Thanks to Narendra Modi, India is Fast Going Bankrupt

In the aftermath of full lockdown imposed by the central government of Narendra Modi, Indian GDP has crashed by -24% in the June quarter. This is an historic event. Government’s revenues continue to plummet while their expenditures, to supposedly revive the economy, continue to sky rocket resulting in historically high record budget deficits. Government’s debt to GDP ratio is rising rapidly. Basically, the Indian government is fast going bankrupt and insolvent.

All these reminded me of an article of mine that I wrote in 2013 in the run up to the crucial 2014 Loksabha election. In my May 4th, 2013 article titled Narendra Modi: An Extraordinary Popular Delusion I warned Indian voting public about the dangers that they will invite by voting for Narendra Modi who just announced his candidature for PM position and lot of euphoria was building up around his name. In that article, which I am reproducing below with little edits, I warned Indians about their delusion with Modi and what kinds of things Modi is capable of doing. In the context of the dire condition of government’s finances, I specially want to  reproduce the following paragraph from that article which is now so relevant:

In fact, what is true is that Modi has put Gujarat under a heavy burden of debt in the name of his growth policies and extravagant expenditures (see this, and this). He recently said, that I have repaid mother Gujarat’s debt and now I am ready to repay mother India’s debt. It will be more appropriate to say, that he has put mother Gujarat under heavy debt, and now he is aspiring to put mother India also under a burden of heavy debt. Watch out, mother India!

And now here is the full article:

I was recently reading Charles Mackay’s famous book, Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, which discusses some of the major popular delusions like the Mississippi bubble, the tulip mania, the south sea bubble, the alchemists, the witch mania, crusades etc., of the known human history. These popular delusions exhibit a kind of madness of crowd which we see every now and then in all ages and at all places wherever human beings are present. The evolutionary brain, which has primed human nature for a kind of herd behavior, is the root cause of this phenomena, but I won’t discuss this matter at length here in this post. I want to focus on one such extraordinary popular delusion and madness of crowd type of episode which is right now on-going in India. This episode is of the cult of the popular chief minister of Gujarat, Narendra Modi. The crowd is in frenzy re his name. Many deluded people want him to be the next prime minister of India and rescue the country from the evil hands of Congress party, particularly now hated Gandhi family. Many people are seeing him as a kind of messiah, a savior who can increase India’s economic growth, remove political corruption and make it a Super Power! Although Modi’s popularity is mostly manufactured by his own lackeys via false propaganda campaigns, but as always happens, this has fooled many people. The next national assembly election is approaching, and it is important to expose this Modi cult. That is the task I am attempting in next few paragraphs. This surely will not be an exhaustive treatment of this subject. I will only focus on major theoretical arguments which are not only applicable to Modi, but to every other state official.

Is Modi responsible for Gujarat’s growth?

The first major delusion re Modi is that he has single handily put the economy of Gujarat on the path of growth and development. Modi’s fans don’t get tired of telling everyone that he is solely responsible for Gujarat’s high economic growth rate. Is it true? Is this possible? For those who understand the true nature of the state and who are having knowledge of sound economic laws, the answer is a clear cut no. And for those who don’t understand the true nature of the state and economic laws, I have to draw their attention to Bastiat’s famous ‘Broken Window Fallacy‘. Broken window fallacy is a logical method of analyzing any governmental action.

People need to understand, that whatever work government is doing on the one hand is done by taking money forcefully from the productive sector of the society on the other hand e.g., when Narendra Modi government builds a road, this road is financed by Gujarat tax payers. Without tax payers’ productive work this road will never come into existence. That means, Narendra Modi is not building this road; tax payers of Gujarat are building it. People very easily forget that society comes first and then comes the government. Government exists because of society and its productive people and not otherwise. Without the work of productive tax payers, governments won’t be able to do anything. But without the government, productive people will not only survive but, in fact, thrive. And we also need to remember that whatever work government is doing is all political in nature. There is no market test of profit and loss to evaluate the efficiency and desirability of such works. Politicians love power and all their works are directed only in the direction of gaining more power. They use these phony works to purchase votes for their election. All the special interest groups – big corporations and other government cronies – determine what kind of work government officials are going to carry out. Anyone familiar with the ‘Public Choice Theory’ knows this fact. The most important fact that these works were not carried out by the private market itself suggests that they were not demanded by the consumers.

Not only Narendra Modi didn’t carry out any of these works on his own, he, in fact, diverted precious scarce resources from the productive sector of the economy towards the unproductive parasitic consumption sector. The unseen effect of Modi’s so-called growth drive is those projects which private entrepreneurs could not accomplish because their profits were forcefully taken away from them via taxation by the Modi government. In the absence of this taxation, entrepreneurs would’ve surely used these resources to fulfil the most urgent needs of their consumers in the best possible way of producing highest quality products at the lowest possible prices. But they couldn’t fulfil these consumer wants just because Modi robbed them of their profits. When I talk about entrepreneurs here, I am  talking about honest entrepreneurs only, and not those fascist corporatists like Adani, Ambani, Tata etc., who are enriching themselves by working in cahoots with Modi government. They are not real capitalists. They are fascist robbers who are looting Gujarati public, especially small farmers. What Modi is doing in Gujarat is nothing but stealing farmers’ land and giving it to his crony corporatist friends at absolutely discounted prices. This is not growth. This is not development. Some urban dwellers are benefiting because of this robbery, and they are the major cheerleaders of Narendra Modi. Modi is a shameless liar e.g., his claim that his government is providing 24 hr electricity supply is totally bogus. I live in the financial capital of Gujarat, Surat, and here itself there are frequent power cuts every week!

