Return of protectionism

Prime minister Narendra Modi has applauded India’s latest budget delivered by his finance minister Arun Jaitley, but the parallel chorus is fading out by the day. It was Utrjit Patel, RBI governor last week, this time it’s Modi’s former advisors, Arvind Panagariya, who was also deputy chairman of the Niti Aayog until August 2017.

The RBI's monetary policy committee listed out reasons why inflation could stay well above the RBI target of 4% throughout the next financial year. RBI expects a rise in food and vegetable prices, crude oil prices and cost of health and personal care. Three other factors that will likely fuel inflation emanate from Jaitley’s budget. 

• Proposal to raise minimum support price (MSP) for farm products
• Hike in custom duties for various products including industrial inputs
• Wider-than-expected fiscal deficit

All this assuming that the south-west monsoon will be normal this year. The future of investments is  as bleak as it was before. For Modi government, these  nonchalant jabs from the RBI governor it is yet another sign that its populist budget may not help push the growth pedal. 

Substantial liberalisation under PV Narasimha Rao and Atal Bihari Vajpayee, India became the first democracy to achieve 8% plus growth for nine years beginning in 2003-04. The top industrial tariff rate fell from 355% in 1990-91 to 10% in 2007-08 and imports and as proportion of the GDP expanded to 30% and exports to 24% by 2011-12. Sadly, a new generation of bureaucrats seems to have now replaced its more enlightened predecessor. It is on course to erect the wall of protection all over again. 

Those who cannot remember the past,
are condemned to repeat it ... George Santayana 

Much is said about liberalisation and globalisation which benefited only one half of the world population while leaving other half in distress. What is visible is the constant economic growth that had eradicated extreme poverty and at the same time helped rich to become extreme rich, albeit unjustly. The casualty is environment, over extraction of non replenishable natural resources and workers with stagnant wages in developed nations. Today, US has accumulated trade debt of $20 trillion, up from $1 trillion during 1980's and has no clue or any forward looking plans to repay that debt and trade gap of $100 trillion is likely in next few decades and is saddled with huge industrial work force with stagnated wages. On other hand, China armed with huge trade plus faces deterioration of social values, degradation of landscape & environment and over exploited 150 million labour force with no human rights for over 30 years. Economics are complex and any change usually has unintended consequences. Over dependence on either exports or imports, for prosperity, is detrimental to any nation. The prudence lies in living within means and/or maintaining manageable trade gap at all times. Economic growth is never a true indicator of progress, development and wellness of any nation.

Rahul Gandhi better than Narendra Modi

Rahul Gandhi's speech and Q&A at Berkeley

• At UC Berkeley, on Sep 11, 2017, Rahul Gandhi critiqued the Government of India without resorting to insult or abuse.
• Rahul was so disarmingly candid that the BJP government in Lutyens Delhi panicked and held a press conference to hurl personal insults at him. 
• The final straw was the assassination of activist-rationalist-journalist Gauri Lankesh. It was  a planned murder by a trained shooter. Enough is enough. The gang in power must go.
• Rahul is better than Modi and for that matter 'anyone is better than Modi'.
• Rahul will lead the next government, given Modi's self-inflicted fatal injury of demonetisation that has pushed the economy into free fall, and given Modi's broken promises of job creation.
• Rahul Gandhi is more dignified than the crass and nasty Modi. 
• It is obvious to increasingly more voters that Modi's taunts and abuses were mistaken in 2014 for toughness and determination.
• Modi's reliance on clever acronyms makes clear his disdain for wisdom. 
• Demonetisation was not deliberated or calibrated, but an ill-advised move that Modi blindly jumped into.
• Former RBI governor Raghuram Rajan felt that demonetisation would hurt the economy in the short-run without long-run benefits and was not offered the usual two-year extension of tenure; Modi prefers his own decisiveness to expert advice.
• Calling Congress Vice President Rahul Gandhi "pappu" or "shehzada" does not behove someone occupying the Prime Minister's position. It is learnt that Modi has appointed 20 IT professionals to attack Rahul Gandhi in synchronised fashion, which is an act done in frustration.
• The BJP rumour machine manufactures lies about Rahul (and he mentioned this at Berkeley). They say he is disinterested, he is reluctant, he would rather holiday abroad, that his sister is smarter, etc. The nastiest lies have been disproved in court, but unemployed trolls like Subramanian Swamy nevertheless continually recirculate them. To Rahul's credit, he does not get bogged down countering each and every bit of calumny.
• BJP leaders had no right to attack the Congress, especially Rahul Gandhi, because the "ancestors of BJP" were working in connivance with the British Whereas Rahul's ancestors were fighting for independence of India and were jailed for prolonged periods.
• Rahul is basically an introvert. This is a fact of life. Some humans are introverts. Despite being an introvert, he still manages to attempt a shake-up of India's oldest political party or to address massive election rallies.
• He's not a bully. At Berkeley, he honestly answered questions from the audience. Modi, on the other hand, doesn't even meet the press, disparaging the media with such vehemence that his troll machine takes the cue and substitutes abuse for argument. Heck, Modi doesn't even take questions from his own partymen, as Member of Parliament Nana Patole said a fortnight ago.
• Rahul will not hesitate to take aboard some strong hands when he forms a government. This is a clear contrast to Modi, an insecure man who can only head a Cabinet of duds. Even fellow traveler Arvind Panagariya had to leave.

