September 07, 2014
Array

SHAMELESS PROPAGANDA

Prabhat Patnaik

THE news was splashed everywhere: India’s GDP in the first quarter (April-June) of  2014-15 had increased at the rate of 5.7 percent over the corresponding quarter of the previous year, and that this was the highest quarterly growth rate recorded for the past two and a half years. The growth rate for the previous quarter (over the corresponding quarter a year ago) was only 4.6 percent; and the growth rate for the first quarter of 2013-14 (over the corresponding quarter a year ago) was only 4.7 percent. The jump to 5.7 percent therefore meant that the economy had turned around; and particularly gratifying was the fact that the industrial sector which had witnessed absolute stagnation for the last two years had recorded a noticeable positive growth in the first quarter of 2014-15.

          The credit for this “turn around” was given to the newly-installed Modi government. Modi himself claimed credit for it when he told reporters in Tokyo: “Within the first 100 days of this government, we have achieved stability and stopped the continued reversals that the country was facing.” And the media followed suit. Indeed what The Economic Times (August 29) wrote on the issue was by and large reflective of the overall stance of the media: “India’s economy expanded at its fastest pace in more than two years, revitalized by a decisive political mandate for the Narendra Modi-led government, and subsequent actions by his government” (emphasis added).

          The question naturally arises: how did Modi work this supposed miracle? The acceleration in growth in the first quarter of 2014-15, according to the Press release of the Central Statistical Organization, was mainly on account of mining, manufacturing, electricity and construction. In agriculture, the growth rate in the first quarter of 2014-15 was 3.8 percent compared to 4.0 percent in the corresponding quarter of 2013-14. Likewise in the service sectors taken as a whole there had been little increase in the growth rates between the first quarter of 2013-14 and the first quarter of 2014-15. The real increase had been with regard to these four sectors, and especially manufacturing, which has a large weight and in whose case, while the first quarter of 2013-14 had registered a 1.2 percent decline in GDP, the first quarter of 2014-15 actually registered a 3.5 percent increase.

 

MANUFACTURING

 SECTOR

 In fact, of the one percent difference between the growth rate in the first quarter of 2013-14 (which was 4.7 percent) and the growth rate in the first quarter of 2014-15 (which was 5.7 percent), as much as 0.75 percent was accounted for by the manufacturing sector alone. The “Modi magic”, if there was one, must therefore have worked with particular effect in this sector. Or putting it differently, if the Modi government was indeed responsible for turning the economy around, as the government and the media are claiming, then the manner of its doing so could only have been through some extraordinarily favourable impact that its installation had on the manufacturing sector. Let us therefore examine the manufacturing sector during the Modi regime.

          Modi was sworn in as the prime minister of India on the evening of May 26. Hence, if there was indeed a “Modi magic” with regard to the manufacturing sector’s performance in the first quarter (April-June) of 2014-15, then it must have left its imprint in the month of June alone, which is the last month of the first quarter of 2014-15. The accompanying Table gives the indices of industrial production for the months of May and June, for the industrial sector as a whole, and for its various subsectors: mining and quarrying, manufacturing (which of course is the dominant component of the industrial sector having 75 percent weight within it) and electricity.

                             Index of Industrial Production (2004-05 = 100)

                                                May 2014                               June 2014

Mining and Quarrying           125.6                                      121.5

Manufacturing                       181.6                                      178.2

Electricity                               183.2                                      181.6

General Index                         173.8                                      170.5

(Source: Govt. of India)

          It is clear from the Table that not only in industry as a whole, but in every subsector of industry, each of which, let us recall, contributed substantially to the increase in the quarterly GDP growth rate (with manufacturing leading the rest because of its much higher weight), the Modi period has been disastrous! Each of these subsectors has registered a negative growth rate in output in June compared to May.

So, for Modi to claim credit for the “turnaround” in the Indian economy, and for the entire media to fall in line, vying with one another in heaping praise upon the Modi government for having worked wonders on the economic front, when the Modi period has actually seen a negative growth in precisely those sectors which supposedly contributed to the growth rate increase in the first quarter of 2014-15, represents a staggering level of chicanery.

