Since May 2014 Narendra Modi government has been in power and we have seen Modinomics for about seven and a half years. Modi government took many big economic decisions as part of its economic policies known popularly as Modinomics. If we assess the results from economic benefits perspective to the masses and for the country as a whole, it sounds like Madonomics. Let’s analyze the important economic decisions of Modi government and see why it is Madonomics, as such decisions would not be taken by any sane person and definitely not by government economists who are supposed to take the best decisions for the government.

        Demonetization: This first great policy advocated by Modi government was Demonetization brought in November 2016 when all 500 and 1000 denomination notes contributing about 86% of exchange were declared invalid as a means of exchange. The advocated aim by Mr. Modi was to establish a cashless economy which would eliminate black money, improve payments system, reduce the cost of transactions and boost the economic growth. The results achieved however have been completely disastrous. Instead of increasing GDP growth rate, it kept falling continuously quarter after quarter since then. Many people died in ques standing to exchange the rupee before banks. No black money was recovered. After five years, the cash supply within the Indian economy has been more than what it was on 8th November 2016, the day demonetization was announced.

The government announcement of demonetization on November 8, 2016, had taken even most policy makers by surprise. The lack of preparedness as people rushed to exchange the demonetized Rs 500 and Rs. 1000 currencies created chaos across the country for several weeks as not just people but also businesses faced cash crunch. Five years later, the impact of demonetization on the economy still lingers while experts argue that black money is back in circulation. This was most noticeable during the two waves of Covid as people rushed to get scarce life-saving drugs and oxygen for their dear ones. Income tax raids in recent months have also uncovered fraudulent transactions and unaccounted incomes from many businesses.

According to Reserve Bank of India (RBI) data, currency with public for the fortnight ended October 8, 2021, stood at a record high of Rs. 28.30 lakh crore, up 57.48% or Rs. 10.33 lakh crore, from a level of Rs. 17.97 lakh crore on November 4, 2016. Cash with the public has shot up 211% from Rs 9.11 lakh crore, recorded on November 25, 2016. It rose by 8.5%, or Rs 2.21 lakh crore, on a year-on-year basis. The jump was primarily driven by a rush for cash by the public in 2020 as the government announced a stringent lockdown to tackle the spread of the Covid pandemic.

To sum up, the policy sounds like the policy of Muhammed bin Tughlaq who had, when found it difficult to maintain the supply of gold (dinars) and silver (adlis) coins on a large scale, introduced a token currency system and minted vast quantities of new copper and brass coins (tankas) that could be exchanged for fixed amounts of gold and silver. He has historically been known as a “Mad Emperor” and that makes me conclude this policy as Madonomics.

The economics of fossil fuel price hike: Modi government has been continuously raising fossil fuel prices even when they had fallen internationally. This brought a lot of discontent amongst consumers. So, on the eve of Diwali, the Central government had cut excise duty on petrol and diesel prices by Rs 5 and Rs 10, pronouncing this as “Diwali Gift”. This brought relief to customers, who were reeling under inflation and skyrocketing fuel prices. Following this, at least 22 states and UTs cut VAT in different proportions. The petrol price was cut in the range of Rs 5.7 to Rs 6.35 per liter and diesel rates by Rs 11.16 to Rs 12.88 across the country on November 4. The BJP-ruled states have slashed VAT rates on petrol and diesel by Rs 8 and 9, respectively.

Making minor tweaks to fuel prices don’t make an impact. Center first raised the price of petrol and diesel by up to Rs 30 and then decreased it by Rs 5. Since transport is a necessary input for almost all final output, raising fuel prices has cascading impact on inflation. When India is reeling under inflation, raising fuel prices is Madonomics when government plans to curb inflation by first raising fuel prices and then withdrawing that raise partially.

Withdrawing the Farm Act: Modi government first brought Farm Act in September 2020 withthe declared aim that it was farmer friendly. However, farmer realized the mad element in it and they vehemently protested for over a year. Finally, because looming state elections, Modi government withdrew it. This is nothing but Madonomics as 700 farmers died in protest, wasted their time over more than a year in protest and then Modi government shamefully withdrew it. Farmers proved that Farms Laws part of Modinomics were Madonoimcs and by withdrawing this law Modi government acknowledged that it was indeed Madonomics which should be removed.

