Professor of Economics at the Jawaharlal Nehru University in New Delhi. She is also a member of the National Knowledge Commission set up by the Indian Prime Minister.
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