Split Personality: Modi is no Mao, Marx or Mahatma. And demonetisation is no Cultural Revolution

You know it’s silly season when people start muddling up identities, comparing two dissimilar events and equating themselves with great historical figures. And you know this whole thing is straying into nutty zone when the ease of comparison trumps traditional ideological divides.

Uma Bharati, India’s water resources minister, recently claimed that prime minister Narendra Modi’s economic policy actions (especially the demonetisation scheme) were consistent with Karl Marx’s ideology. “The truth is the prime minister is executing what Marx always advocated,” Bharati asserted rather breezily in a recent interview with The Economic Times newspaper.

This suggested convergence of Marxist economics and Modi’s policy does not carry even a trace of irony or hint of sarcasm. It also seems to lobotomise the bitter philosophical and political antagonism between the Hindu nationalist Bharatiya Janata Party and the Indian Left parties, currently playing out through the students of New Delhi’s Jawaharlal Nehru University.

Taken at face value, Bharati’s statement seeks to prise out crucial electoral space from the Left parties that has traditionally eluded the BJP; her equivalence stems from the idea that both Marx and Modi seek equality and want to eradicate disparity. This is not the first time Bharati has tiptoed into enemy territory: “I am in the BJP, but ideologically I am a Leftist,” she reportedly said according to India Today.

This blurring of sharp lines between political opposites has been taking many curious twists.

Demonetisation was part of a grand “cultural revolution” being choreographed by Modi, the BJP’s minister for urban development and information and broadcasting, M Venkaiah Naidu, wrote in an Op-Ed on Nov. 29. There are three ways of vivisecting Naidu’s poker-faced assertion.

One is to assume that the minister is using the historical allusion with full knowledge of the barbarity and societal upheaval that accompanied the Cultural Revolution in China. Two, this is his Shilpa Shetty moment: the article has been ghost-written without him or the scribe really caring to check its authoritarian imprint. Three, Naidu is consciously seeking to divorce the term from its Chinese precedents and has used it bereft of its underlying significance.

Crossover in America

The line between the deep Right and the Left has been blurring for a while, especially in the US. Neo-conservatives, who occupied important positions within the Bush administration, were ironically considered as ideological descendants of Leon Trotsky, the communist theorist and prominent leader of the 1917 Russian Revolution. The neocons sought common cause with Trotskyites through their differentiated understanding of permanent revolution, world revolution or the withering away of the state.

The US has a long history of Left-wing firebrands moving to the Right; David Oppenheimer’s book Exit Right: The People Who Left the Left and Reshaped the American Century provides details of people who undertook the ideology-traversing journey and are still influencing political thought in the USA.

It should, therefore, come as no surprise that Steve Bannon, the alleged white supremacist and handpicked member of Donald Trump’s incoming administration, had supposedly declared himself a “Leninist”a few years ago. While Bannon does not remember the conversation, the possibility that such a declaration might exist has inspired many op-eds and articles.

Assuming the conversation did take place, Bannon presumably makes this leap of faith because he sees his desire to demolish the state congruent with Lenin’s vision, though there is a deep divergence over what comes thereafter. Bannon is executive director of brietbart.com, which gained infamy during the recent US presidential campaign for peddling half-truths and unwittingly helping “post-truth” become the word of the year.

Modi and Indira

Apart from Karl Marx, Modi has often been compared to other historical figures. Occasionally fawning acolytes have even rushed into cringe-land blithely: the new chief of Indian Council for Cultural Relations, Lokesh Chandra, called Modi a reincarnation of god and greater than even Mahatma Gandhi for adopting a practical approach to solving India’s social and economic problems.

The fact that 87-year-old Chandra was a lifelong loyalist of late prime minister Indira Gandhi and reportedly enjoyed close links to former Soviet Union leaders in an earlier life can be viewed either as an absurd incongruity or part of the same affliction that’s warping boundaries between the Right and Left.

Historian Ramchandra Guha recently compared Modi with Indira Gandhi herself. Despite the two leaders inhabiting conflicting political terrains, many overlapping points exist: the personality-driven politics, the authoritarian streaks, the high-decibel rhetoric of punishing the rich and eradicating poverty.

The opening pages of Sukumar Ray’s Bengali book of nonsensical stories, HaJaBaRaLa, describes how a man sleeping under the tree one summer afternoon suddenly finds his handkerchief transmogrified into a cat. Ray, father of renowned filmmaker Satyajit Ray, was influenced by Lewis Carroll’s idea of distorted reality. There is a similar shade of fantasy in Indian politics: What you see may not always be a true depiction of absolute reality.

