Why India Inc. is suddenly vocal against the Modi govt

India’s economic slowdown appears more structural than cyclical. However, the RBI Governor would make you believe otherwise

Photo courtesy: social media
Photo courtesy: social media

Tathagata Bhattacharya

As India’s economic slowdown is assuming more and more of a structural dimension rather than a cyclical one, unlike what the Reserve Bank of India Governor believes, captains of Indian industry have started speaking out.

Bajaj Auto chairman Rahul Bajaj was amongst the first ones to blame the government’s inaction for falling demand and poor private investments in the country.

“The government may or may not be saying this, but there are clearcut markings from the International Monetary Fund (IMF) and World Bank, which show a decrease in growth in the last three to four years,” Bajaj told Bajaj Auto shareholders at the company’s annual general meeting in July. “Like any government, they would like to show a happy face, but the reality is a reality,” he said.

“There is no demand and no private investment, so where will growth come from? It doesn’t fall from the heavens,” Bajaj added.

In a recent address to students of his alma mater, St Xavier’s College, Mumbai, noted industrialist Adi Godrej warned that the rising intolerance, hate crimes and moral policing can “seriously damage” the economic growth of the nation. He said, “It’s not all a rosy picture now. One must not lose sight of the massive impoverishness plaguing our nation which can seriously damage the pace of growth going forward and prevent us from realising our potential.”

He went on to say that economic growth would be affected if “rising intolerance, social instability, hate crimes, violence against women, moral policing, caste and religion-based violence and many other sorts of intolerance that are rampant” were not contained to ensure social harmony. He also pointed out that unemployment was at a four-decade high and should be tackled at the earliest.

Without naming anyone or any issue in particular, software major Infosys’ co-founder N.R. Narayana Murthy recently lamented that India was no longer the country its freedom fighters had fought for.

“If you look at what is happening in different parts of the country today, it is time that we, especially the youth, stood up and say this is not the kind of the country our forefathers had got the freedom for. But how many of us are doing it? Nobody is doing it, sadly. That’s the reason why this country is in this state that it is. Nobody wants to displease anybody by saying what is wrong,” he said at a Mumbai gathering.

The issue of Income Tax harassment that has drawn attention after the death of Café Coffee Day founder V.G. Siddhartha saw Biocon chief Kiran Mazumdar Shaw and entrepreneur Mohandas Pai criticising the government’s tax terror raj. But they soon received phone calls, asking them to refrain from making statements against the government.

A report in The Telegraph read, “Biocon chief Kiran Mazumdar Shaw has confirmed that ‘a government official’ called her recently and told her not to speak about issues such as.”

“He just said that ‘please don’t make such statements. Even Mohandas Pai should not. I am telling you as a friend’,” Mazumdar Shaw told The Telegraph.

Pai has disclosed to Quint that the Biocon founder had received such a call.

Asked whether it was an advice or a warning, Mazumdar Shaw said, “You can call it both ways.”

While Reliance chairman and Asia’s richest man Mukesh Ambani lauded Modi’s vision of a $5 trillion economy by 2023 at the annual general meeting of his company, his announcements did not exactly corroborate his optimism in the economy.

Andy Mukherjee of Bloomberg summed it up best.

He wrote, “Does Mukesh Ambani see dark clouds gathering on the horizon? From his message to shareholders, it doesn’t look like India’s richest tycoon is worried. But his actions may reveal more than his words.

At Monday’s annual general meeting, the chairman of Reliance Industries Ltd. was brimming with optimism. Not only did he endorse Prime Minister Narendra Modi’s vision of bumping up annual GDP by 80% in five years to $5 trillion, he even forecast a $10 trillion Indian economy by 2030. It’s not only possible but ‘inevitable,’ he said.

Something doesn’t add up. If the outlook is so rosy, why is Ambani hitting the brakes on a seven-year, $100 billion investment spree across refining, petrochemicals, telecom and retail? While a breather after such frenzied activity may be understandable, why does he want Reliance to be a zero-net-debt company in 18 months? What will it mean for the more than 100 banks and financial institutions around the world that provide India’s largest company and its subsidiaries with billions of dollars – and yen, and rupees – in financing and refinancing? Above all, what will Reliance’s deleveraging mean for India?

Several Indian business leaders have sounded the alarm on the Indian economy’s increasingly choppy waters. While Ambani may or may not share their concerns, his cautious actions can only serve to bring the storm closer.”

Passenger car sales have fallen by almost 36 per cent and passenger vehicles overall is down by almost 31 per cent in July. A higher downturn in any single month was only witnessed in December 2000, almost 19 years back.

More than 2,30,000 people in the auto sector have lost their jobs and more than 300 dealerships shut down, according to the Society of Indian Automobile Manufacturers (SIAM). SIAM has warned that unless the festival season spurs a sharp uptick in demand, more than a million could lose their jobs in this sector alone.

The real estate sector which feeds several industries like cement, bricks, furniture, timber, paints, electricals, electronics, has been on life support for quite some time now. In a healthy economy, the unsold inventory of dwelling units should not be bigger than that needed to be sold in 12 months. But as it stands today, across India’s biggest cities, the unsold inventory of houses and flats is so huge that it can can be offloaded in 42 months, according to industry watchers, in a best case scenario.

Growth in even the FMCG sector has fallen by more than half as compared to last year. And if men’s innerwear index, conceived by former US Federal Reserve Board chairman Alan Greenspan, is any parameter, the four listed innerwear majors in India grew their weakest in the last quarter in over a decade, a tell-tale sign of the rot down under. The Indian economy is yet to recover from the double whammy of Demonetisation and GST. Rural demand that was growing at 1.5 times than that of the urban demand has fallen to just equal levels.

The government is expected to announce sector-specific stimulus packages, according to sources who are in the know of Prime Minister Narendra Modi’s meeting with Union Finance Minister Nirmala Sitharaman on the state of the economy. But with tax revenues growing at less than 1.5 per cent, where will the money come from? It looks like asset sales like Public Sector Enterprises and Bullion reserve offloading are the only means left for the government.

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Published: 17 Aug 2019, 9:30 AM