A pessimist might say that even if Rahul as PM did absolutely nothing, he would still be better than Modi. The Delhi deputy chief minister who worries there will be no alternative to Modi in 2019 will be proved wrong. It is likely that Rahul's government will never plumb the depths of incompetence we currently see. 

Rahul Gandhi's speech even though well drafted but delivery and subsequent questions & answers were immaculate. He might not be a saint in the past, like any other politician in India, but there were neither untruths nor exacerbation. This reminds me of Rajiv Gandhi's press conference during his first visit to USA after becoming PM in 1980s which catapulted him to an invincible slot then. Kudos to Rahul Gandhi for taking up the onerous task of opposing the invincible Modi for 2019 general elections. While trouncing of UPA in 2014 was a historical necessity, defeat of Modi & BJP and saving India in 2019 is even more important than that.

Arvind Panagariya, vice-chairman of NITI Aayog resigns

Arvind Panagariya, first vice-chairman of the NITI Aayog

• Arvind Panagariya, first vice-chairman of the NITI Aayog, resigns to continue his academia with Columbia University. Nearly a year ago, Raghuram Rajan had decided not to continue as the governor of the RBI.
• Both Rajan’s exit in Sep'2016 and now Panagariya's exit were preceded weeks of sustained attacks on them by the RSS and its outfits. His stated reason that Columbia University declined his further leave extension and, his remark "If I were at 40, then I would have got job anywhere...the kind of job I have at Columbia is almost impossible to get at this age of 64." is so pale and unbelievable.
• It's difficult for a "pure economist" to survive the politically volatile world of economic and monetary planning even if there is a favorable boss. 
• Arvind Panagariya and toothless NITI Aayog did some credible work in education, social sector spending, digitalisation of the economy and agriculture. 
• Panagariya, a pure economist, delighted by economics, disappointed by the landmines of Indian economic policy planning, the motivated criticism, the lack of space to think and deliver was a bit too much to handle. 
• Panagariya's exit proves that bright minds lack the courage to shine in the unlit alleys of governance.

Read Panagariya's brief Q&A with journalists

After predicting that growth in Q4 of 2017-18 will touch 8%, 

Panagariya has wisely resigned before proved wrong ... P. Chidambaram

Modi replacing powerful Planning Commission with teeth less NITI Aayog makes it a redundant body. Advises are being obtained from quacks like Artha Kranthi etc. With top class economists leaving one after another, and replacing them with second grade economists or politicians, where are we heading as a nation? Modi must realize, at least now, that it is easier to demolish than to construct. Next in firing line may be Arvind Subramanian, Chief Economic Adviser?