Opinion: An open letter to PM Modi on the economy

Dear Prime Minister,

Since this is the season for open letters, I thought I would pen one too. No sir, I am not joining the ranks of public intellectuals who are venting on the creeping majoritarianism around us. I am, after all, only a journalist, and a political observer. When a Bharatiya Janata Party minister in Jharkhand is caught on video insisting that a Congress MLA chant Jai Shri Ram, then you know just why a simple religious invocation has so rapidly become a provocative war cry to intimidate fearful minorities. But I do not wish to focus on this despairingly polarising issue since I do not wish to be labelled an “urban Maoist”, “Khan Market gangster”, “anti-national”, and worse, for speaking up for fellow citizens.

Instead, I wish to draw your attention to the real issue of our times: The health of the economy. It perhaps reflects the moral and intellectual bankruptcy of the media — the television media, in particular — that we have expended so little mindspace discussing why, nearly a month after the Union budget, the mood has turned so grim in the business community. I do not claim to be an expert, but have been listening to credible voices warning of the deepening fiscal crisis, and the impact this could have on government spending and future growth. Or, on the long-simmering banking crisis that has engulfed many financial institutions, the non-banking financial companies, in particular. Or, on the failure to incentivise private investment and boost consumer demand. Or, indeed reports of the steady flight of foreign capital.

Many of these concerns have been privately whispered pre-budget too, but it is only now that some of our industrial elites are beginning to find their voice. After all, there is nothing like falling stock markets and a high tax regime on the “not more than 5,000 people in the super-rich category” to make industry suddenly discover their vocal chords. Their concerns are perhaps self-serving, but they also do reflect a growing disquiet at the manner in which policy makers are seemingly oblivious to the challenges being posed by onerous global headwinds and faltering domestic indices.

It is almost as if the constant drumbeat of having won such a big electoral victory means that the “professional pessimists” must be kept away at arms length, fearing that they could gatecrash the continuing celebrations. The feel-good factor, after all, is addictive. Why do you need the nay-sayers to even mildly suggest otherwise?

It is true that so far, sir, your government has been successful in separating the economy from politics, a situation where economic health has little or no bearing on electoral success. Critics argue that this has been done by either fudging or suppressing data, or by shifting the blame all too easily on the inherited 70 years of flawed Nehruvian economics. I feel that your own relentless emphasis on pro-poor “welfarism” has created a large political constituency of beneficiaries of State-run programmes who don’t care if the GDP is 6% or 8% so long as they get, or, at least, can aspire for a pucca house, an LPG cylinder, or a toilet.

But someone must pay for vote bank welfarism, and sooner or later, the numbers do begin to catch up. The discrepancy is reflected in the mystery over the ~1.7 lakh crore missing in the budget documents — clearly, tax collections in the last financial year have been much less than expected, and with a slowing economy, the fear is the numbers could get worse.

Which is why the government needs to come clean on the fiscal crisis. Making the finance secretary the fall guy for the politically contentious decision to raise monies abroad isn’t a solution. Nor can the answer lie in forcing (or should one say “robbing”) the Reserve Bank of India to part with its well-protected funds (will LIC be the next?).

Nor can it lie in so-called disinvestment in which one PSU is encouraged to buy out another. Or, indeed in hiking fuel prices to a point where the middle class starts to feel the pinch. Or, by imposing a multitude of direct and indirect taxes that eventually become a disincentive to investment and growth.

Nor can it lie in astute headline management where emotive issues like Article 35A or mandir-masjid hijack the news agenda. The first step to address the crisis is to snap out of denial and accept that the achche din are over. Then, get down to the ‘real’ business of getting business back on track.

Post-script: This open letter should ideally be written by 50 top industrialists who should call for a structured dialogue with the government on the economy. Sadly, with one or two notable exceptions, I doubt that the cheerleaders from industry, who almost reflexively give every budget 10 marks on 10, would dare show the mirror to government.

Rajdeep Sardesai is a senior journalist and author

The views expressed are personal