Friday, June 1, 2018

Modi Economic Policy, A case of Charismatic Chaos. How much Halo, How much substance???

Added on 06th November 2018

In view of incoming elections, the Modi government wants to announce populistic schemes to win votes in the 2019 general elections. The lack of fiscal and financial discipline, and add to this the financially detrimental  policies like Demonetisation and faulty structure and implementation of GST  have badly hit the economy, GDP, and government revenue badly. A bad economy has gone to worse condition.

The public sector banks are in no position to fund the popular election policy of Modi government of 59 minute loan approval to SME sector. The  government now wants to steal money from the RBI, dig into its reserve and appropriate 1/3 of its reserves to recapitalize the banks to fund the BJP government's populist programmes on the eve of the elections in 2019.

To this end the government has applied never before used section 7 of RBI act.

It is one man's selfish desire to somehow come to power again at the cost of credibility and stability of RBI, the Indian Financial system and the Indian Economy.

Finance Ministry seeking to transfer a surplus of Rs 3.6 lakh crore, more than a third of the total Rs 9.59 lakh crore reserves of the central bank, to the government.
RBI has rejected the proposal. We need to see, what the Modi government future move would be.
The Ministry of Statistics reported growth of 6.7 percent, down from 7.1 percent for a year 
earlier. However, economists expect growth to be robust in the current financial year.

However, when we compare the growth for the period Jan-March 2017, we see finally see a growth of 0.7 % compared to last year for the same period. Finally, albeit slowly, we seem to be recovering from the impact of demonetisation.

But, in the coming months of this year, we may again see government policies which may adversely affect the economic growth.

This being the election year the government may formulate policies to appease people or at least a part of community. History tells us that, whenever a government formulates a populistic policy, it goes against the long term interests of the people of the country.

The Modi government has already spent more than 4,300 crores of tax payer’s money for publicity and the promotion of its various schemes. This is based on the information given by the government ministries in response to the RTI by people. This being election year, much more of the poor taxpayer’s money will go in projecting the government’s achievement.

The Amount of Money Modi Government Spent On Publicity Is Enough To Feed One Million Children For 3 Years


As if, the self created economic turmoil is not enough, the ruling BJP has been pushed to desperation, and frustration by the raising oil prices and adverse by poll results. We only have the prime minister to blame for this situation. He inherited a situation, when the oil prices were dropping and reached a position of almost 50% of the present rate.

He did not pass on the benefit of the bonanza to the people of the country, who were the rightful owners, nor did he create an oil fund to deposit the surplus. If he had done that, the surplus deposited in the account could have been deployed to create a buffer and subsidise to certain extent at least the burden on people.

Where did this huge money go??

How and where was the money deployed???

Was it used for Fiscal expenditure, or was it deployed for people welfare schemes???

Why was an oil surplus fund not setup???

Was the economic management so poor, that, the government did not envisage a future situation, where the USD could appreciate and as a fallout could bring a resultant increase in crude oil.

Silence is not an answer to every question. The government and more specifically the prime minister is accountable to the people of the country for every rupee earned and spent.

We of course don’t mind the prime minister and universities refusing to answer the RTI regarding the prime minister’s educational qualifications???

You cannot do the same with the public money.

The previous government had a galaxy of economic experts led prime minister, who himself was an economist or global repute. Plus, he had another great economist and global expert as head of planning commission. Another great economist as the Chief Economic Advisor and later as the RBI governor. To add to this he had a glittering panel of economists as members of Economic Advisory Council to the prime minister. All the people put together formulated an economic policy, that people of India found it good enough to give UPA and Dr. Singh another term.

Modi immediately after coming to power dismantled the Economic Advisory Council. He could have retained the council but the members. And suddenly, after there was a hue and cry among people on account of mismanagement of Demonetisation and GST, he again reinstated the Economic Advisory Council. He is now pressurising the members to spread false and tailored accounts of economic growth and employment. Even renowned economist Dr. Surjit Bhalla is being used as a tool by the prime minster furthering the cause of BJP. It may be very difficult for poor Dr. Bhalla to calm down his questioning conscious. A conscientious person like him may perhaps hardest days of professional career.

I do not claim to be a know all in economics or governance. People may correct me

wherever I might have gone wrong. I am open to dissents and disagreements and

debates. Please feel free to criticise and correct me.

Best Wishes,


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