Naren­dra Modi, the Pero­nist Prime Min­is­ter of In­dia?

Mint ST - - VIEWS -

a split mon­e­tary pol­icy com­mit­tee—should have sur­prised no one who has been fol­low­ing the gov­ern­ment’s as­sault on RBI. The in­fla­tion­ary con­se­quences we shall see later, af­ter the elec­tion, but the dam­age will have been done.

Five years ago, the com­ment­ing class was hunt­ing for analo­gies for then prime min­is­te­rial can­di­date Naren­dra Modi and they came up with ev­ery­thing from Mar­garet Thatcher and Ron­ald Rea­gan (on the pages of the Fi­nan­cial Times, The Wall Street Jour­nal and else­where) to Au­gusto Pinochet (yours truly, writ­ing in Busi­ness Stan­dard). As I asked on 8 May 2013, will Modi “morph into a paragon of good gov­er­nance, small gov­ern­ment, and mar­ket-friendly eco­nom­ics that will help power In­dia’s eco­nomic rise?”.

Some might have thought this was a rhetor­i­cal ques­tion, given Modi’s own rhetoric then of “max­i­mum gov­er­nance, min­i­mum gov­ern­ment”. How­ever, the ques­tion was in­tended sin­cerely and to­day we have an equally sin­cere and sim­ple an­swer: “no”, as ad­um­brated in the most re­cent in­stal­ment of this col­umn.

Some ac­tual and in­cip­i­ent Modi fans found my Latin Amer­ica com­par­i­son strange, yet it is not as out­landish as it may ap­pear. Let us re­call that RBI deputy gover­nor Vi­ral Acharya, one of the dis­senters in last week’s rate cut, be­gan his al­ready fa­mous A.D. Shroff memo­rial lec­ture on 26 Oc­to­ber 2018 by evok­ing the anal­ogy of Ar­gentina’s at­tack on the au­ton­omy of its cen­tral bank in 2010. In­deed, in ret­ro­spect, my Pinochet anal­ogy turned out to be in­cor­rect in one key re­spect: Modi has not de­liv­ered the sort of far-reach­ing eco­nomic re­forms that the Chilean dic­ta­tor—ac­com­plished un­der the tute­lage of star aca­demic econ­o­mists from the Uni­ver­sity of Chicago, No­bel econ­o­mist Mil­ton Fried­man fore­most among them. Tak­ing a cue from Acharya’s anal­ogy, a bet­ter re­cent com­para­tor for Modi might be for­mer Pres­i­dent of Ar­gentina Cristina Fernán­dez de Kirch­ner, who served two terms in of­fice from 2007 to 2015. Re­call that she suc­ceeded her hus­band, Nés­tor Kirch­ner, who was in of­fice from 2003 to 2007.

Be­tween them, the Kirch­n­ers man­aged to cap­ture all ma­jor in­sti­tu­tions—in­clud­ing, but not lim­ited to, the cen­tral bank—and gov­erned as fire­brand pop­ulists, in­vok­ing the das­tardly for­eign hand when nec­es­sary to bol­ster po­lit­i­cal sup­port. More point­edly, they were ac­cused (cor­rectly) of lean­ing on gov­ern­ment sta­tis­ti­cal agen­cies to fudge the num­bers, to the point where the gov­ern­ment’s of­fi­cial in­fla­tion statis­tics, which vastly un­der­stated true in­fla­tion, were dis­carded by all cred­i­ble do­mes­tic and in­ter­na­tional ob­servers. (The Econ­o­mist de­voted a col­umn in its is­sue of 20 June 2014 to ex­plain at length why they would no longer pub­lish Ar­gentina’s of­fi­cial statis­tics.) Even­tu­ally, even the Ar­gen­tine gov­ern­ment had to scrap its own statis­tics, and switch to us­ing more cred­i­ble data cre­ated by pri­vate sec­tor an­a­lysts.

In In­dia to­day, statis­tics on gross do­mes­tic prod­uct (GDP) and em­ploy­ment, among oth­ers, are in­creas­ingly prob­lem­atic and are be­com­ing de­creas­ingly cred­i­ble. No one would say that the sit­u­a­tion is as yet as stark as the Ar­gen­tine in­fla­tion statis­tics of yore but, for the first time in my me­mory, In­dia has en­tered the wor­ri­some ter­rain where gov­ern­ment statis­tics are taken with a grain of salt be­cause of the fear of politi­ciza­tion. The erst­while Congress-led United Pro­gres­sive Al­liance gov­ern­ment can rightly be ac­cused of mainly fail­ings, but in one area at least, it was ex­em­plary: mak­ing cred­i­ble and re­li­able data im­me­di­ately and read­ily avail­able for scru­tiny.

Per­haps the most tan­ta­liz­ing tale, though, from the Kirch­ner years is the land­slide re-elec­tion vic­tory to a se­cond term in of­fice of Fernán­dez de Kirch­ner on 23 Oc­to­ber 2011. Ob­servers at­trib­uted her sur­pris­ingly easy win, de­spite ap­par­ent un­pop­u­lar­ity head­ing into the elec­tion, on a range of key fac­tors, no­tably, a frac­tured and frag­mented op­po­si­tion and vot­ers feel­ing gen­er­ally up­beat about the econ­omy—de­spite con­cerns about the fudg­ing of statis­tics and wor­ries about al­leged cor­rup­tion and crony­ism un­der her watch. Cru­cially, vot­ers’ gen­er­ally pos­i­tive per­cep­tions of the econ­omy were but­tressed by strong GDP growth, an ever more gen­er­ous wel­fare state and the sense that wealth and in­come in­equal­i­ties had at­ten­u­ated un­der the pop­ulist Pero­nist pres­i­dent.

Might there be a les­son here for Modi and those at­tempt­ing to un­seat him?

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