Another Landslide Victory and What it Says About the State of the Indian Economy

The recently concluded state assembly elections in Gujarat and Himachal Pradesh yielded results along expected lines. It’s just that no one could tell the extent of the BJP’s landslide victory in Gujarat, nor how close it would be in Himachal. And it was India’s two leading national parties slugging it out in both states. These are some of the few bastions of the national parties, the BJP and the Congress, while many states in India have gone the regional party way.

However, a regional party and a relatively young one at that, the Aam Aadmi Party or AAP, won the civic body elections held in Delhi for the Municipal Corporation of Delhi, long a stronghold of the BJP. They broke the 15-year grip that the BJP had over the municipal corporation, which itself has only recently unified after 10 years of Delhi having three municipal corporations! The municipal body itself was often at the centre of the controversy and conflict between the AAP government in Delhi and the BJP which controlled the corporation as well as large parts of the capital, especially its law and order under the union Home Ministry.

The election to watch closely was the one in Gujarat. Not merely because it is the prime minister’s home state, but because this is the 7th consecutive term that the BJP has won in Gujarat. You would think that in a well-functioning democracy, anti-incumbency would have crept in and caught up with the politics of the state, leading to change in the ruling party. No such luck in Gujarat. From television news coverage of the elections, it appeared that the BJP juggernaut is not to be stopped. Prime Minister Modi himself campaigned, addressing several rallies across the state. And it was reported that ordinary folk had no complaints against the government and that they would vote for the BJP once again. Because of Modi. Not for any particular election issue, since none seem to have been raised.

If this seems completely one-sided in terms of news reporting, it probably was. But one has to admit the election was itself one-sided from the start, since the opposition is non-existent. From the news, it seemed that the Congress Party hardly campaigned and Rahul Gandhi was certainly not seen in Gujarat, since he was too busy with the Bharat Jodo Yatra (Unite India Movement), which the party has been conducting for the past couple of months across the country. Almost all of the Congress’ loss in seats seems to be BJP’s gain. AAP too contested the elections in Gujarat and will probably open their account with a few seats, enough to call themselves a national party now.

What does all this tell us about Modi’s presidential form of campaigning, and his personality cult looming large over the BJP party and the country? And more importantly, what does it tell us about the state of the Indian economy?

The fact that people didn’t vote for local candidates, nor on local issues, but for Modi cannot be a good sign for Indian democracy and for elections in general. Many experts believe that the three-way fight between BJP, Congress and AAP also split the opposition vote and benefitted the BJP. Perhaps. However, it was never a three-way fight in any real sense, but a one-sided domination and sweep. Voter turnout is said to have been lower this time compared to the 2017 assembly elections, which is believed to indicate low anti-incumbency.

That Modi’s personality towers above local issues or problems and local concerns tells me that there is no opposition. People simply have no recourse but to believe or hope that Modi will simply solve all their problems. It also suggests to me that the connection which political leaders are expected to build with their local population and their concerns has weakened to an extent beyond repair. That is also a dangerous sign for Indian politics. Political parties have to work harder to produce candidates who have grassroot support, because they have local issues in mind. It is not a good sign even for the BJP, a party that has always claimed to be democratic in internal party matters, and not subject to dynastic whims or high-command orders.

The Sardar Sarovar Dam across the Narmada river that displaced millions from their lands; Image: Rupesh Sarkar on Wikimedia Commons

This makes me wonder why Gujarat, along with a few other states in India, have not been able to create or build regional parties, the way many others have. Are there no large and compelling enough local issues for a regional party to take up and build a better future in Gujarat? With an anti-Muslim pogrom that took place in Gujarat two decades ago, the displacement of millions of farmers and poor rural folk in the shadows of the Narmada Dam being built around the same time, and the more recent killings and lynching of Muslims and Dalits in the state, it seems to me that the state is ripe for another kind of politics and development.

The same can be said about states like Rajasthan, Haryana and Madhya Pradesh that haven’t been able to throw up any regional political parties based on ideologies and principles different from those of the ruling national parties.

Which brings me to the economic story of Gujarat and indeed, of India. As I have said before on my blog, Modi’s Gujarat model of development is a myth, since Gujarat has historically had a more sophisticated industrial base than many other states in India. Modi’s policies certainly built on it, and also streamlined processes within government to facilitate faster industrial and economic growth. And his model of development refers to industrial development alone, not general economic development based on education, health and social and economic welfare.

Gujarat has lagging human development indicators; Image: Arvind Shakya on Pexels.com

In terms of state GDP and its economic performance, Gujarat being a highly industrialised state does reasonably well. Never mind that in recent years, the state has also attracted large scale investments due to Modi’s influence. This recent economic growth can also be attributed to Modi’s policies, or his larger-than-life persona, I suppose. To the extent that two of India’s leading industrial groups, the Ambanis and the Adanis who also hail from Gujarat have been the biggest beneficiaries of Modi being in power. Adani’s rise to power and wealth is nothing short of meteoric, and in just the past decade he has become the wealthiest businessman in Asia and the third wealthiest in the world.

