Through the past few weeks, a sequence of images has kept flashing in my mind. It is a version of Monty Python’s Philosopher’s Football skit. Call it Note Swap football. At the opening whistle, Narendra Modi kicks the ball towards Amit Shah. Shah feigns a pass at Arun Jaitley, who is moving up his favoured right wing, but instead sends the ball back to Modi, who dribbles into his own penalty area and shoots. The goalkeeper, Urjit Patel, stands aside and lets the ball into the net. The stadium, packed with Indian fans, erupts in applause. A bewildered Jaitley jogs back to his own half and congratulates Modi and Shah.
Now, a new dimension has been added to the game. The referee, India’s chief statistician, TCA Anant, just awarded a goal to the Indian side. While most analysts expected a dip in third quarter gross domestic product growth and a drag on the economy that would last for months, the figures provided by Anant show a robust quarter marked by a 10% rise in Private Final Consumption Expenditure.
In other words, the government’s data suggests that in a period when 86% of the currency in circulation was abruptly removed in a nation where 98% of all private transactions are carried out in cash, Indians somehow managed to go on a historic shopping spree. The images we saw of laid-off workers, of farmers selling produce at throwaway prices or actually throwing it away because the supply chain had broken down, of tens of millions of people standing in lines for long hours each day, were all fake news.
Arun Jaitley gave us the real picture when he clarified that, “At no point of time, not for a single day, was the currency inadequate.” Obviously the biased media missed the fact that shopping malls were packed, auditoriums had house full signs all the time and markets were thronged by eager consumers flush with money throughout November and December.
Naysayers will point to third quarter income stalling or dropping for companies in sectors linked with discretionary household spending such as fast moving consumer goods and two wheelers, and to home sales plummeting. The odd frustrated businessman has even lashed out at the currency swap, saying it wasn’t a good idea handled poorly but a terrible idea handled poorly. However, it seems like Rajiv Bajaj was reading too much into his own company’s top line. Sales growth in firms that provide no public numbers obviously more than compensated for the fall suffered by listed corporations.
What madness is this?
It is true that corruption continues unchecked, the shadow economy is generating money at the same rate it was last year, that counterfeits of the new Rs 2,000 notes are flooding in already and even finding their way to automated teller machines, and that the promised windfall to the government will almost certainly not materialise (something the Reserve Bank of India can confirm when it finishes counting the returned cash, which it should accomplish sometime before the 2019 elections). All this is irrelevant when placed beside the fact that the government’s motives were pure, which is the only thing that counts for the public at large. A series of by-elections, state and municipal polls have demonstrated citizen support for Modi and the BJP. It is possible that on March 11, results from Uttar Pradesh, Uttarakhand and Goa will confirm that trend.
Those of us who interpreted the game’s opening action differently sit crestfallen in the stands, unable to join the cheering crowds and wondering if it is we who are insane. To us, India’s GDP figures have been questionable ever since the United Progressive Alliance government, in its dying days, instituted an updated method of calculating growth. Now, it feels like our government has taken lessons from the old Soviet Union in massaging data to show favourable outcomes. The capital markets have been edging higher for weeks, and this new piece of good news might drive them higher still. At some point, as happened with Brazil and Greece, the fudging will be discovered, and things will get very bad very fast, but there’s no telling when that moment will come.
Meanwhile, an analogous madness is playing out in the United States. With each passing day, Donald Trump proves his incompetence once again, finding ways of doing it that one wouldn’t even imagine. And with each sign that he is leading the country down a disastrous path, the Dow Jones average hits a new high. It’s as if basic competence is no longer a criterion by which to judge a government and make bets on an economy’s future. Trump’s first truly disastrous move is likely to be a raising of trade tariffs, and plenty of Americans will cheer him on as he purposefully dribbles the ball towards his own side’s goal and shoots.