What is more important to understand is, that Gujarat’s growth is possible because Gujarati people themselves are very hard working since ages. Gujarat is a prosperous state since ages. The entrepreneurial populace of Gujarat is world famous. The business acumen of Gujarati people is known everywhere. Gujarat is prosperous because of its hardworking entrepreneurial populace. To think that some fanatic guy like Modi is responsible for Gujarat’s growth is showing a disrespect to the hardworking productive populace of this state. It is undermining the importance of productive members of this society. It is a supreme folly. A madness of crowd who believes in such fairy tales.

In fact, what is true is that Modi has put Gujarat under a heavy burden of debt in the name of his growth policies and extravagant expenditures (see this, and this). He recently said, that I have repaid mother Gujarat’s debt and now I am ready to repay mother India’s debt. It will be more appropriate to say, that he has put mother Gujarat under heavy debt, and now he is aspiring to put mother India also under a burden of heavy debt. Watch out, mother India!

What kind of development is taking place in Gujarat under Modi government?

I already alluded to this issue above. Narendra Modi is a fascist dictatorial chief minister and whatever growth and development people are talking about is nothing but enriching his corporate buddies at the cost of common man, especially poor farmers (see thisthisthisthisthis, and this).  I am sure people know about the recent CAG report which implicates Modi’s favors for his criminal fascist pals like Adani, Reliance, Essar, L&T etc. (see the CAG report hereherehere, and here. Also see, thisthis and this).

Modi cult will be exposed if he becomes PM of India

Notwithstanding the fact that no Narendra Modi is responsible for Gujarat’s growth, I wish he becomes PM of India just so as to break the delusion of people re his charismatic powers. Once on the national stage, this fascist dictator’s real colors will be in front of everyone, and that will spell a doom for his cultist figure. Modi is a mad leader and I won’t get surprised if on the first day of his inauguration itself he declares a war on Pakistan or China! It will be very comic to see him deal with national political morons like Lalu Yadav, Mamta Banerjee, Mulayam Singh, Nitish Kumar, Jay Lalita, Benni Prasad etc., etc. To handle 20-30 different parties won’t be easy for him because he is ruling like a king in Gujarat, and so is not habituated to any kind of opposition. I wonder he will turn out to be even a good politician on the national stage!

As Charles Mackay said in his book, such delusions are seen in every age and at every place. What we are witnessing on the Indian political scene right now is just another example of that popular delusion and madness of crowd. I am quite sure that when Modi bubble will burst in future, people will find another Modi for themselves instead of learning the supreme fact that no one person can rule over their life and make it better. Government is a parasite and it can only suck productive society’s blood. It can never do any productive work. To expect that some guy will come and save peoples’ lives is a height of (false) human expectations.

As long as individuals don’t assume responsibility of their own lives, their situation won’t improve for better.

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6 thoughts on “Thanks to Narendra Modi, India is Fast Going Bankrupt

  1. Rohan Mehta says:

    Dr. Madhusudan, what in your opinion, is going to be the near future to long term future of the Indian economy given the fact that Modi regime will remain officially till 2024. Is there any hope for revival? Some economists are suggesting immediate cash transfers in the hand of common people. What is your take? Thanks.

    • Madhusudan Raj says:

      No matter from which angel you see, the future right now is looking very grim. I almost zero chance of any recovery till 2024 and beyond unless and until some major political upheavals arrive which heavily weakens the central power. Hoping anything better will be deluding oneself and giving false hope.

      Immediate cash transfer in the hands of people will be a disaster. It will only lead to higher prices and nothing much. As I have said many times in my past articles, consumption never a problem for any economy; production is. Our problem is halted production which has resulted in lower income and unemployment. We need to boost production which requires government to let go its controls and regulations. Exactly reverse is happening in India e.g., power is heavily centralized day by day. Central planning always means disaster.

  2. Siddarth says:

    “Adani, Ambani, Tata etc. … They are not real capitalists. They are fascist robbers who are looting Gujarati public ” Why r u whining like a crybaby. This is called pure business. I earn on stupidity of others and if your are on losing side thats not my fault . So grow up .

    • Mises India says:

      I am sorry but it is not called business. Business is when you satisfy the most urgent needs of your customers by providing them the best quality goods at the lowest possible prices by honestly competing openly in the market. There is a thing called “morality” and “trust” also without which there can’t be any business and society itself. We are seeing the end results of the philosophies like the one you are espousing above.

      It is not your fault but when those hungry unemployed people will knock on your door and ask for your head then please do not complain! Actions have consequences. Immoral actions will result in evil consequences. So be prepared for that. Thank you.

  3. Gaurav Tyagi says:

    Sir I completely agree with you I just do not agree with the characterization of the government nature but leave it.

    The question I have is this “in the time of pandemic or global recession, should government boost spending or not because in 1932-1935 both Hayek and Keynes agreed that government should boost the spending at the time of great depression.

    • Madhusudan Raj says:

      Why leave it? Understanding the nature of the government is crucial to understand the reality. That is how we do science. Understand the nature of the phenomenon under consideration.

      Where did Hayek say in 1932 that government should boost spending? Give me a precise quotation. I advise you read his Prices and Production book where he so elaborately talks about the business cycle. In that book Hayek so nicely demonstrated, after his mentor in that field of inquiry Mises, that why government spending itself created the great depression. The depression that was created by the government spending cannot be reversed by that same spending!

      Young Hayek was radical and brilliant. He lost his way in middle ages. After getting his Nobel prize, which actually belonged to Mises, he again became radical and good but still compromising. And that is why Hayek should not be someone who liberty lovers must look forward too. He isn’t consistent.

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