Modinomics: Why India is Rising
India is changing. For years the BJP has been banging drums, tolling bells, and blowing conches to signal a New India. A mammoth mandate in 2019 was an early smoke signal for the fire that had erupted in the Indian market, but now a flurry of foreign praise answers the call of the drums, bells, and conches previously labeled as empty and enemy propaganda. Ironically, the newly found foreign admirers just a few years back cried wolf as they predicted India to turn into a hellscape due to what they saw as economic mismanagement, not listening to “experts,” religious tensions, some random picture they saw on the internet, or any other reason a comprador elite would pass on from the home country. What changed?
There are plenty of articles about India’s rise, but very few about why. The reason for this is that they would have to associate with someone untouchable in their ivory towers. The government primarily responsible for this rise is not only the arch-nemesis of the narrators of India to the West but also has a terribly difficult time presenting their case in a manner that doesn’t involve frothing at the mouth. There have been many mistakes made along the way. There are many critiques worth their weight. But one has to start acknowledging that something special is occurring in India. Let’s explore why.
The Shoulders of Giants
Artha or wealth was one of the 4 purusharths or primary aims of life instilled in ancient Indian thought. Indian merchants and sailors would span the ocean named after their land creating a trade network parallel to the Silk Road to the north. Luxury and legend defined the Indian brand whispering and wafting into bazaars and agoras in the olden times. Commerce was king in historical India, but the Republic of India inherited a different pursuit and prophet.
Socialism was in vogue as the economic vanguard of decolonialism. India’s first Prime Minister, Jawaharlal Nehru, a staunch internationalist, would herald this ideology. But what is fashionable does not necessarily feed. India’s growth would pitter and patter as later economists would bigotedly deride this period as a “Hindu” rate of growth, no doubt pinning the pitiful performance on the people rather than the premier. Nehru’s daughter, Indira Gandhi, would continue this socialist splurge so far as to declare India as “Socialist” in the Indian Constitution during her declaration of Emergency. This signal would be followed by the signage of acts resulting in the nationalization of private businesses, expanding the state into more parts of the economy, and increased taxes with slabs maxing out at 97.5% of one’s income.
Reprieve from the deluge of state intervention would come years later as Saddam Hussein invaded Kuwait. An energy crisis hit India as the chickens of economic mismanagement came to roost. Luckily, India would gain a golden egg from this moment of panic. Forced into economic liberalization, Prime Minister Narasimha Rao would enact era-defining reforms charting a new course for the country. Its citizens would promptly reward him with a crushing electoral defeat as the pill of reforms left a too-bitter taste amongst other misgivings. Yet like all good medicine, these reforms would heal and revive the body politic of India over the years. Soon, another brave reformist Prime Minister, Atal Bihari Vajpayee would take a stab at the cumbersome beast of Indian bureaucracy. Slashing regulations, Vajpayee carried the torch of liberalization from the fallen Rao igniting infrastructure initiatives and kindling investment into education and healthcare. Straying from the path of sops as many of his contemporaries did, Vajpayee strode into the 2004 elections declaring that India was shining. Indians, on the other hand, did not see the sheen and gifted victory to the opposition.
As you can see, reform is not just thankless work in India, it is electoral suicide.
Peanut Butter & JAM
After an initial attempt to fulfill the dreams of out-of-touch Reaganite Neoliberal commentators, Narendra Modi quickly backtracked into Indian socialism during his first term. But he did it with a bit of a twist. So much was this contortion that much of the excess of typical Indian socialism, akin to the toxic 4x reused seed oil at a street food stall, was wrung out handily delivering a much more refined end product.
This streamlining was done through “JAM”:
Jan Dhan Yojana – A financial inclusion scheme aiming to give access to bank accounts to every Indian family.
Aadhar – A digital biometric citizen ID system that serves as the bedrock of both government and private transactions, KYC, and identification.
Mobile – The Government of India focused especially on mobile interfacing of the above 2 and built apps for things like digital payments (BHIM), government services (Umang), and healthcare.
These 3 would become the epitome of synergy and would be akin to financial alchemy as possibilities exploded due to the open APIs available built upon Aadhar and its cohorts. Perhaps the most advanced FinTech stack in the world, India Stack, would be built using these 3 essential parts. While the government launched many of these early on in Modi’s term, what probably, as well as controversially, kickstarted accelerating mass adoption was demonetization.
The same day Trump shocked the world with his 2016 victory, Narendra Modi sent a massive jolt across the country. Without prior warning, Modi announced that ₹500 and ₹1000 notes would need to be deposited into banks and later exchanged for new ₹500 and ₹2000 notes. Lines at banks lengthened while the economy contracted as the massively informal Indian economy leapfrogged into the digital 21st century. The government offered explanations such as curbing corruption, which is debatable, but what did happen was a rapid adoption of banking and digital payments. A FinTech rocket had taken off.
Aadhar required for bank accounts now meant the government had not just a more formal method of collecting taxes, but more importantly, a much more direct method of delivering welfare. This was a real revolution. Direct Benefit Transfers (DBT) would conquer the middle man as no more would the local thug or feudal politician take his standard and hefty cut. Rupees were delivered digitally straight into people’s bank accounts without a single finger touching them and only requiring a fingerprint for accessing them.
Anticipation over a liberalized India would be crushed under a slew of welfare. Unlike many of those who lounge in the cushy ideology of libertarianism, Modi was born into poverty brandishing his tea-seller origins as electoral street cred and acutely understood the bleak conditions that many of his countrymen were in. The late tenacious capitalist and stock czar, Rakesh Jhunjhuwala, christened Modi as a “distilled socialist” who wanted to ‘increase the size of the cake’ before handing out pieces of it. Essentially, giving Indians the opportunity to partake in the market before working on the market itself. Throughout his term, he enacted policies such as free grains for the poor, subsidies to farmers, building free housing, handing out free gas cylinders, enacting monetary healthcare support for the poor, and more.
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