From Business World of 27 August 2004.
Those who dare not revel
Everyone knew that India was
shining. The BJP leaders told us so (but they would, would they not?) The
newspapers told us so (and they stake their reputation on veracity). The
television assured us of it (and pictures cannot lie).
And then the shine was suddenly switched off the day the BJP lost.
How? It was natural that the BJP should stop talking of shining India; the
elections had taken the shine off their faces. But the newspapers? Surely they
reported facts as they were? And television? Pictures can be darkened; but
surely they cannot be made to lie?
No, but the subject can be changed; the camera can turn elsewhere.
When the tide of government money that financed the India shining campaign
ebbed, the media turned sober. Suddenly, after the elections, the colour of the
news changed. First there was the spectacular melt-down of the stock market.
Then there was Chidambaram’s politically correct and economically lacklustre
budget. Then there was the biting of nails over the missing rains. And then
there was the rising inflation. These events were all topical, important and
relevant; they had to replace news that had gone out of date.
Out of date? Or Out of fashion? Let us look at the figures that
went into making India shine. First, GDP growth. Figures of growth are released
at the beginning of each quarter, trailing one quarter. The last figures
available before the elections were for the last quarter of 2003. They showed
growth of 10.5% year-on-year. That was entirely the result of what is called
the base effect. In the same quarter of 2002, agricultural production had
fallen 9.8%. From that low base, it had risen 16.5 % in 2003. Although it has
risen only 5% over the two years 2001-03, the one-year growth, an accident of
seasons, was passed off as a great achievement of the government. The results
of the first quarter of 2004, released since, show the same pattern:
agricultural output fell 6.3% in 2003, and on the reduced base, rose 10.5% in
2004. It is like a Pakistani report last November: “Recently
released numbers on industrial growth show India’s industrial production grew a
smart 6.5% in September. Leading the growth list is Pakistan, whose industry
grew over 18% in September. China is close behind with 16%, Thailand and
Malaysia are racing at 10%.” That Pakistani leap was a one-month wonder; the
shine in India’s agricultural and in GDP growth was a two-quarter wonder.
The
growth in the index of industrial production in April was 8.5%; in June, the
latest month for which figures are available, it was 7.3%. But most of the fall
was in mining (from 9.6% to 3.3%) and power (from 10.3% to 4.3%); growth in
manufacturing in June was 8%. In
April-June it was 7.9%. Thus, manufacturing continues to grow just about as
fast as when India was supposed to be shining.
Inflation,
as measured by industrial workers’ cost of living, was 4.8% in June. It has
gone up; but it started going up last year. In September it was 2.9%. By April
it had gone up to 5.1%. Since the advent of the UPA government, it has fallen
slightly.
Exchange
reserves no doubt accumulated at a breathless pace in the last months of NDA
– from $100.6 billion at the end of
December to $119.8 billion at the end of May. By the end of July, they were
down to $118.3 billion. They fell largely because of a huge inflow of portfolio
investment in the last year of the NDA and outflow after the arrival of the
UPA. And the outflow was also behind the meltdown of stock prices.
The
rise in stock prices in the last months of NDA would have stopped at some point
– when foreign investors decided that the Indian market was no longer
underpriced. Maybe that point would have coincided with the change of
government. But stock prices did not stop rising; they just fell vertically as
the leaders of the UPA accused NDA and foreigners of manipulating the market
and threatened condign punishment. The punishment was never handed out, and the
threats turned out to be empty. But they set the image of the UPA – dour,
paranoid and self-righteous.
That
is the image the UPA government projects even now. And it cannot shed the image
because it has to pose as the champion of suicidal farmers and workless youth.
Nothing has changed in reality; the news about the Indian economy is as good as
it was under the NDA. But no one dares whisper any more that things are going
well for India – least of all its rulers.
