The Big Story: One-way street

Even as Finance Minister Arun Jaitley was trying to defend his record as finance minister, saying that the drop in Gross Domestic Product growth is temporary, Prime Minister Narendra Modi made a decision that effectively acknowledges his government’s economy failures. Reviving an institution that had existed in the previous Congress-run United Progressive Alliance administration, Modi formed an Economic Advisory Council. Its key remit will be “addressing issues of macroeconomic importance and presenting views thereon to the Prime Minister. This could be either suo-motu or on reference from the Prime Minister or anyone else,” according to the Hindu.

So, more than three years after effectively handing over control of the economy to Jaitley – and alienating top international economists like former Reserve Bank of India Governor Raghuram Rajan and former NITI Aayog chief Arvind Panagariya – Modi has suddenly decided he wants inputs from a new set of economists on how to steer the Indian economy. The panel will be headed by NITI Aayog member Bibek Debroy, and include three other economists: Surjit Bhalla, Rathin Roy and Ashima Goyal as well as a former finance secretary, Ratan Watal.

Modi had disbanded the Economic Advisory Council after coming to power in 2014, one of a slew of moves that fit into his image as being a leader who prefers to chart his own path than rely on the advice of his colleagues. This seemed particularly evident in the decision to withdraw older Rs 500 and Rs 1000 notes last year, an effort that caused tremendous pain and economic contraction, and has now been acknowledged as both an operational and overall failure. The hasty rollout of the Goods and Services Tax this year has been similarly criticised, with the lack of preparation now being clear for all to see.

In this regard, Modi’s decision to set up a committee seems prudent, if belated. The economy is suffering and, as many economists have now pointed out, it is not simply the shock of GST and demonetisation that has given us six straight quarters of sluggish GDP growth. The causes are structural, and have been part of a three-year downturn that we are only now seeing clearly, despite benign conditions, good monsoons, low oil prices and manageable inflation. An economy that is run with sound advice would have taken advantage of those conditions, not driven India to a situation where it needs a stimulus package.

But the question about Modi’s approach remains the same. There were others in government also who would have told him that demonetisation was a disastrous idea, that the GST rollout – which will eventually spur growth but only if done properly – should have been better planned. Modi evidently did not listen. If he had an Economic Advisory Council before announcing demonetisation, would he have asked them for advice? And would Modi have listened to them? Will he listen now?

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Punditry

  1. “Something was threatening enough – in the specific geographic, social, political context of BHU – about unarmed university girls protesting and holding up hand-written posters for their MP, also the PM, to see,” writes Seema Chisti in the Indian Express.
  2. “Preventive strikes in hyper-nationalist bilateral settings could defy our expectations and go out of control, with disastrous implications.” Happymon Jacob in the Hindu looks at what has changed since the surgical strikes, one year ago.
  3. V Anantha Nageswaran in Mint lists out six mistakes the government has made which forces it to now look at economic stimulus: “The sixth and final mistake could be the wellspring of the other five. Leaders have to surround themselves with advisers who can speak truth to the power. Now, we can decide how many of these mistakes could be possibly reversed by a fiscal stimulus.”
  4. “Trapped between rising interest and other costs and faltering demand that affects prices, the real estate sector is experiencing a severe version of the crisis stemming from the inability of the system to sustain growth-driven by private debt-financed spending,” write CP Chandrasekhar and Jayati Ghosh in Hindu Businessline.
  5. “The other problem has been that the vocabulary and symbols used by the Hindu-right are mostly derived from the narrow social base of the upper castes of North India. The question must be asked as to why is Prithviraj Chauhan a mascot of the Hindutva movement and why Raja Suheldev is not? Why it took a Bahujan Samaj Party government to install the statues of Uda Devi and Jhalkari Bai?” asks Abhinav Prakash in Swarajya.
  6. “After all is said and done about Trump’s new approach to the Subcontinent, there should be no illusion in Delhi that America will forever bear the burden of security of Afghanistan,” writes C Raja Mohan in the Indian Express. “As a regional power with high stakes in stabilising its north western frontiers, Delhi will inevitably have to do more in Afghanistan.”

Giggle

Don’t miss

TA Ameerudheen writes about another case like Hadiya’s in Kerala, where a woman who says she chose to convert to Islam is nevertheless being investigated.

The High Court was more restrained in the case of Athira, a 23-year-old computer science graduate from Kasargod district. In an order passed on July 31, it asked the police to “ensure that no influence shall be exerted on her by any radical groups which are involved in anti-national activities or forceful conversion of religions”.

Unlike some other states, Kerala does not have anti-conversion laws. But over the last decade, a rise in religious tensions and the emergence of hardline political organisations among both Muslim and Hindu communities have turned conversions into flashpoints. Even though there is no credible evidence to support the suggestion that Muslim groups are forcing others to convert to Islam, no political party has come forward to challenge this notion. Even the courts have shown a willingness to accept the narrative.