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    South Asia
     Dec 23, '13

Li's turn to try the Modi, Manmohan juggling trick
By Samir Nazareth

The history and development of economic thought and practice is littered with those propounding how the individual and the state should spend and earn money; from Plato to Adam Smith, the Mills father and son duo, Marx and Engels, to Keynes and numerous Nobel prize winners, there is no shortage of economic theory on the topic.These people were also teachers and had the ears of those in power. Chanakya and Confucius gave counsel to their respective kings. Confucius, whose

philosophy was based on ancestor worship, equilibrium and respect for a central authority, was also a well-respected administrator who travelled to other minor kingdoms to share his expertise.

Understandably, much economic theory has been based on man's position and role in society and also the meaning, role and function of society. Most theorists have remained just that, unable to implement their theories. This was left to either the king or in more recent times the government.

Religion, too, touched on economic thought and practice. Islam had zakat, riba and many other concepts, while Jesus had many a parable to do with money and spoke against the tax collector and what he represented.

Sanatana Dharma, now known as Hinduism, had Lakshmi, the goddess of wealth and prosperity, who is also depicted as Shakti, the divine female creative power. Lakshmi is also the consort of Vishnu, the supreme being.

Maybe ancient thinkers from what we now know as India wished to indicate that wealth either manifests itself as power or sits at the same table as power. This imagery still besots, influences and guides Indians who regard wealth as the great solution and its acquisition as the goal.

With economic liberalization, people have greater opportunity to convert their thoughts into actions. Theorists' economic models and resulting policies are stamped with their names, giving their economic paradigms a human face.

Take for example Narendra Modi, chief minister of India's Gujarat state since 2001 and the poster boy of the Bharatiya Janata Party (BJP) as it prepares itself for elections, due to be held early next year.

The BJP is a right-wing political party known for its use of religious identity, which colors its economic policy and is sold by them as aimed at bringing back "Ram Rajya", the kingdom of Rama.

What Modi is touted to have done for Gujarat in his more than decade-long control of the state has drawn plaudits from the business world and from lay people, both forgetting the concerns voiced by many in India, including respected industrialist and parliamentarian Rahul Bajaj in 2002 in the aftermath of riots in Gujarat between Hindus and Muslims when Narendra Modi was chief minister.

Many Hindus today live with a sense of diminished pride and of being wronged by history - the destruction of the holy temple in Somnath by Mohd of Ghazni centuries ago, being ruled by Mughals and finally the Partition that lead to the formation India and Pakistan are seen as incidents that robbed their land of its true historical and geographical stature. Thus these Hindus constantly attempt to regain their pride, which in many instances implies playing with Muslim sentiments.

This is exacerbated by the belief amongst this set of Hindus that in independent India political parties like the Congress give handouts to the Muslims at the cost of the Hindu majority. The resultant animosity is a socio-religious tinder box that results in regular conflagrations. It was in such a backdrop that a group of Muslims murdered right-wing Hindu activists on February 27, 2002, at the railway station in the town of Godhra in Gujarat.

Those murdered were returning from a visit to the disputed Babri Masjid, where an unused ancient mosque had been destroyed by Hindu revivalists in December 1992 in a warped attempt to undo history and regain lost Hindu glory. Modi, as chief minister, is alleged to have given permission to parade the bodies through the streets against the advice of the state police. He is supposed to have told the police to "let the Hindus vent their anger". This resulted in the riots of 2002 and they remain a shadow over his potential rise to the country's leadership.

Against that, there has been much hype about the economic growth in Gujarat under Modi. The state's economy has certainly grown strongly over his tenure, in the past six years notching up annual increases in its gross domestic product of between more than 9% to just below 14%. However, those rates are surpassed by several other states, such as Bihar and Uttrakhand to name just two, but that fact, for some reason, never makes it to the headlines.

To create an aura around Narendra Modi, there is a lot of hype about his "golden touch" that supposedly turbo-charged Gujarat's economy during his time leading the state. His candidature to be prime minister is based largely on this ability. According to a Planning Commission document released in October this year, under "Real Growth Rates of States - GSDP % [change in gross state domestic product] at Constant Prices", Gujarat's growth in the six financial years ending in March 2012 was 10.13% - trailing the growth in Tamil Nadu (10.30%), Sikkim 18.48% and Uttrakhand (13.15%) - and those other states have done better without Modi and with the added bonus of not beating their chests to boast of their their economic success.

