Economy & NRC — CAA
Background
I am writing this blog in the backdrop of big and violent protests around India on the topic of NRC and CAA. While there many aspects of these legislation that I want to explore, the most immediate reason why I want to explore is the impact of this law and the vitriolic and violent debate on this point on the economy and the current economic situation. To few political observers the timing for NRC and CAA seems more to do with Jharkhand election than and an effort to shift the attention of people from the more pressing matter of economy to the issue of their religious fear and identity and on a possible threat of a specific ethnic community which many consider not native of India. My aim for this blog is not to explore why the Govt and the timing of why this debate is raging now but rather I would explore the outcome of it in short term and long term.
Distraction from Real Economic Issues
Today at many street vendors where ever I go I don't see onion in the food any more. The Finance minister says that she does not eat onion and others should also avoid it. But the Onion price is just an indicator to the overall increase in the Inflation of all products in an economy where early signs of recessions are taking root. There are multiple indicators and GDP (even with changed method) is on the decline. There are many reasons for this recession to be honest that may be out of the control of the current government. While we can debate that the multiple whammy of the mismanagement of the economy and self inflicting wounds of Demonetization, GST and meddling with RBI and various economic and constitutional institutions are a major contributing factor. The self inflicting would of NRC and CAA I feel is very much difficult for this country to get over. With so much hyper activity of the previous term what the economy wanted was re-focus to fixing the deep rooted issues in economy but what we are getting instead is the distraction of abrogation of article 370 and the now NRC and CAA. The rising inflation, contracting economy and joblessness and crumbling banking system can only increase the distrust in Indian economy and the spiraling effect can be much deeper and wide spread and can erode all the good that this government may have got on the promise of religion.
Impact on Poor
One of the major reasons why the current government came to power beyond their unending propaganda and media blitz and jighonism of nationalism, was because poor felt touched by the initiatives like direct credit transfer, action against corruption, dirt cheap health insurance and Swatch Bharat bathrooms that they may never have got or realized on the ground in recent decades but this government tried to provide. But all that goodwill now may stand eroded if the economic hardship and the rising prices increase poverty and the double whammy of NRC impacts poor people with no or incomplete records to show their citizenship in a country where even the well off have difficulty to get their documentation right. And there is the issue of people fighting for and loosing their genuine land rights and impact on the demographics of tribal and scheduled cast as rightly seen in Assam and other north eastern states, that with more refugees seeking citizenship, they would need to be resettled, that means giving government land. While land is taken from SC, ST and poor for industrial projects and because of the increase in population pressure, shrinking pockets of land is a major social and economic issue for poor in India. Now adding the impact of settling refugees and possibility of being questioned on their citizenship , the poor stands the most to loose. Unfortunately poverty in India is based on religion, cast and creed even in urban India, and to them no reservation and no assurances or no government policy can help as in India is one of those notorious countries where the life of poor and needy can easily be lost in the unending red tape and coldness of government bureaucracy if you ever get entangled. Assam NRC , Indian criminal system, and Indian pension and license system is a great example of it. And add to this the new GST system. I am sure no one the government or even the parties that have supported this bill have thought about it. They just thought about the lesser collateral that they have to pay or ignore the threatened or voices who oppose the soundness of the current law.
Cost to Economy
NRC in Assam took 10 years and cost Rs 1220 Cr, the cost of abrogation of article 370 is already approx Rs 17000 cr (2.5 billion usd) to the economy of Kashmir so far. De-MON, GST already have indirect impact 2–3 % of the GDP growth. While the short term impact of DE-MON as been analyzed to some extent, the overall impact GST till now has not been positive, even now with changing tariffs and shifting slabs the business community is not sure where the tax system is going. And the long term impact of such hyper activity and lack of economic stability would take a toll in the economy. And the signs are already showing, decreasing consumption, lack of job growth, stagnating FDI, Banking & NBFC crisis, hence bringing NRC and CAA can seem the only way to deflect the focus from the question in short term and even with such divisive moves even if the current government gets re-elected the cost to economy is going to be huge. It will only increase social and economic inequality. While these laws want to create targeted marginalization but its overall marginalization can be even worse.