This article originally appeared in quartz (www.qz.com) on December 1, 2016, and can also be read here

After Shock Within, Comes External Shock Wave

Apart from demonetisation worries, Donald Trump’s victory in the US has added new risk variables for equity, bond and currency markets

The government’s demonetization contretemps has focused attention on the short-term havoc it will inflict on the domestic economy. There’s another worrisome front opening up which could exert additional pressure on the stressed economy: the external sector.

Donald Trump’s unanticipated election victory in the US and his scattergun statements on trade, visa control and general economic policymaking have added new risk variables for equity, bond and currency markets.

In addition, markets sense that the Federal Reserve might be on track to increasing interest rates in December. Consequently, investors are headed for dollar-denominated assets which, in turn, has adversely affected emerging market assets.

In India, foreign portfolio investors sold close to Rs32,000 crore of securities in November (till 25 November) alone. Predictably, the Indian rupee also depreciated by over 2% in November.

It also raises questions about the Reserve Bank of India’s (RBI) surgical strike: There’s speculation that the sudden and inexplicable 100% incremental cash reserve ratio announcement is aimed at stopping the deposits deluge from bringing down bond yields further and staunching outflow of foreign exchange.

But, that’s not the main problem; it only adds to the underlying weakness. The problem lies on the current account front.

The mainstay of India’s export basket— services—is slowing down. According to RBI data, services exports between April-September 2016 increased only 2% over the same period in 2015, while services imports are up 7%. And, though India enjoys a positive trade balance in services exports, slowing export growth has shrunk the surplus trade balance by 50%.

There’s more. The performance of software and IT-related services exports, the largest contributor to services exports, is expected to deteriorate progressively. Leading infotech companies are revising their FY2017 estimates downwards.

For example, Infosys has marked down its top-line growth expectation to 8-9% for FY17; the lowered guidance comes a second time this year.

Nasscom, the industry association for the information technology and business process management companies, expects IT industry’s exports to grow at 8-10% for the financial year ending March 2017, against its earlier estimate of 10-12%: from $119-121 billion estimated earlier to $116-118 billion now.

The drop in the IT sector’s revenue generation is a direct fallout from US-based companies holding back, or deferring, their spending till the political drift becomes clearer. Trump is expected to take over in January; meanwhile he has revealed his business agenda which, if followed through, is likely to spell trouble for India’s IT sector.

For example, he has promised to review the US visa programme and reform “abuses of visa programmes that undercut the American worker”. Read that as targeting the H1B visa programme, a non-immigrant visa that allows US companies to hire foreign workers in specialized roles for short periods. In IT-speak, it’s a special window which allows Indian software coders to work on client sites in the US.

Trump seems to be following through on his promise: his pick for advocate general, Alabama senator Jeff Sessions, is a long-time H1B opponent who has tried to legislate a reduction in H1B annual quotas and sought federal investigations into alleged H1B visa frauds.

So, till the picture gets clearer, most US companies have put their IT spends on hold. This hurts because the US accounts for about 60% of India’s software exports. Add to this Brexit and the uncertainty caused earlier in year, and that’s another negative mark against the rupee. Expect further changes over the next few months as the picture becomes clearer.

There’s additional pressure on the horizon. Goods exports have been in steady decline, affected by a mix of cyclical and structural factors. Merchandise exports between April-October 2016, in dollar terms, were stagnant (actually marginally down by 0.17%) over the same period in 2015.

The trade balance might look redeeming, with the negative spread between imports and exports having narrowed but hides another source of worry: goods imports during April-October contracted 10.85% in dollar terms.

Apart from the impact of lower oil prices, this reflects two trends: waning global demand squeezes items imported for re-export (such as precious stones, or other jewellery inputs), and decline in domestic demand affects imports of raw materials or intermediate goods.

The bad news doesn’t end there. One of the pillars of India’s current account— remittances sent by Indian workers overseas—has also been steadily coming down. Net remittances during April-June 2016 amounted to $8.82 billion, down 3% from $9.1 billion in the same period of 2015.

It can be argued that the external economy has been under stress for a while. What’s changed is the effect of demonetization on the economy.

The sudden liquidity withdrawal will have a shock effect on the economy, disrupting supply chains, dampening an imminent consumer-led economic revival, deterring capex impulses and lowering overall GDP growth.

How long that will last is still uncertain. But what is certain is that the added burden of a shrinking external economy—gripped by a decade-long slowdown and buffeted by systemic shocks like Brexit or unexpected sharp turns in US economic policy—will only aggravate the systemic shock.

This article originally appeared in Mint newspaper on November 30, 2016, and can be also be read here