Modinomics and its Incoherence

Modinomics are the economic policies of India’s Prime Minister, Narendra Modi. His followers or voters believe that Modinomics is a much-needed panacea to India’s economy. Unfortunately, there is no coherent difference between Modinomics and other “socialist” policies. Devotees of Modinomics believe, “lesser evil is better than bigger evil”, whereas liberals believe that Modinomics doesn’t make social-economic sense. There is no difference between both sides because their virtual goal is to maximize state power and social demagogy in a euphemistic way, at the cost of personal freedom, individual volition and cultural liberty.

• Modinomics is an immoral economic approach to individual freedom and socio-economic libertarianism.
• The established narration is socialism (government owning the resources, controlling, regulating and manipulating the means), which is totally against the hyperbole of free market capitalism.
• The Indian economy led by PM Modi and his “expert” team is consciously ignorant of economics.
• The matrix of Modinomics is again hopelessly inured and infatuated with etatism or statism.
• It is said that PM Modi is a pragmatic modernizer of “government running the economy”, but in reality his government failed to minimize the government’s role. His favorite rhetoric “minimum government, maximum governance” convinced the ultracrepidarian class, youngsters and global investors, but the result is “maximum government, minimum liberty”.
• Although his government has taken grim steps to outlaw the unnecessary laws, bureaucratic instruments and interventionists, Modinomics is still an old wine in a new bottle. His government is still run by the economics of “moral hazard” policies, “too big to fail” mechanisms, albeit his government iterates “recapitalization of public units” dialogue. 
• His followers strongly hold the opinion regarding his Fabian way of enriching the economy but their forgiving-forgetting attitude doesn’t distort the truth of economics.
• Modinomics, unlike the previous system of governance, suffers from ‘Emporiophobia’ (fear of free market),‘Aurophobia’ (fear of gold savings) and ‘Apoplithorismosphobia’ (fear of deflation). 
• Considering his government’s ‘selective silence’ on major economic issues like property rights, civil liberty, secessionism, economic expropriation, indirect taxation, capital structure, border trading, etc., it is right to ratiocinate that his government is a turban-less Keynesian. 
• Modinomics, along with the economic system of India and its paid politicians, still repeats high-sounding terms like “freedom of the investors” and “stable growth” which sedates the madding crowd. The terms “private” and “freedom” no longer mean what they are. They are cruel deceptions that fool the mind yearning for human freedom. 
• The fact is that in India we still have massive regulations and regimentations. This is necessary, we are told, because it is “in the public interest.” Terms like “public interest” and “common good” are code words that mean police state and reduced liberty. How has Modinomics liberated the Indian economy?
• With this reverse propaganda, the opposition has been neutralized. True words, true meanings of patriotism (example: bolo “Bharat Mata ki Jai”) and freedom have become the farce and illusion that cover fascism. 
• PM Modi has attracted the millennials in droves, based on the lie that “UPA’s socialism is immoral but his brand of socialism is moral” because it guarantees “liberty of opportunity”. 
• Modinomics is also embedded with obscure ideas when it comes to deciphering trickle-down economics, social spending and international economy. 
• His government voices out that the Indian economy would balance between growth and development but fails to understand that growth and development are conventional and outdated concepts, in the current changing environment. Neither growth nor development improves the real essence of economic liberty. In fact, they both crush the schema of economic freedom.
• Catallaxy, market voluntarism and property rights can be considered as sound solution(s) to counter the fascism of Modinomics and ‘Sickularism’. As long as Modinomics doesn’t divorce its romance with/from eminent domain, public monopoly and crony capitalism, it would stand indifferent in this whole paradigm. 
• The time has come to apply deductive reasoning against such economic philosophies advocated by the politicians than falling for rhetoric et al. Simply put: “Modinomics rewards sloth and penalizes hard work while Voluntarism rewards hard work and penalizes sloth.”