The annual investors' meetings in Gujarat see businessmen promise millions in investment and media trumpet the event. However, other states too receive foreign investments. Between 2006-2010, Gujarat was able to sign foreign direct investment agreements worth 5.35 lakh crore rupees, or US$119.3 billion, which has the potential of creating approximately 600,000 jobs. However, the state of Maharashtra has been able to get more bang for its buck - 4.20 lakh crore rupees, or $93.6 billion in investments in the same period, but with the potential of creating more than 800,000 jobs. [1]

It would seem that Modi may be a creation of a lot of marketing hoopla and fanfare as much as he is an economics wizard. APCO, the PR firm hired by his government, has done an outstanding job.

Modi's economic philosophy can be encapsulated by his mantra "P2G2" formula or "minimum government, maximum governance". This philosophy can be better understood by the fact that Narendra Modi holds 11 portfolios in his government. His government website makes it more clear, stating that Modi looks after "All Policy Matters and Ministries not allotted to other Ministers".

Over the past few months, many newspapers in India have discussed the glaring disparity in urban average daily wages between those working in Gujarat and the rest of India. According to the National Sample Survey Organization, the average daily wage in Gujarat is 44.52 rupees, [2] or US$2.65, against 170.10 rupees, or $3.12, for the rest of India.

Could these low wages be a reason for high malnutrition rates recorded among women and children in Gujarat? A recent Comptroller and Auditor General report states that 66% of children in Gujarat are underweight. Though the government of Gujarat disputes these figures, the state's own Women and Development Minister has in a written reply to the Gujarat State Assembly said that at least 600,000 children in 14 districts are malnourished - data for the remaining 12 districts were not available to her. A 2011 survey of more than 100,000 children across India by the Nandi Foundation found that 42% were underweight.

Christophe Jeffrelot, senior research fellow at CERI-Sciences Po/CNRS, Paris and Professor of India Politics and Sociology at King's India Institute, London writes in an article titled "No model state", (Indian Express, September 16, 2013) that Gujarat's progress is due to handouts to industry at the cost of the state exchequer; the state gets another hammering because its progress is fueled by large-scale debt, which stood at 45,301 crore rupees in 2002, or US$9.3 billion at the then exchange rate, and is now at 1,38,978 crore rupees, or $25.5 billion at the current exchange rate, for a population of around 60 million. [3]

Uttar Pradesh has a similar debt, of $29 billion, despite a vastly larger population of 199.6 million, and West Bengal, population 91.3 million, one-and-a-half times as big as Gujarat, has debt only slightly larger at $35.3 billion.

Jeffrelot explains his concern saying "In terms of per capita indebtedness, the situation is even more worrying, given the size of the state."

According to a report by rating company ICRA , Andhra Pradesh, Gujarat and Punjab were relatively more indebted in 2010-11 (21.5%, 23.2% and 31.4%), respectively, as a proportion of gross state domestic product ... as compared to the consolidated average debt/GDP ratio of the Indian States (20.3% of GDP)."

Could Modinomics be leading to a decline in the well being of the average citizen of Gujarat and of the states' financial well being?

Linomics, propounded by Chinese Premier Li Keqiang, goes in a slightly different economic direction. He has put in place policies to reduce environmental pollution and wants to decrease his country's wealth gap. He shared his economic vision with the World Economic Forum: "We need to spread the fruits of reform and development to the whole population ... increasing spending in some key areas, such as western regions, social welfare projects and smaller firms."

Confucian thought, though initially vilified in early Communist China, has found varying interpretations in today's Chinese economic policy and governmental control. The Communist Party uses the idea of respect for central authority to maintain its hegemony - although others view Confucian thought as focusing on soft power and less government. In the policy direction chosen by Li, there seems to be an effort at creating balance. Is Confucian influence on the premier's economic policy creating Linomics?

This policy seems to be a culmination of what began with Mao's Big Leap Forward followed by the Cultural Revolution, the Gang of Four and finally the economic reforms that began in the late 1970s.

