Government faces headwinds at home and abroad

Even as global opinion takes serious note of growing religious intolerance in India, the government’s hopes for solace at home are likely to be meagre. Policymakers everywhere are struggling to choose between opening up the economy and continuing a lockdown. However, India’s job is tougher because of the weight of the informal sector in the economy and limited fiscal headroom.

Crisil had warned that any extension of the lockdown beyond May 3 might lead to a zero growth in GDP. Factoring in a second extension of the lockdown, Barclays has also predicted a 0per cent GDP growth in this calendar year and 0.8 per cent for FY2021. Even NITI Aayog, assuming a lockdown till mid-May with some moderation from mid-April, had earlier made a baseline scenario prediction of 2-3 per cent drop in real GDP. This projection implies loss of over 30 million jobs. With the IMF estimate of 1.9 per cent GDP growth, India could be staring at negative GDP growth even if there is no lockdown extension beyond mid-May.

Amid talk of another stimulus package, government sources reportedly suggest that its relief spending cannot exceed Rs. 4.5 trillion. A relief package of Rs. 1.7 trillion (0.8 per cent of the GDP) announced in March was largely for direct cash transfers to the poor and distribution of free grain. The next relief package is expected to assist those who have lost jobs and to revive MSMEs through tax holidays and other measures.

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But government revenue is expected to shrink because of the lockdown. Fitch estimates tax receipts could contract by 1 per cent because of weak economic activity compared to the 11.8 per cent growth projected earlier. The government had also hoped to raise Rs 2.1 trillion from the sale of public-sector companies in FY21, but there may be few takers now. The sale of Bharat Petroleum Corporation Ltd is stalled because of crashing oil prices. Air India sale may be handicapped by the state of the aviation sector. The sale of Container Corporation of India is also problematic – its major valuation was from land leased from Indian Railways at subsidised rates. Purchasing that land will load a debt of Rs 8,000 crore onto its books. The government wanted to offload 47per cent of its stake in IDBI Bank and 10per cent in Life Insurance Corporation of India but the stock market has crashed.

Therefore, the government has little money to revive the economy. Talk of attracting companies relocating from China is still a pie in the sky. Foreign investment flows to India are likely to be inhibited. Both Fitch and Standard & Poors have categorised India’s investment grade barely above junk status. Moody’s has places India two notches above junk.

Rising public anger because of the emerging social and economic crises could impact the government’s popularity.

Internationally also, India’s image has eroded with the world seeing India as a dysfunctional democracy moving towards majoritarianism.

Consider the unravelling of India’s diplomacy in West Asia. India invested substantially in its ties with the Islamic world over seven decades. The UAE and Bahrain in fact honoured Prime Minister Modi immediately after he had revoked the special status of J&K. Even nine months ago, there was no concerted “Muslim response” to the Pakistan Prime Minister’s terming the Modi regime “Fascist” and accusing it of using “Nazi methods” in Jammu and Kashmir. Today the Arab elite including royals, is vocal about the promotion of hatred against Muslims in Modi’s regime.

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Prime Minister Modi therefore may not be able to savour for long the afterglow of having received the highest civilian awards of some very important Islamic countries: the Order of Zayed of the United Arab Emirates, King Hamad Order of the Renaissance of Bahrain, King Abdul Aziz Sash Award of Saudi Arabia, Grand Collar of the State of Palestine, and Amir Amanullah Khan Award of Afghanistan.

International opinion turned perceptibly against India with the targeting of Muslims in North-East Delhi in February this year. Instead of the usual descriptor of a communal riot the events were internationally reported as an “organised massacre of Muslims” and an “anti-Muslim pogrom”. These negative perceptions were reinforced when the got tagged as a “Muslim virus” and “Jihadi virus” after a congregation of the Tablighi Jamaat in Delhi led to a spate of infections.

Critical Arab voices erupted with influencers criticising India for an Islamophobic campaign during the pandemic and allowing the negative public profiling of Muslims in the media. Some of them explicitly held the RSS responsible. It would seem that the Islamic world no longer stands with India and Turkey, Malaysia and Iran are no longer outliers.

Meanwhile, the US Commission on International Religious Freedom recommended that the State Department put India in the ranks of “Countries of particular interest” implying sanctions if their record did not improve. Its 2020 report alleged that the “allowed violence against minorities and their houses of worship to continue with impunity, and also engaged in and tolerated hate speech and incitement of violence.” It singled out two ‘mascots’ of the ruling party – Home Minister Amit Shah for referring to largely Muslim migrants as “termites” and UP Chief Minister Yogi Adityanath for his comment that the anti-citizenship law protestors at Delhi’s Shaheen Bagh must be fed bullets and not biryani.

Although India has rejected the report as “biased and tendentious”, just three days after its publication, the Chief of the Rashtriya Swayamsevak Sangh, Mohanrao Bhagwat, in a televised address from RSS headquarters, advised against blaming an “entire community for the mistakes of a few individuals”. He did not name the Tablighi Jamaat but the impact of international reaction was unmistakeable. Prime Minister Modi too had to say that the sees no race or religion soon after the expression of Arab anger.

The severity of the damage to India’s reputation by communal politics should therefore not be underestimated. Nor should the deteriorating state of the economy. The Punch and Judy shows that the government offers to the citizens intermittently during the extended lockdown are unlikely to prevent the headwinds that the government faces both at home and abroad.

Twitter: @Bharatitis

Disclaimer: Views expressed are personal. They do not reflect the view/s of Business Standard.

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