Mohan Guruswamy - 2018: Interesting times ahead
The year that has gone
by is best forgotten. It was a year gone wrong by manmade injuries, mostly made
by one man. Its true demonetization was ordered in 2016, but the backbreaking
consequences were debited to 2017. Then we had the double whammy of the ineptly
and mangled GST rubbing salt into the nations open wounds. The loss of GDP is
estimated, by most serious and unbiased economists, to be around 2% of the GDP
(2016-17) of Rs.152.51 lakh crores, which translates into a huge Rs.3.05 lakh
crores or about $70 billion. In terms of PPP GDP, we are looking at a humungous
amount of 2% of $8721 trillion or a deemed loss of over Rs.12 lakh crores.
These are mind-boggling numbers and there is no question of ever recovering
this loss. Even recovering the pre-November 8 GDP growth trajectory will take a
number of years.
The economy has been
on the skids since 2012, which was the one big reason the UPA, whose decade
long tenure scaled giddying heights of GDP growth to average 7.8%, was shown
out and the growth revival promising Narendra Modi’s NDA was ushered in. For a
bit it was looking as if we were getting back to the dizzy heights of January
2010 when it was over 11%. In January 2016 we were back at 9.2%. But in January
2017 we were at 6.2% and now we are at 5.7%. And don’t forget the NDA2
GDP growth should be read as being on a trajectory flying at 2.2% less, because
the current regime tweaked the figures to look better. We can thus say relative
GDP growth in October 2017 was actually 3.5%. From here one can say
things will only get better. I will hence make a prediction, without sticking
my head too much, that GDP growth should be up by about 1.5-2% in 2018. In the
Modi accounting system that would be around 7%. Unless of course, if Narendra
Modi in his irrational exuberance, once again decides to take a chop at the
economy in its other foot too?
The job creation
figures for the organized sector have just come out. We have had 4.16 lakh new
jobs in the past year. The IT sector pink slipped around 50,000 high spending
techies in these past few months and more are expected to beached this year.
The job situation overall is going to get bleaker. A sharp increase in public
investment as capital expenditure, to smartly lead the economy out of the
doldrums may be too much to expect considering that the Government of India has
just entered the market to borrow another Rs.50,000 crores to make ends
meet.
However, it was a good
tax collection year and congratulations are due to the tax collectors who
apparently took a little more from what they usually let go. According to
the finance ministry the tax collection of Rs 17.10 lakh crores is a growth of
around 18% compared to last year. While direct tax mop up during the
April-March period grew 14.2% at Rs 8.47 lakh crores, indirect tax kitty
swelled by 22% over last year to Rs 8.63 lakh crores. Our Tax/GDP ratio
is at about 11.2%. I feel hopeful that we will do even better this year as the
frantic linking of PAN, Adhaar, bank accounts will improve tax compliance.
But India spends a
whopping Rs 10.18 lakh crores on salaries of its Central and State government
employees, including the amount spent on implementation of the 7th Pay
Commission’s recommendations. This is a staggering 8.15% of the country’s GDP.
But as Arun Jaitely famously said when announcing the consequences of the 7th Pay
Commission, it will spur consumption demand and so we can expect a good year
for cars, white goods and upper class consumables.
The external situation
has been a bit bleak also. Till December 15, 2017, there were 310 infiltrations
from across the LoC, a four year high and up from 270 the previous year. The
number ceasefire violations reported by the Home Ministry this year was 820,
598 more than the previous year and up 667 since 2014. This clearly suggests
that things with Pakistan are getting worse, and things in Jammu and Kashmir
too are getting worse. After all more terrorists are coming from across because
they feel there is much unfinished business here and the fire needs to be
turned up.
The number of
terrorists killed in 2017 (till December 1) is now over 200 and the highest in
seven years. The number of civilians killed in cross fires was 54, up from 14
in 2016. We lost 47 officers and jawans till December 24, 2017, of which 12
were in suicide attacks. Security forces lost 60 killed the previous year of
which 36 were in suicide attacks the previous year. Clearly the other side is
struggling with getting suicidal jihadis. It would thus be safe to infer that
Pakistan did not have a particularly good year last year. Now read this with
the increased numbers of infiltrations reported and we can expect 2018 to be a
busier year for security forces inside the state and on the border.
I think the number of
actions will keep increasing to reach a high towards the end of 2018, as
security forces will also be pushed to become more proactive in anticipation of
2019. In the voter perception, a cross border raid has a far higher valence
than knocking off terrorists inside our territory. There are also no signs that
the Pakistani Army outsourcing to terrorist gangs is going to diminish. On the
contrary with President Trump breathing down its back, the Pakistan Army might
ease off pressure in Afghanistan and open the valves on the Indian side. So it
looks like 2018 will be much more interesting.
There is an old
Chinese curse “may you live in interesting times”. There is a typically Chinese
subtlety in this curse. While sounding like a good wish or even a benediction,
the allusion to “interesting times” is clearly suggestive on less tranquil
times ahead, because tranquility is a highly desirable state of mind. The
Chinese will almost certainly make life more interesting for us. The intensity
and duration of crises provoked incidents at Depsang, Chumar and Dokolam now
suggest a new tactic to ratchet up public agitation, both in India and in
China. In China the regime seeks to increasingly pander to rising jingoism,
just as it is the same in India. With both sides quite apparently keen to use
external tensions to rally domestic support, we can the India-China border to
become a more interesting place.
With economic
prospects still suffering from the self-hamstringing, the external situation
will play right into the Modi playbook. The Army did well in handling the
Dokolam and Chumar incidents. Such incidents unleash our animal spirits and such
nationalism releases patriotism combined with religiosity. Which makes me believe
that this will be the year when the Ram Mandir building will start. This will
also be the year when the legislation of Uniform Civil Code will be attempted –
for often the attempting is better than the doing. Modi can be trusted to make
it an interesting year. And I think that it will be a good year too for him,
politically. When you can’t give people jobs, you can always give them a good
show.
It usually works. But unlike Ghalib, I will not be able to say:
Zulm
ki raat bahut jaldi dhalegi/
Abto aag chulho mein har ek roz
jalegi/
Abto bhukh ke maare koi bachha nahi royega/
Chain ki
neend har ik shaksh yahan soyega/
Aandhi nafrat ki chalegi na
kahin/
Ab ke baras pyaar ki fasl ugaayegi zamin ab ke baras
Mohan Guruswamy