Cost on Loss of Talent
While there are a huge majority of talented and educated Indians who support the current government tooth and nail, the cost to education and education institutions because of this divisive law is already showing. While I will question the seriousness of this government towards education but the current handling of student protests and the aftermath to it is condemnable. While many may say we don't need any such anti-nationals, but there is a huge cost even here to be paid. Growth and return of talent sprouts in peace and prosperity and not in gloom and adversity. While today we are in the throes of things to come in future, given what NRC has done to Assam and to its student population and to student population around the country. We risk loosing talent to mass movement or to brain drain in the long run which will only hurt the long term growth of the economy. In the short term, number of days lost to protests and to crack down and loss of property and loss of education also has huge cost to educational institutions and students and in testing economic times, government could have done without it.
Capital Flight
With bad economics, constant botched implementation of ill thought laws and policies and constant security threats, internet shutdowns and lack of focus on economy by the government, the only outcome that I can see is capital flight. Already the stature of India as a credible economic super power and investment destination is all time low. With negative press coverage of Kashmir and the current student protests and constant social and political instability and upheaval only will dampen the interest of foreign businesses and governments from investing in India. Lets face it, the facade that the current government tried to create before the international community in its last term is laid bare by the stark economic numbers that lay bare the economic reality of India. Despite how much we hide from Indians or how much we fudge the numbers, the hawkish eyes of business and economic community only shows the darker times that we are going into. And NRC & CAA doesn’t sound a good news for them. It will only increase the speed of capital flight from India.Despite recent waivers, continuing the withdrawal of FPIs from the Indian economy highlights the perils of an un insulated capital market in India.
Impact to Tourism
Already US and UK have put out travel advisory on the brewing security and political situation in India. Winter season is a prime season where the tourist traffic and revenue from tourist inflow helps lot of local economies in India, but the prevailing security situation in Kashmir and the ongoing protests and opposition to CAA and NRC begs to question was it a great time to introduce this bill now when peak tourist season was to start and overall domestic and intentional tourist travel could have helped alleviating some of the downsides of the current economic situation or the government did not think them important enough like many things they don’t think.
Economic Impact to Neighbors & Cost of Detention
While NRC and CAA may sound like a great idea to Indians to clean India of infidels and foreigners, but the current experience of NRC in Assam has only shown otherwise. Currently we don't even have the detention centers to accommodate the people who have been found illegal after the NRC exercise, usually the meager numbers of detention centers that are built are either out of existing over crowded prisons or make shift establishments where the pathetic sanitation and living conditions or their lack of is well documented but not circulated. And I am sure while naming the persecuted minorities of Afghanistan, Bangladesh and Pakistan, the government never consulted those countries but just gave into to the trappings of illegal immigrants living from these countries who promised their votes. But the diplomatic , security and economic costs to these countries was never thought. While some of the leaders of these countries may say one thing not to antagonize India but I am sure no one wants to add to their existing list of economic and political woes that they already have. Added to that the increased risk to ethnic minorities in these countries and retaliatory action they may face. I really don't see how much great thought was put before unilaterally pushing this plan. And I am sure the economic impact of this misadventure is going to be there directly or indirectly.
Cost of psychological impact
Given what has happened in Kashmir and Assam in last few years and months, the un accounted cost that India and the local communities have to pay or may be even ignored is the cost of the psychological impact such traumatic actions have on section of the population or the the overall population. Lets take the case of internet shutdown in Kashmir, because of the prolonged internet shutdown, many jobs have been lost and many skilled people have migrated as in “Digital India” we like it or hate it more and more business and transactions and communication happens online and lack to internet is denial of fundamental right to social inclusion and growth. Also the deep physical, psychological scars that such actions put on people as seen in Kashmir and in Assam this in short to long term will only increase cost of medical treatment and can easily be contributing factor to vicious cycle of social unrest, terrorism, drugs and crime.
Cost to Tax payers
All the economic reprieve that we have been waiting eagerly will easily evaporate with increased tax slabs in GST, and all these misadventures where public money is lost by both sides. My question is who will foot the bill?. We & RBI has already foot the bill of one of the most expensive elections on Independent India. Now in these gloom and doom times when we expected the government to improve the flagging economy, we have a situation where we have to bear the expense of the millions of refugees that will flock to India and the double whammy of NRC which is another monumental waste of money after AAdhar, DE-MON & GST already being implemented, question is after being hounded by tax authorities and after the whole drama of Aadhar in first term of this government do we really need the tragedy of NRC to befall on us now. Or this government does not have the means and intelligence apparatus to find and detain illegal immigrants. The answer is they have but the aim of CAA and NRC is not to detain foreigners but to divide and rule.
Finally
Someone said while bad economics may turn to good politics but in long run bad economics is still very bad and its just remains to be seen who is going to take the brunt of this misadventure. Obviously its us the common man.
