The Timing of Article 370 may be in the Indian Economy
0 comments | by MirMak
Was Imran Khan administration about to attack India to liberate Jammu & Kashmir ? I do not think so. Had The United Nations Security Council awakened from its 50 yearlong slumber to resolve the Kashmir issue ? Was there any new insurgency within the Indian Occupied Kashmir boundaries overnight that was going to destroy Indian dreams of making Kashmir its union territory?
Then what had happened that all of a sudden, knowing that abrogation of Article 370 will also create an uprising amongst the 200 million plus people who come under Article 371 and its many subsections, people from Assam, Nagaland, Mizoram etc. What was such an emergency that Indian government seemed prepared to take on the world overnight ? Well, like James Carville coined the most famous political slogan for the Presidential campaign of Bill Clinton, “It’s the economy, stupid”. Nothing is more applicable to the Indian state at this time more than that coined term. While the non-finance and many finance minds as well, look for conspiracy theories behind the abolishment of Article 370, I chose to delve into the state of the Indian economy and relate it to Modi’s recent action. It is not an action without deep thought. It is one of the most well thought of action, but not for the reasons you might think. It is to save his next 4 years by keeping an issue alive, an issue which will bring the entire Hindutva brigade on the same page regardless of the fact that their plates will be foodless. Remember, patriotism at times is more important than food on the table, especially if that patriotism is filled with religious feelings and anger towards anyone who does not belong to your religion Modi won because he supports anti Muslim narrative, covertly or overtly, fact remains that he did. The RSS and Hindutva brigade blindly follows him. His following is mostly in rural areas. People in rural areas do not understand economies or economic matters better than their counterparts in the urban areas. Maybe it is because of education or maybe it is their simplicity to remain tied down to their farming values. Whatever it may be, Modi played a master stroke. And that master stroke is, to divert the attention from a sinking economy before everyone notices. It all started with Modi’s demonitisation drive. I had written an in-depth article 3 days after the demonitisation drive began in India that this drive will kill not only the banking sector of India but will create economic havoc within the next few years in every sector. And that havoc in every sector is here. Airlines were the first to be affected. Air India is facing a loss of Indian Rupees 7600 crores. Jet Airways closed its operations leaving tens of thousands of people jobless in related industries in the south. Kingfisher Airline shut its doors leaving thousands of crores of debts to its lender banks. Bharat Sanchar Nigam Limited, or BSNL, a state owned enterprise dealing in telecom services is in deep financial crisis. From an operation profit of Rs 10,000 crore in 2015 it has come to a debt of Rs 13,000 crore Indian rupees in 2019. To pay the salaries of the employees, it has requested the Indian government to lend Rs 2500 crores only to keep it afloat for the next 4 months. Its demise is imminent leaving 176,000 employees jobless within the next few months.
Hindustan Aeronautics Limited, HAL, with over 30,000 employees, is cashless and about to go bankrupt. It made a last minute ditch to sell its own shares to its employees at a deep discount but it failed. It offered 6,687,772 shares but employees only picked up one fifth. Even the employees have lost their confidence in their own company.
Videocon Industries, an Indian pride that was running perfectly till 2014 has amassed a loss of Rs 1,367 crore in 2016. Earlier than 2014 it was reporting an average profit of Rs 800 crore. It owes the banks Rs 90,000 and has advised the banks that it may not be able to payback its obligations. Imagine a default of 90,000 crore Indian rupees just by one company, what it would do to those banks. They in turn will go bankrupt as well and it will create a perfect dominos affect. Tata DoCoMo is another story of a multi billion dollar disaster that you may not have heard about. The game is also over in this scenario. It is out of business leaving billions of dollars of debt. Café Coffee Day, which served 1.8 billion cups of coffee a day from its 1,722 locations in India and 19,943 employees saw it last when its Founder committed suicide last month after piling up too much debt and not being able to pay back.
Auto industry is in shambles right now in India. Maruti Motors says that it will halt all production because it has Rs 55,000 crores worth of unsold cars at its dealers’ premises. 465,000 people have lost their jobs in the auto industry alone. The percentage downfall in sales in the past quarter alone is 31%. An unheard of figure in any auto industry around the world. The GST has gone up from 18% to 28% and it killed the industry within months. Such a huge increase in GST by Modi government was needed because India cannot survive economically in the next few years without such huge taxes. The same 28% GST has also killed the construction industry because of rise in material costs. Killing along with it, the 176 industries related to it. Mostly Steel and Cement and Transportation. That is an estimated 13% loss to its total GDP. With a $2.61 trillion nominal GDP, we are looking at a loss of almost $500 billion dollars for the fiscal year of 2019 alone. A $500 billion shortage in GDP that intertwines with every other falling industry means, it is simply spelling a wreckage waiting to happen. With a corporate debt alone of $391 billion owed to the public and the banks, with the corporations declaring bankruptcy every week, not figuratively but literally, an unemployment rate at a 45 year high, state owned corporations in a mess, a steep decline in economic activity, of course there is a disaster in the making. What better of a move by Modi to preempt that disastrous news by creating an issue that will keep the people screaming Hindutva patriotism chants of Jai Shri Ram while the economy in 2019 and onwards goes to the dogs. Nothing could have been a more brilliant of a move from Modi at this time based on the way he thinks. But then again, nothing could have been a better decision by Hitler to attack Poland as well. We all saw what happened to Hitler and his brilliant moves of supposed Checkmates. We shall also see the end of Modi Sarkar with its seemingly intelligent but inherently disastrous move of abolishing Article 370 at this time. After all, a CHAI WALA can only stir a storm in cup. But this time, the cup is his own and the Chai is boiling hot and spilling over.
The author is business man a Wall Street trained investor banker who writes regularly on financial and economic matters.