Assessment of Modi’s Economic Policy on the Occasion of Gandhi Jayanti

by Rahul Pandey and Sandeep Pandey

Mahatma Gandhi’s birth anniversary is an opportune time to assess PM Narendra Modi’s major policy thrusts on the economic front. His policy contrasts both with Gandhi’s vision and with what is needed to develop long term capabilities in India’s workforce and economic infrastructure.

Summary of Modi’s Economic Policy and Its Likely Impact

In a nutshell Modi’s economic policy is an accelerated version of that of former PM Manmohan Singh and his UPA government. In spite of a few initiatives of social empowerment like RTI and economic security for the poor like NREGA, the primary policy focus of Manmohan Singh’s government was foreign direct investment (FDI) and big business led GDP growth.

Modi’s much touted ‘Make in India’ campaign is nothing but what every PM and CM of India has been doing since the economic policies of liberalization, privatization and globalization have been introduced – to bring foreign investment into India. Modi has sharpened that focus several notches up. His visits to Japan and USA and Chinese President’s visit to India have been about marketing India to attract big investments from those countries. In his well advertised meetings with CEOs of largest American and Indian companies he has promised business friendly tax and regulatory regime. The business corporations – both Indian and foreign – are expectedly welcoming all this as unrestricted opportunity to grow revenues and profits. At the same time, the new policy initiatives are silent on the real ‘make in India’ sector that comprises small scale firms and small entrepreneurs.

There are already indications that environmental and social audits and norms are being diluted. Companies will be made even less accountable for impacts of their investment on the environment and local communities’ livelihoods. Labour laws are going to be further relaxed to facilitate companies to hire and fire employees at convenient terms. This implies economic security of workers, especially the less skilled ones who are often at receiving end of the demand-supply equilibrium, will be further compromised than what it used to be in the previous government’s tenure.

Consequently, indigenous communities living in rural and forest areas will be displaced and marginalized with greater impunity. Small farmers will be subjected to greater economic pressure to lose their lands and migrate in distress for work. Urban citizens who possess lesser skills due to their socio-economic background – largely slum dwellers – will be further stripped of the little social security they might have. For the low income people in general, the essentials like housing, healthcare, clean water, food and education will become more unaffordable as the government deregulates and relinquishes its responsibility over to the businesses. A recent example of this is sharp rise in prices of certain drugs for tuberculosis, diabetes, AIDS and cancer by pharmaceutical companies as the government has withdrawn price control in order to attract investment from large companies. Such moves will surely enhance corporate investments and generate some jobs as well, but the ordinary people will bear economic brunt. In addition, our rivers, lakes, air and soil will become more polluted and less habitable, forests will be cut with even less compunction than before.

At the same time the country’s GDP will rise probably at a rate greater than in the recent past. High income areas of cities will become glitzier with wider roads, bigger shopping malls, and gated residential societies. Lucrative employment and entrepreneurial opportunities for the educated and elite youth will multiply. The rich class will embrace a lot of such young and educated people who will ride the accelerated wave of investments and free markets. However, as these opportunities will come mainly for the highly skilled people, they will not generate employment in proportion to income. With such accompanying of growing wealth with growing disparity, market prices of a lot of things will slip relatively out of reach of the majority. Modern quality infrastructure of super highways, speed railways, special industrial zones will be expanded to facilitate operations of businesses and life styles of the rich.

As the rising average income gets more concentrated among the rich and upper middle class, high economic status becomes the only means to acquire social security and the majority of less privileged citizens are stripped of it, prices of essential services and goods rise faster than ordinary people’s incomes, the environment is polluted, control over natural resources is transferred from local communities to large companies, farming and tribal people are dispossessed of ancestral assets and forced to migrate as unskilled workforce, and the government withdraws its responsibility even further, the contradictions in the Indian society will become more glaring. In other words, Modi’s economic policies will create opportunities for the rich at the cost of the poor.

The Urgent Need of the Hour

First and foremost, India needs economic opportunities to be created directly for the poor. That will move the entire society, not just the rich, towards prosperity. In addition, India needs a strong social security protection for the poor and vulnerable. So that, until the time they do not come out of poverty, they are not adversely impacted by unintended consequences of industrial investments. This need cannot be felt more acutely at any other time than now when India has had enough experience of both rising GDP and sustained growing economic disparity together as a consequence of the economic policies followed in the past two decades.
It is useful to turn to Gandhi to convince ourselves of the moral underpinning beneath the urgency of this need. To quote Gandhi on economic policy matters:

“A non-violent system of governance is clearly an impossibility so long as the wide gulf between the rich and the hungry millions persists. … Economic equality is the master key to non-violent Independence. … Working for economic equality means the levelling down of the few rich in whose hands is concentrated the bulk of the nation’s wealth … and the levelling up of the semi-starved millions. ”[1]

“I would allow a man of intellect to earn more, I would not cramp his talent ….”[2] but more urgently “I want to bring about an equalization of status. … I want to allow no differentiation between the son of a weaver, of an agriculturist and of a school master.”[3] “When I succeed in ridding the villages of their poverty, I have won Independence.”[4] “The revival of the village is possible only when it is no more exploited. Industrialization on a mass scale will necessarily lead to passive or active exploitation of the villagers as the problems of competition and marketing come in.”[5]

“What I object to is the ‘craze’ for machinery, not machinery as such. The craze is for what they call labour-saving machinery. Men go on ‘saving labour’ till thousands are without work and thrown on the open streets to die of starvation. I want to save time and labour not for a fraction of mankind but for all, I want the concentration of wealth not in the hands of a few but in the hands of all. Today machinery merely helps a few to ride on the backs of millions. The impetus behind it all is greed. … This mad rush for wealth must cease, and the labourer must be assured not only of a living wage but of a daily task that is not a mere drudgery. … The saving of labour of the individual should be the object and the honest humanitarian consideration, and not greed the motive.”[6]

Gandhi’s concerns have been thrown to the wind. We have been so obsessed with trying to maintain a high GDP growth rate that we’ve chosen to ignore the fact that India has slipped down on the ladder of most social indices, like literacy, malnutrition, health care, access to sanitation.7 Clearly the GDP growth rate is increasing and not decreasing the gap between the rich and the poor.

Even though some of us may not agree with certain specific solutions proposed by Gandhi, it is hard to disagree with the urgency he placed on the goal of improving economic status and dignity of the semi-starved millions. It is also hard not to see the conflict between this goal and that of promoting mega business investments. The core economic policy followed earlier by Manmohan Singh’s government, and now being accelerated by Modi government, is centered on the latter goal.

The contradiction became patently evident when Modi and the Chinese President Xi rode through the roads of Ahmedabad and spent some time at Gandhi’s Sabarmati Ashram. The slums, low income houses and small shops along the route were hidden from the view by long, green cloth curtains. While the poor of the city were covered up, the two leaders had dinner on a riverfront garden, pledged to boost Chinese investments in India, and signed pacts at a five star hotel.

The stark contradiction between Modi’s policy and what Gandhi stood for is a reminder for us to ponder about what kind of society we wish to live in.

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