 

GULLIBLE

MEDIA

It would of course be utterly silly to say that the negative growth rate in the Modi period has been because of the Modi government’s coming to power. Indeed that would be as silly as saying what the Modi-crowd is saying, namely that the increase in the growth rate of the GDP has been because of the Modi government. But what is bizarre in the present context is not just the intellectual puerility in attributing an acceleration in growth to a particular government’s being one month in office (which is the time-period between Modi’s assuming office and the end of the first quarter of 2014-15), and that too when that government has done nothing spectacularly different from what the previous government was doing; it is the fact of attributing this acceleration to a particular government’s being one month in office when that one month has actually seen negative growth!

To be sure, governments do try and advertise their actions and claim exaggerated credit for their doings. But when a government claims credit for something for which it not only contributed nothing but for which its period of office was associated with a negative contribution, then we are clearly in a realm of shameless propaganda. And such shameless propaganda only betrays a contempt for the people, an implicit assumption that they are gullible enough to swallow whatever is told to them.

It follows from the foregoing that the real acceleration in growth had already occurred in April-May, and that because of this acceleration, even though June was worse compared to May, the figures for April-June as a whole still show a growth rate unmatched for the previous two and a half years. The real acceleration in growth in other words had occurred before Modi took office and his period in office was actually associated with a worsening of growth, though this worsening gets submerged, and ceases to count for much, when the quarter as a whole, i.e., April-June as a whole, is taken as the reference period.

 

BANAL

DISCOURSE

But before this assertion is taken to be a certificate for the UPA government that preceded Modi, we must emphasise the utter banality of this entire discourse. If we take the month of May, compared to which the “Modi month” of June actually saw a negative industrial growth, then we find that the growth rate of industry in May, compared to May 2013, was 4.7 percent (for April-June as a whole it was 3.9 percent). But this 4.7 percent itself is a paltry figure, in addition to the fact that the employment generated by this industrial growth rate is way below the rate of growth of the work-force (which means that let alone absorbing the workers from other sectors, and therefore effecting an occupational diversification, industry cannot even absorb the natural growth of its own work-force).

Under the earlier dirigiste  strategy of development, the rate of growth of India’s industrial output between 1951 and 1965, according to the index of industrial production with 1956 as the base year, had been 7 percent per annum. If we take later base years then the rate of growth turns out to be higher. The industrial growth rate in the 70s and the 80s was somewhat lower than this figure but still above 5 percent. The dirigiste strategy however was debunked for keeping the rate of growth low (the so-called “Hindu rate of growth”), for embodying a “quota-licence-permit raj”, and for shackling the “entrepreneurial spirit” of the Indian capitalist class. It is ironical that the very persons who had lauded the achievement of neo-liberalism in having broken out of the stagnation of the dirigiste strategy are now going into paroxysms of joy because the industrial growth rate has reached a figure that is well below what the dirigiste strategy had achieved.

The dirigiste strategy had been based essentially upon the idea that industrialisation must occur to cater to the home market. The Left critique of the dirigiste strategy had been that while relying on the home market, which itself was unexceptionable, it had not done enough to expand the home market. It had for instance failed to carry out radical land redistribution that both immediately (through putting purchasing power in the hands of the landless poor), and over a period of time (by stimulating agricultural production), would have enlarged the size of the home market. Neo-liberalism however critiqued dirigisme from an entirely different perspective, namely that its emphasis on the home market (or what the World Bank calls the “inward looking development strategy”) was itself wrong; it advocated that the economy should be opened up to the free global flow of goods and capital, in which case the growth rate, especially the industrial growth rate, would be much higher, with domestic production catering to the world market as a whole.

For a while this presumption appeared to have been vindicated by the growth rate of the Indian economy (even though agriculture and industry never experienced any acceleration in the growth rates they had experienced earlier, and even though this growth was a “jobless”, and hence massively inegalitarian growth). But with the world capitalist crisis, even this growth has disappeared, so much so that a 4 percent rate of industrial growth is now tom-tommed as a big achievement, for which the UPA and the NDA are vying with one another in claiming authorship.

This only underscores the cul-de-sac to which neo-liberalism has brought the economy. The way out of it is to base growth on an expansion of the home market by undertaking radical measures of asset and income redistribution. World public opinion is waking up to the need for such redistribution; the Indian discourse alas continues to be stuck in banalities.