The Indian government’s inflated aspirations are laughable

R N Bhaskar

Image from Canva — https://www.canva.com

The Indian government has big plans, and mighty pronouncements.  Examine them closely, and they appear horrifyingly inflated. They have become objects for derisive laughter in many countries.

The FM hype

Consider the recent statements of the finance minister (https://www.thehindu.com/business/Economy/food-prices-to-be-under-control-critical-imports-mired-in-uncertainty-fm-nirmala-sitharaman/article69216361.ece).

The FM believes that food prices will remain under control. Really?  And how does she hope to achieve this?  She says that the government will import food at the right time to keep prices under control. It will even slash import duties on such occasions to ensure that prices remain stable.

Hasn’t she forgotten one thing?  What about the farmer who has grown his crop in anticipation of higher prices?  By importing crops, will India not be enriching foreign countries and making India poorer?  And will it not become more import dependent, vulnerable to international prices?  Moreover, she appears to have forgotten the story about India’s edible oil imports.

Earlier governments also tried importing edible oil to keep prices down.  But when farmers lost money, they stopped producing edible oil.  So, India imported more.  And more. Domestic production thus kept declining. Even Piyush Goyal, the commerce minister waxed eloquent about defending edible oil imports (https://indianexpress.com/article/explained/edible-oil-imports-customs-duty-waiver-prices-explained-7572355/), He paid little heed to the disastrous consequences to the economy and the rural community.  Inflated claims again.

The MP hype

Then take the statements of Mohan Yadav, the Madhya Pradesh chief minister (https://www.business-standard.com/politics/expect-investments-in-excess-of-rs-4-trn-to-create-100-000-jobs-mp-cm-125021700011_1.html). He recently said that MP could expect investments more than Rs 4 trn to create 100,000 jobs.  He also says that “Even if it is a factory with an investment of Rs 25 crore [it] leads to creation of 5,000 jobs. . . . . And the way we have been receiving investment proposals, I am extremely confident that we will break all our past records in attracting investments.”

But there are two problems here.  Last year, India (the entire country) saw FDI of $26.4 bn (https://www.fortuneindia.com/infographics/budget2024/117690). Yadav expects MP alone to generate investments (domestic and foreign) of $47 billion (Rs.4 trn divided by Rs.85 to a USD).  Looks inflated, right?

Then look at his claim that it takes Rs.25 crore to generate 5,000 jobs.

Ironically, the best conversion of investment to jobs is 75 jobs per Rs.1 lakh investment.  Therefore, Rs.25 crore should generate 187,500 jobs, according to the ICOR (incremental capital output ratio) data brought out by the NSSO.  So, why is there such a huge mismatch between tables brought out by the NSSO and Yadav’s statements?  Deflated claims on jobs? Or inflated claims on investment? Keep guessing.

Jobs needed

Take another number.  India needs around 12 lakh jobs each year. This is without counting the backlog of unemployed youth. And this does not include the jobs that will be lost on account of AI.  Unless the government creates enough skills and provides quality education to enable the affected to learn new skills, the number of unemployed will grow.  Even assuming that 50% if the youth does not require a job – family businesses, or homemakers – you will still need to create 6 lakh jobs.

This leads to two questions:

1. Who will invest, since FDI inflows have plummeted, and private investment is jittery?
2. What will the state do about making people (especially investors) feel safe in that territory?

MP’s track record of vandalising churches, and targeting minorities is not going to attract investments either from overseas or even from within India.  There is enough documentation on how it has been hurting the vulnerable (https://cjp.org.in/up-leads-in-cases-of-atrocities-against-dalits-madhya-pradesh-tops-in-most-crimes-reported-against-sts/   and https://www.hrw.org/news/2021/02/19/india-government-policies-actions-target-minorities).  Money is skittish.  It wants an environment of law and order and safety.  The state must address these human rights violations first.

National pride

Listen to ministers puff out their chests and demand that their countrymen be proud of being an India.  And compare these statements with how the government has short sold India to the US.

It allowed the US to return India’s illegal migrants in handcuffs and shackles (https://www.thehindu.com/news/national/we-were-handcuffed-claims-deportee-who-arrived-in-second-batch-from-us/article69225715.ece).  Look at the way Columbia refused to allow US planes to land at its airports till the handcuffs and shackles were removed first. Why couldn’t India do that?

Or consider the way India bent backwards in agreeing to buy US arms – most of them failed in the Ukraine and Israeli wars against the arms of Russia, Iran and the Houthis.

India agreed to purchase LNG from the US, fully aware that the US couldn’t pump out more LNG without having a signed long-term contract in place first (Free subscription — https://bhaskarr.substack.com/p/will-trump-get-bogged-down). This is despite getting oil and gas at very favourable terms from Russia and Qatar.

It even meekly accepted a 25% impost of import duty on its pharma and auto exports to the US (https://www.cnbctv18.com/world/trump-tariffs-india-us-pharma-auto-tesla-elon-musk-19561705.htm).  Compare India’s acquiescence with the stand taken by both Canada and Mexico when the US threatened to slap additional import duties (https://www.bbc.com/news/articles/c87d5rlee52o).  They countered by slapped import duties on American goods. Trump acquiesced. He agreed to talk over these issues instead.

And why has the US not levelled a similar import duty on Apple phone imports from India considering that many components come from China?  Why has India meekly submitted. Is this on account of inflated claims?

Similarly, why is India embracing Musk’s Starlink, (https://economictimes.indiatimes.com/industry/telecom/telecom-news/starlink-nears-in-space-nod-after-agreeing-to-most-conditions-for-satcom-licence/articleshow/118428776.cms)   when Italy is suspicious about it (https://economictimes.indiatimes.com/tech/technology/italy-working-on-alternative-to-elon-musks-starlink-minister-says/articleshow/118403518.cms)?

There are other disturbing signs as well, eloquently brought out by Pravin Sawhney of ForceIndia (https://www.youtube.com/watch?v=qkljQD0e8AU).  He points out how, after Modi’s meeting with Trump,

• India has marginalised itself in the BRICS consortium where it has been one of the founding members (https://bhaskarr.substack.com/p/the-west-stumbles-brics-in-the-ascendant)
• It has agreed to do all trades only in the US dollar.
• It has agreed to almost quintuple its trade with the US to $ 500 billion. This, points out Sawhney, will see the country filled with (more expensive) US goods and even further weaken both the rupee and India’s trade deficit.

And India has effectively become a US supplicant, much like it was in the ‘sixties when it imported wheat from the US under the obnoxious and demeaning PL480 scheme.

India has capitulated.

Was it because of myopia?  Or was it because of what Sergei Lavrov stated in Delhi in March 2023 –  Lavrov quote from timeline 18:47 at https://www.youtube.com/watch?v=hiA8Ex9KQo4).  He talks about the ways the US blackmails countries. Is India now being blackmailed?

India could be left out in the cold – like Ukraine is being left out today.

It is obvious that India’s leaders have either been ignorant of the facts on the ground, or have chosen to misrepresent them (free subscription — https://bhaskarr.substack.com/p/nudge-fudge-but-the-economy-wont). Either way, both hurt national pride. They erode the credibility of ikts leaders. Without a spine, even inflated rubber dolls collapse into a hopeless heap on the ground.  And yes, like children, bystanders will chortle.

Can India avoid all this?

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Do watch my latest podcast on Trump and his plans for oil and gas at https://www.youtube.com/watch?v=ci_VZugRgz4

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