Failures on Death Rate from COVID Pandemic: When we compare COVID related deaths and death rates of India Vs. the second largest democracy, the USA and other neighbors we find that India of India has failing badly in saving Indian lives. From the New York Times latest statistics, India’s COVID related deaths have been significantly higher when compared with similar other countries and in the nearby region. At the peak, the number of weekly average death was 4454 on May 23, 2021. On June 12, this has been 3303. The sad part is it increased after June 9 when this average was 2177. For the USA, this average has been 370 on June 121. Since the population of India is roughly 4 times of the USA, the death rate in India should have been 4×370 or around 1600. This means the death rate in India has been twice of that of the USA despite aid coming from all over the world to save Indian lives. The weekly average death rate in Bangladesh has been just 30 on June 121. India’s population is about 8.7 times larger than Bangladesh which implies that India’s weekly average death rate should have been just 330. At the peak death rate in Bangladesh on April 23, the average figure was just 981 which implies that the peak weekly average death rate in India should have been 850. For Pakistan, the peak weekly death rate was 140 on April 28 and on June 12 it was 61.  Since population of India is 6 times that of Pakistan it implies that even per Pakistan’s standard, the peak weekly deaths in India should have been 850 (140×6) and on June 12 it should have been 360 (61×6)1.  It is really shameful, that with population adjustment made, India has been performing 10 times worse than its immediate neighbors Bangladesh and Pakistan in handling Covid death rates and at the peak (worst time of both the countries compared) also India was 5 times worse than them.

GDP: On GDP also India’s performance has been dismal. As per the latest data, the growth rate of India has been -7.3% for the fiscal year 2021 (4/20 to 3/21). US and China are much bigger economies than India and they also had COVID almost on the same scale as India. However, their economies grew at the rate of 2.6% and 8.4% respectively. It is clearly the failure of Modi government because of their regressive economic policies.

Alarming Balance of Trade Deficit with China as a Cause of sluggish GDP growth of India: The news is being touted that “Trade between China and India soared 70.1% in US dollar terms in the first five months of this year to $48.16 billion, according to Chinese customs data released on Monday. Specifically, Chinese exports to India grew 64.1% year-on-year from January to May, while imports surged 90.2%,” the tabloid Global Times reported. The trade deficit during the same first five months of 2021 has been$45 billion, which is 1.5% of India’s GDP. Since GDP = Consumption + Investment + Government Expenditure + Balance of Trade, India’s GDP is down by 1.5% in just five months of trade with China. This implies that for the whole year at this rate of trade deficit with China, 3.6% of India’s GDP would be taken away by China. It is very surprising that Modi Government is not realizing this drain on India’s economy. President Trump imposed heavy import duties on China in the year 2018 and that has been continued under Biden administration, but the Indian Government is not even realizing this problem. What kind of Finance and Commerce Ministers this government has that they are not even understanding that with this kind of trade deficit, India’s GDP can’t grow? Only under this government with India-China trade volume of $87.6 billion in 2020, China overtook the US to become India’s largest trading partner despite a bloody conflict along the Line of Actual Control (LAC) and the rising anti-China sentiment. All Asin tigers and both China and Japan achieved miracles because of trade surpluses, but Modi government does not even realize that India’s wealth is being drained by China! Even one of the richest and the most powerful country, the USA could not survive the economic drain on US GDP caused by trade deficit with China. This problem must be discussed in Parliament. This is urgent.

Failure on Inflation: India’s inflation for the year 2020 was 6.2% which is far above the stated goal of 4%.

Failure on Unemployment reduction: Over 10 million (1 crore) Indians have lost their jobs because of the second wave of Covid-19, and around 97 per cent of households’ incomes have declined since the beginning of the pandemic last year, Centre for Monitoring Indian Economy (CMIE) chief executive Mahesh Vyas said on Monday4. The total figure of unemployed has been 3.5 crores or 350 million labor force.

The Problem of Stagflation: India has experienced the worst of both the worlds during the current regime. Since the relationship between inflation and unemployment has historically been inverse in many parts of the world including India under Dr Man Mohan Singh’s government (also known as Phillips Curve), India under Modi government has seen higher inflation and higher unemployment as discussed above. This means stagflation is the special feature of this government because of its wrong economic policies.

Failure on reducing inequality:India’s inequality had increased. Only two business houses of Gautam Adani and Mukesh Ambani have been accumulating wealth by exploiting the rest of India. As already discussed, that 97% of Indians have become poorer while the wealth of Mukesh Ambani has tripled since the formation of this government in 2014 and Gautam Adani’s wealth has increased by about 30 times. As per Forbes records, Gautam Adani’s wealth was just $3.5 billion in March 2016 which jumped to $75 Billion on June 13, 2021. This kind of immense richness over just 5 years is not possible without government (Prime Minister in particular) favoring him.

Since all the economic policies of Modi government have failed, and some have been fully or partially withdrawn like Farm Act and fossil fuel price hike, I rightly name the Modinomics to Madonomics.

(The author is General Secretary of IOCUSA)