Economist Arjun Jayadev describes Narendra Modi's fiscal policy as remarkably poor in wake of COVID-19 pandemic

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      Indian prime minister Narendra Modi is playing games with numbers in the wake of the pandemic, according to a highly regarded economist from that country.

      In an interview with the Georgia Straight, Arjun Jayadev rebuked Modi's televised claim that India is undertaking a giant stimulus program of around 10 percent of the gross domestic product.

      According to Jayadev, a faculty member at Azim Premji University, the true stimulus is between 0.7 percent and 1 percent of GDP.

      "It turns out that a substantial fraction of the policy announcements includes the repackaging of previously undertaken policies," Jayadev insisted. "Second, there is a large set of policies that are an expansion of contingent liabilities which may or may not require actual outlay and should not therefore be thought of as part of a stimulus.

      "And just as importantly, there are very few  policies will have immediate impact, which is of course critical at this juncture." the economist continued. "Overall, the package appears to be an exercise in accounting to ensure that a given number is met, rather than a set of new policies focusing on the immediate needs of the economy."

      Jayadev will join Nobel Prize–winning U.S. economist Joseph Stiglitz in the next installment of the Indian Summer Festival's series of 10 weekly events.

      Entitled "People, Power, and Profits", it will take place online at 7 p.m. Pacific time on Tuesday (June 9) in the festival's YouTube and Facebook channels. It's named in honour of Stiglitz's 2019 book, People, Power, and Profits: Progressive Capitalism for an Age of Discontent.

      Jayadev also said in the interview that India's economy has been faltering since its best decade from about 2002 to 2012. That's when the economy grew based on credit, infrastructure, real estate, and a rise in some exports.

      "In the last decade it has been dependent on consumption and government and has been decidedly worse," he stated. "Communalism has been there throughout this period and while an awful and debilitating thing for the polity, it has not necessarily had a direct negative impact on the economy.

      "It is nevertheless extremely painful to watch, as it is pushing toward a cruel majoritarianism which is antithetical to the original conception of the country in the post-independence period." 

      The Georgia Straight asked Jayadev six question about India's economic situation in advance of Tuesday's discussion with Stiglitz. You can read the transcript below.

      Georgia Straight: What are the biggest misconceptions in the West about India's economy?

      Arjun Jayadev: The British economist Joan Robinson once said: "Whatever you can  say about India, the opposite is also true." And this is also the case with the economy.

      One view is that it is common is that it is a poor country, with high malnutrition, hunger, ill health. The other is that it is a rising power, with a large base of young talented people [and] a strong services economy. Both are true.

      It may be hard for people in the West who have had little exposure to understand just how varied life experiences can be in one country.

      Language, religion, [and] geography serve to make it possible that in the same neighbourhood, you can have a First World life and a decidedly much poorer life coexist. Both kinds of economies at the same time.

      Georgia StraightHow would you rate the Modi government's fiscal policy in response to the COVID-19 pandemic?

      Arjun Jayadev: It has been remarkably poor. A couple of weeks ago, the prime minister was on television with one of his 8 p.m. addresses which is often designed to have some sort of shock and awe element, and announced rather grandiosely that India was going to undertake a giant stimulus of around 10 percent of GDP. 

      But like so many things with such pronouncements, once the headlines did their rounds, and people began to dig into the details, it became clear that it was nothing of the sort and at most, the true stimulus would be between 0.7 and 1 percent of GDP. This was corroborated by many different organizations.

      It turns out that a substantial fraction of the policy announcements includes the repackaging of previously undertaken policies.

      Second, there is a large set of policies that are an expansion of contingent liabilities, which may or may not require actual outlay and should not therefore be thought of as part of a stimulus. And just as importantly, there are very few  policies will have immediate impact, which is of course critical at this juncture.

      Overall, the package appears to be an exercise in accounting to ensure that a given number is met, rather than a set of new policies focusing on the immediate needs of the economy. 

      Georgia StraightWhat impact will the pandemic have on India's capacity to finance future growth in the economy?

      Arjun Jayadev: With the lockdown, some have estimated that India has lost around $5 billion every day. While we are easing off, just as the pandemic is starting to spread, we are well over two months into it.

      This obviously means that our ability to generate tax revenue has fallen. This comes on the back of a growth slowdown that preceded the pandemic, and an economy in which tax revenues were not rising.

      The upshot is that 'traditional' fiscal space has contracted. I should add that I do not think that this should in any way deter spending—if there is ever a time to run large deficits, it is when there is a sharp demand contraction like we are seeing now. But I am afraid that the hardwired ideologies of fiscal rectitude will prevent policy makers from making the correct decisions.

      Georgia StraightCan you offer your thoughts on how vulnerable India's economy is to climate change?

      Arjun Jayadev: In the last month, we have just seen the arrival of locusts in India, which may seriously damage crops, and two once in a century cyclones—the first creating havoc in Calcutta and the other narrowly missing Bombay.

      All three are quite clearly related to the rapid changes in climate and possibly the temperature differences in the Western and Indian oceans. We are increasingly looking at groundwater shortages in many major cities and  quite possibly serious changes in cropping patterns as a result of changing climate.

      The Indo-gangetic plain is also home to over 400 million people so it will be happening in a place with immense population density. So overall, India is likely to be quite badly hit.

      Georgia StraightThere's a renewable-energy revolution taking place in many parts of the world. India has long been dependent on oil imports. What impact will changes in the global energy sector have on India over the next decade?

      Arjun Jayadev: I think the renewable energy revolution is also there in India. For example, Indian solar costs are now the cheapest in the world, and in a country that is very sensitive to price points, this is good news.

      In addition, the government has set a very ambitious set of targets to move to renewable energy of the next 10 years.

      That noted, oil and coal continue to be major sources of energy, and the lower cost of oil imports since 2014 or so have dampened the incentive for renewable sources.

      But India's largest energy issues are really to do with the political economy of energy generation, distribution, and billing. Especially with the provision of subsidies and the inability to accurately  and effectively meter energy use.

      All of this makes it perhaps one of India's most difficult problems, which needs to be solved urgently. Hopefully though, renewable improvements, especially solar, will serve to further incentivize clean energy usage in the next decade.

      Georgia StraightDoes communalism in India and growing xenophobia in the West have the potential to derail India's economy over the medium term?

      Arjun Jayadev: India's economy has been faltering  for the last few years. The economy during the best decade of Indian performance (from about 2002 to 2012) was built on credit, infrastructure, real estate and some export growth.

      In the last decade it has been dependent on consumption and government and has been decidedly worse.

      Communalism has been there throughout this period and while an awful and debilitating thing for the polity, it has not necessarily had a direct negative impact on the economy.

      It is nevertheless extremely painful to watch, as it is pushing toward a cruel majoritarianism which is antithetical to the original conception of the country in the post-independence period. 

      The growing xenophobia in the West, I suspect, will have more of an impact in rethinking global arrangements, and to the extent that this will, for example, make H1 B visas less available, limit some globalization-led aspects of Indian growth.

      But here again, I think it will be a minor impact in terms of growth, though culturally it will be a significant change.

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