 

Read the original article - June 2016

Low inflation is an anemic economic condition

• Low inflation at 2.28%, IIP at 3.12% is due to low food prices and only indicates anemic state of economy which is unable to produce more and spend more. There is  no need to greet 'low inflation' with a hurrah, which is a symptom of ailing economy.
• Modi administration has laundered away savings due to low oil prices on his mindless adventures in the name of reforms.
• Make in India campaign without any ground work has deindustrialized India and our economy dependent on Chinese imports so much like never before.
• Low food prices and low consumption has not increased the consumption pattern. Low consumption is injurious to market economy and indicates declining economy.
• Farmers are on street agitation due to prices not even covering production expenses.
• Low crude oil prices for last three years even though good for consuming countries like India is destroying economies of oil producing countries.
• RBI's higher interest rates and not cutting them are not indicative of inhibiting expenditure and holding back consumption. It is weak demand that is culprit.
• Higher inflation within a band is preferable, because it means economy is moving and sputtering.
• It is Modi & BJP's failure to spur growth even after three years. Blaming predecessor doesn't work beyond two years.
• The over publicized 'demonetization' has failed to achieve any of its stated objectives but has jolted informal sector which operates on cash that brought its economy to its ominous halt. What ever good it may do in long term, demonetization has proved to be painful and disastrous in short term.
• The other big decision of Modi administration is uniform GST rate across nation, w.e.f. July 1, 2017, is supposed to improve tax compliance and governments will be able to spend more money on infrastructure and enable people to produce more, sell more and buy more and will result in economic growth. Paradoxically, benefits might come only in long term but its devastating short term effects are to be coped with by our already ailing economy. The transition to GST and its impact on lower tax compliance might persist over an year. 
• There is hardly any activity on ground. Economy needs a push. GST is going to be a speed breaker rather than a stimulus at least during first year. It is not going to energize our economy, which at the moment is going nowhere.
• Low inflation, low growth, demonetization and GST are aggravating the already bleak situation and when economy will become better is a million dollar question? In the meantime, how many will vanish or perish?

Inflation is taxation without legislation ... Milton Friedman
Inflation effectively transfers wealth from savers to borrowers.

The government will always tell you that it wants low inflation. 

The real issue is the horizon over which to bring inflation down ... Raghuram Rajan

My View:

Low inflation and low growth are features of rich & developed nations. Their economy is largely dependent on consumption. Yet they grow rather slowly. For a developing nation like India with considerable infrastructure activity, higher inflation rates within a band is necessary for good growth associated with job creation. Here, RBI's primary role is to contain inflation within the band by managing interest rates and bank's CRR & SRR ratios. India with 40% people below poverty line and half of the population without personal latrines, low inflation and low growth regimes are undesirable. Modi government resorting to high speed & high risk financial reforms only to please rating agencies and foreign financial institutions, indicates his lack of understanding of the ground realities and exposes his incompetency as a sound economic manager. Today, instead of creating a million jobs every month, reckless Modinomics resulted in deindustrialization, exorbitant Chinese imports, loss of millions of livelihoods in informal sector is what he has done so far. Modi must realize that perpetual promises and blaming predecessors work well during initial years only but not during fourth year. Prolonged low inflation resulted in agriculture becoming a loss making activity and with no support from government, farmers have taken to streets. GDP growth with  job losses is an astonishing feature of Modi's achievement. Pep talk & unsubstantiated publicity won't do any trick.

Vegetable farmers, first victim of demonetization driven deflation

Vegetable farmers are the first victims of demonetization resulting in cash deprivation consequently destroyed the markets deflating its prices due to disturbance in demand supply mechanisms because it is entirely cash driven. Only metro cities vegetable markets survived because of some availability of cash to support these markets.

Already, real estate, cinema production and construction workers are work less or job less since a month. When the work will resume and how many will get back their jobs is a mystery. Informal sector dependent casual workers, many are is disarray without work and income.

In coming days/weeks many more stories will get unfolded, the innocent victims of mindless Modinomics.

My View:
Demonetization is a well known mechanism used in many countries for tackling corruption, black money & fake money. Secrecy is important for getting good results but without proper preparation and mechanism to replenish cash into system with minimum pain to people of the country is nothing but audacity and insanity and reflects hidden objectives rather than sincerity of the purpose.

Modi, with just on hand 20% replacement cash printed in worthless Rs.2000 denominations and failing to foresee the necessity of re-calibrating ATMs to dispense the new currency notes has resulted in 86% cash sucked out and printing new notes & replenishing is at least 2-6 months away, has just botched up Indian monetary system and if it does't collapse he should thank his stars.