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Rediff.com  » Business » '90 pc of Modi's achievements are due to decline in oil prices'

'90 pc of Modi's achievements are due to decline in oil prices'

May 18, 2015 17:50 IST

'Where are our local manufacturers? Why don’t you appease them first? We are in such a position that we get our Ganesha and Krishna idols made in China!'

'This government wants to cater only to the bulging middle class population of about 300-400 million'

'Land Acquisition Act in its present form will result in lot of chaos, resentment, and frustration'

Narendra Modi rode to a massive victory in the 2014 general election on poll promises of a Shining India, where both the rich and the poor would reap the benefits of reforms. But the reality is far from what he promised. As the Narendra Modi government completes one year in office, Rediff.com speaks to eminent economists to analyse the first 365 days of the present government.

In the 2nd interview in the series, Shobha Warrier/Rediff.com spoke to S Janakarajan (bottom, left), an economist currently working as a professorial consultant at the Madras Institute of Development Studies, Chennai.

Part I in the series: 'Achche Din not here but we are moving in the right direction'

He is also a professorial associate at the Centre for Water and Development, SOAS, University of London UK. He has done his post-doctoral work at the Cornell University, USA and subsequently was a visiting fellow at the International Development Centre, Oxford University, the UK, for one year.

Janakarajan, who recently co-edited a book titled Indian Economy in Transition: Essays in Honour of C T Kurien warns that without proper infrastructure, India will never be able to build a market economy, and that is why, he says, foreign investors are hesitant and selective.

"You have to clear the mess here first if you want the international community to come and invest. You can’t sell an empty box," he says.

The Modi government has completed one year in office and many say it is 'more talk, less action'. Your comments please.

When Narendra Modi took over as the prime minister, expectations were high among people from all walks of life. People thought India was going to be a superpower under Modi. My question is, were these expectations justified? It was the people’s mistake to have such high expectations and not Modi’s. Everybody makes poll promises and he too did the same. Why did people believe that India would be transformed into a superpower in no time? I do not know what he did for people to believe in him and expect miracles.

He sold the success story of Gujarat.

He ruled the state for decades but what did he achieve? Did he eradicate poverty? Did he set right the sex ratio? Did he set right the human rights indicators? Besides opening the doors for corporates who could invest plenty of money in the state, what other big development did you witness in Gujarat? I don’t disagree that the huge investments by big corporates boosted the GDP of the state but all this happened at the cost of ecology and environment.

When investments pour into a state, doesn’t that translate into more employment for the locals?

Only in select areas. Did he manage to create employment in the agricultural sector or in the rural areas?

When he spoke of the Gujarat growth story, people believed him.

That is the problem. People believed him. Maharashtra also has a growth story. Bihar under Nitish Kumar has a fantastic growth story. Tamil Nadu has been growing. Even Karnatka and Odisha are growing. Growth story is the growth of the GDP and all growth stories have a parallel story where people suffer. But is the development you are talking about sustainable?

Narendra Modi could sell his Gujarat growth story and that was why there was so much expectations.

Could he live up to, at least, a small part of the expectations?

After he took over, there is an increase in the growth rate. In 2013-14, the growth rate was 6.9 per cent. In this current year, the growth rate is 7.4 per cent. Should we be happy about the GDP growth? This growth is achieved at the cost of your land, flora and fauna, air, ground water, carbon space.

The foreign exchange reserve we have is far better than what we had before. Because of this, there is a reduction in the fiscal deficit, from 4.1 to 3.9. Inflation has come down from 8.8 per cent to 5.5 per cent.

But you have to remember that 2014 had been a tremendously good year with decent monsoon and massive decline in oil prices. In the last four decades, this kind of oil price decline has not happened.

You mean, all these happened only because of the oil prices coming down?

Exactly. Fiscal deficit coming down, lower inflation and better foreign exchange reserve -- all happened because of low oil price.

So, you feel Modi has been lucky in a way?

There is no point in saying Narendra Modi is lucky. These are facts. It is up to you to attribute all this as the success of the Narendra Modi government.

Would you say, without Modi doing anything, he has achieved all this?

Ninety per cent of all the achievements I have cited can be attributed to the decline in oil price.

Yes, Narendra Modi also introduced schemes like Swachch Bharat, Jan Dhan Yojna, life insurance and accident insurance schemes.

Is it not necessary to have such social security schemes, especially when we have around 30 per cent of the population below the poverty line?

They are definitely needed as part of social security measures. But we will have to wait and see how these schemes are operationalised. We will have to see how many bank accounts opened under the Jan Dhan Yojna are operational after one year.

We will have to wait and see whether these schemes have the desired effect.

Arun Shourie said the government’s economic policies are directionless. Do you agree?

I entirely agree with Arun Shourie. The schemes are haphazard. They are just trying to touch the hearts of the people with schemes like these. Nobody knows where these schemes will end up.

It is not that such schemes have not existed till now. Many states have such schemes. After two-three years, you will know whether they have had the desired effect.

There is a definite direction in which the economy is going, it is to build a market economy. He is very determined about it. You have to just look at the Land Acquisition Act to see in which direction the government is moving.

Do you think the new Land Acquisition Act is detrimental to the lives of farmers?

Absolutely. There is a difference between the 2013 and 2015 Acts. Earlier, 80 per cent of the population had to give consent, otherwise you could not acquire the land, but now it’s not so. Earlier, land acquisition was only for public purposes but now, it can be even for private purposes. Earlier, it had to go back to the farmer if it was not utilised in five years, now it doesn’t have to. What kind of forcible land acquisition is going to happen?

So much of land has been acquired in independent India and so many people are yet to be rehabilitated. Without clearing the backlog, you want to acquire more land. You are saying you are going to build India and help the common man. This is not going to help common man; this will destroy the livelihood of our farmers and agriculture. The government has no plans to boost agriculture when thousands of farmers are committing suicide because of debt.

Do you think this government is pro-corporate and anti-poor?

I do not want to make any such drastic statement. But it is definitely a pro-corporate and anti-agriculture government. There is anguish in the rural areas, so a distress induced migration is happening from the rural to the urban areas.

But this government wants to cater only to the bulging middle class population of about 300-400 million. Companies like WalMart want to come to India only for this huge middle class population. This middle class doesn’t care who rules the country, they only want a good life for themselves.

Do you think the land acquisition act will lead to Maoist-like violence in the rural areas?

Definitely. It will result in lot of chaos, resentment, and frustration.

If you analyse the first year of Modi Sarkar, what is its biggest achievement and biggest failure?

In the last one year, Narendra Modi made his presence felt all over the world. He is meeting all non-resident Indians and corporates and making huge promises. Will he be able to fulfill the promises of land, power, infrastructure, etc? He strongly believes that poverty can be eradicated by building a market-driven economy. Narasimha Rao believed in it, Manmohan Singh believed in it, P Chidambaram believed in it. Narendra Modi also believes in it. But where is the ‘trickling down’ everybody has been talking about for the last 24 years?

Here, without having infrastructure, how can you build a market economy? That is why foreign investors are hesitant and selective. You have to clear the mess here first if you want the international community to come and invest. You can’t sell an empty box. The truth will be out soon.

China is a different story, it’s a closed economy. They spend lot of energy and time building their infrastructure. The local manufacturing sector is also very strong. They manufacture and export and they have trillions in foreign exchange.

Where are our local manufacturers? Why don’t you appease them first? We are in such a position that we get our Ganesha and Krishna idols made in China!

Photograph: Sreeram Selvaraj

Shobha Warrier / Rediff.com in Chennai