To just give you an idea of the accelerated growth in Gujarat’s GDP, it might make sense to compare it with its neighbour, Maharashtra, also an equally industrialised state and a fast growing one. According to RBI data, in 2013-14, Gujarat’s GDP was Rs. 7.3 trillion, and was almost half of Maharashtra’s GDP of Rs. 14.5 trillion, according to RBI statistics. In 2019-20, it had caught up and was Rs. 12.6 trillion while Maharashtra’s was 20.4 trillion. Gujarat’s state GDP has been growing at around 10% annually after 2013-14, before slowing to 6.95% in 2019-20, which might have been impacted by Covid-19. Prior to this period, the growth was much slower.

However, when we consider the human development indicators of Gujarat, they are much weaker than Maharashtra and many other states of India. There has been an improvement over the years, but Gujarat still lags behind in these areas. I have again had to rely on RBI statistics, and you can take a look at some of these indicators such as life expectancy, literacy levels, infant mortality, maternal mortality, poverty rate, etc. and you will see that in these respects, Gujarat for all its industrialization and development, belongs with the most backward and low growth “BIMARU states” as they have always been called, which stands for Bihar, Madhya Pradesh, Rajasthan and UP. The unemployment data in the RBI documents look a little suspect to me, though. It is here that the Gujarat government must focus its attention and spending, improving education and skills as well as healthcare, in order to sustain long-term growth.

I have written before about Uttar Pradesh being used as a testing ground or laboratory for all of BJP’s Hindutva politics to do with religion. It looks more and more to me that Gujarat is being developed as a laboratory or test case for how that Hindutva brand of politics combines with industrial heft to create Modi’s vision of a new India. The state was originally the home of India’s textile industry, chemicals and petrochemicals. Today, it is one of India’s major auto hubs, and is fast expanding in renewable energy, including green hydrogen in which both the Ambanis and Adanis have committed billions of rupees worth of investment. If Gujarat first developed as a hub for chemicals, pharmaceuticals and petrochemicals, it was largely because of the ports allowing for large volumes of chemical and petroleum imports into the country. Today, Adani presides over the largest ports in Gujarat and the largest SEZ as well.

Gujarat is blessed with several large sea ports; Image: Felix Dance on Wikimedia Commons

That is not all. Gujarat is also being promoted heavily as an investment destination for other industries that any economy, including India’s, would consider strategic. Besides petrochemicals and chemicals, we have green energy, finance (GIFT city), and most recently, defence. Gujarat recently won four large investments at the expense of Maharashtra, including Tata-Airbus in defence and Vedanta-Foxconn in semiconductors. I am not sure if Gujarat’s infrastructure, or its educated and skilled talent pool is that markedly superior to Maharashtra’s, but it could also be the latter’s recent political turmoil that has affected its ability to attract investment. After all, what can be more politically stable than a single party rule for 30 years! If India is to pursue its independence from Chinese APIs for our pharmaceutical industry, guess which state will benefit the most immediately.

The central government is seeing to it that Gujarat remains the vanguard of India’s industrial economy, and is using it to shape India’s industrial policy, if there is one. As far as the overall Indian economy is concerned, the news of our FY23 Q2 GDP was slower than earlier expected, but encouraging nevertheless considering the slowdown in the rest of the world. The Indian economy grew in the second quarter of FY 23 by 6.3% over the corresponding period in the previous year. The growth has been led by services, with all parts of it firing well, at rates of 6.5% to 14.7%. The slower growth is on account of mining and manufacturing which contracted by -2.8% and -4.3% respectively. Agriculture and construction did quite well, growing at 4.6% and 6.6% respectively.

In terms of gross fixed capital formation and private consumption, these have maintained a steady and good share of GDP, at 34.6% and 58.4%, and have grown over the same quarter last year. This is encouraging news, though the reason for the government consumption expenditure falling is not quite known. And while exports’ share of GDP has grown modestly over last year, the share of imports has grown much faster and at already elevated levels of 31.9%. This must be a cause of concern to the government, as international oil prices stay firm and so do our imports, with a weak rupee against the US dollar. India’s current account deficit is already a matter of concern as is our fiscal deficit.

Just a few days ago, the industrial production numbers for October 2022 were released and the slowdown story in manufacturing continues. The overall IIP (Index of Industrial Production) contracted by -4% in October 2022 over the previous year, with manufacturing accounting for most of it at -5.6%. Both consumer durables and non-durables contracted -15.3% and -13.4% respectively, which is quite inexplicable to me. The only bit of good news is that November consumer price inflation came in a tad lower at 5.88%, but that is mainly on account of a cooling off in vegetable prices. No reason to celebrate yet, as core inflation still remains stubborn at 6.1%, where it has been for more than a year.

As always there is hardly any mention of India’s high unemployment and so I must draw your attention to the fact that India’s overall unemployment rate for November 2022, according to CMIE (Centre for Monitoring the Indian Economy) was 8%, and by December 12, 2022, it was at 8.5%, with urban unemployment even higher at 9.4%.

Elections done, all eyes are now on India’s G20 presidency next year. The chatter on TV news has already begun and according to what I read in the newspapers, the central government plans to make a grand show of it, by taking the event to every state in the country. Instead, I wish they would focus on getting some serious and tangible work done and taking the discussion between the member countries forward in concrete ways.

2023, a year of global slowdown will be India’s year of G20 leadership. Expect it to be a grand spectacle then, before the even grander pageantry of India’s general elections in 2024.

The featured image at the start of this post is of a footbridge across the Sabarmati in Ahmedabad, Gujarat, by Tarul Patel on Unsplash       

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