Narendra Modi-India Inc: Who said what

The global economic weather is not looking good. That is the plain fact. Prime Minister Narendra Modi has sensed it alright and, with his characteristic alacrity, convened a meeting with representatives of the industry, flanked by the economists in the government, to discuss the issue. From what could be gathered from Finance Minister Arun Jaitley’s post-meeting press briefing, the industry and the Prime Minister spoke frankly to each other.

The industry had predictably insisted on the Reserve Bank of India and other retail banks cutting interest rates. There was also the demand that the government should focus on agriculture;  irrigation projects should be completed and food processing units should be set up. The industry has at last realised that unless there is healthy growth in agriculture, farmers and others in the rural sectors will not have the necessary purchasing power to buy the industry’s products. Industry’s spokespersons also talked of “destressing the stressed sectors” like steel, cement and textiles. It is a plea to boost infrastructure projects.

The greater surprise was the industry telling the government that it should strengthen the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), to empower the people to spend. The fear of the private sector is rooted in the fact that domestic demand is low and the economy cannot get off the ground unless people spend.

Modi, on his part, told the industry quite bluntly that public investment and state-driven textiles growth would not be sufficient, and that there is a need for increased private investment. He had also asked the private sector to take greater risks, indirectly telling them to shed their risk-aversion.

However candid the exchange of views between the Prime Minister and the industry, there is an unwillingness on all sides to recognise the simple fact that India cannot remain immune to global economic lows. The argument that India is the lone “bright spot” in the world economy, maintaining a positive and impressive growth rate of seven per cent per annum when all others are floundering, including China, is a weak, if not a false, one. It is almost like whistling in the dark.

Finance Minister Jaitley at the press briefing showed much unease about the impact of global economic blues on India. He used three phrases, “relatively untouched”, “little touched” and “transient effects”, all of which indicated that the Indian economy is integrated with the global economy, and it cannot remain untouched by the events out there. While answering a question on the impact of China’s economic slowdown on the country, Jaitley explained that India’s exports to China were not substantial and, therefore, India would not be seriously affected. 

The best thing for the Modi government and his economists would be to accept the simple fact that India cannot attain a high trajectory growth unless there is a turnaround in the global economy. It is, of course, not in India’s power to rejig the world economy. 

Meanwhile, the government and industry should complement each other’s efforts. There is a need to accelerate public and private investments. This does not seem to be happening at the moment because there is a trace of distrust between the two. 

The government will have to take the risk of aiding the private sector to spend more by clearing stalled government projects. This might encourage the private sector to step up its own spending.  What the two need to do is to reiterate their faith in each other because that seems to have frayed in the last one year.