That being said, one wonders whether this is another experiment conducted with the Chinese population as guinea pigs, which was what all the above eras were - everything from creating communes to the horror of tattling on parents by children during the Cultural Revolution to the One Child Policy (and hence a generation of Little Emperors - spoilt Chinese children), to high levels of pollution and suppression of protests. A certain brutalization was accepted, but it was not only people and cultural history that were taken for granted in this march of progress; the environment also was given short shrift.

Though it is still too early to see the impacts of Linomics, some things have not changed - crackdowns on free speech and executions. Premier Li, like his predecessors, is also focusing on people to give the economy a push. His idea is to create a bigger home-grown consumer base, with less focus on exports, credit and investment. Thus once again people are being used to further Chinese economic policies.

Back in India, one of the astounding bits of information that comes out of the 2012-13 Annual Economic Survey is that pre-liberalized India was growing at rates similar to Asian economies such as South Korea, China and Indonesia that had already "taken-off", the per-capita income hovered around $90 (at 2000 figures).

After India's take off (1991), the pace of economic growth declined and the country was able to keep up only with Indonesia. According to Indian government figures, the average GDP growth rate between 1980 and 1995 for India, China, Indonesia and Korea was 5.6%, 11.1%, 6.6% and 8.7% respectively.

The annual survey points out that for 2010-11, India's Gini coefficient, a measure of income inequality, was 36.8, lower - that is, there was less inequality - than countries like South Africa, Brazil, China and Israel, but India's Human Development Index ranking was lower than these nations - that is, the people's circumstances and possibilities were worse than in those other countries. What that means is that even though there is less income inequality in India today, Indians are either not able to access, on their own or through the government, a range of social and medical facilities that would improve their lives.

This all began with the liberalization of India's economy now stamped with the sobriquet "Manmohanomics". Today, 22 years after then finance minister and now Prime Minister Manmohan Singh opened up the Indian economy with his neo-liberal policies, many are left wondering why the country's economy is not roaring ahead. GDP grew at 9.3% in 2010-11, however current growth rate is approximately 4.8%.

As finance minister, Manmohan unshackled the industrial licensing regime and created the financial markets this lead to a spate of companies selling their stake to the public. This lead to the rise and fall of people such as stock broker Harshad Mehta who manipulated the stock market in 1992 creating a $770 million fraud.

Since then, the economy has had its share of scams; seen the birth and rise of the services sector along with the decline of agriculture as a share in the country's gross domestic product; and witnessed an increase in migration from the countryside to the cities. Though policies have now been tempered with efforts at social inclusion leading to better access to education, sanitation and financial services, many Indian citizens claim that what the government gives with one hand it takes with the other. Many want the process of liberalization to continue.

Each of these three people are at different junctures of their public life - Modi is the prime ministerial candidate for the right wing BJP, Manmohan is prime minister and may hold on to this position if the ruling United Progressive Alliance retains power in 2014, and Li is a relative newbie wishing to make a mark in China.

In spite of their differences, they have each been able to go beyond economic theory and create an agenda that has changed the economic environment of their constituencies. These people are recognized globally because their policies have gone against the norm.

It would not be wrong to say that the highly marketed Modi, with his economic policies, is where Manmohan was in 1991. But the real question is whether the 2002 riots were the foundation on which Modi's economic policy of Gujarat was laid - the peace and quiet since the riots is sold as an incentive to potential investors. Today Manmohan and Li are trying to juggle social well-being with liberal economic policies and find that it is like trying to fit a circle into a square.

Thus, even though each economic paradigm may seem distinct because of it having the personal stamp of an individual, they have one thing in common - the human angle; either because their policy is bereft of any consideration for the population or because now their policies consider the needs of the broader population in an attempt to rectify mistakes made in the past.

1. Using an exchange rate of USD = Rs 44.85/-, the average of exchange rates between 2006-10 calendar years.
2. At an exchange rate of US$1 = 54.4 rupees for the fiscal year to March 2013.
3. US$1 = 48.5993 for 2002 calendar year; US1$ = Rs 54.4 for FY 2012-13.

Samir Nazareth is a commentator based in India. He can be contacted at samirnazareth@hotmail.com.

(Copyright 2013 Samir Nazareth)

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(Dec 13, '13)

Modi faces Indian political currents
(Dec 5, '13)



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