John Maynard Keynes, drawing on an observation of Vladimir Lenin, wrote in 1919: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction and it does it in a manner which not one man in a million is able to diagnose."

No one would say that India today is in the situation that Europe was in after the Treaty of Versailles, but the Lenin-Keynes insight has borne itself out repeatedly in economies undergoing hyperinflation. Likewise, no one would say that India will, in the near future (if ever), enter such terrain. But, it would be foolish to deny to that, as predicted in this column, after the ouster of governor Urjit Patel, the Reserve Bank of India (RBI), under its new chief Shaktikanta Das, is likely to hew closer to the wishes of the ministry of finance and of India Inc, which is to deliver looser monetary policy.

The rate cut delivered on 7 February—by a split monetary policy committee—should have surprised no one who has been following the government’s assault on RBI. The inflationary consequences we shall see later, after the election, but the damage will have been done.

Five years ago, the commenting class was hunting for analogies for then prime ministerial candidate Narendra Modi and they came up with everything from Margaret Thatcher and Ronald Reagan (on the pages of the Financial Times, The Wall Street Journal and elsewhere) to Augusto Pinochet (yours truly, writing in Business Standard). As I asked on 8 May 2013, will Modi “morph into a paragon of good governance, small government, and market-friendly economics that will help power India’s economic rise?".

Some might have thought this was a rhetorical question, given Modi’s own rhetoric then of “maximum governance, minimum government". However, the question was intended sincerely and today we have an equally sincere and simple answer: “no", as adumbrated in the most recent instalment of this column.

Some actual and incipient Modi fans found my Latin America comparison strange, yet it is not as outlandish as it may appear. Let us recall that RBI deputy governor Viral Acharya, one of the dissenters in last week’s rate cut, began his already famous A.D. Shroff memorial lecture on 26 October 2018 by evoking the analogy of Argentina’s attack on the autonomy of its central bank in 2010. Indeed, in retrospect, my Pinochet analogy turned out to be incorrect in one key respect: Modi has not delivered the sort of far-reaching economic reforms that the Chilean dictator—accomplished under the tutelage of star academic economists from the University of Chicago, Nobel economist Milton Friedman foremost among them. Taking a cue from Acharya’s analogy, a better recent comparator for Modi might be former President of Argentina Cristina Fernández de Kirchner, who served two terms in office from 2007 to 2015. Recall that she succeeded her husband, Néstor Kirchner, who was in office from 2003 to 2007.

Between them, the Kirchners managed to capture all major institutions—including, but not limited to, the central bank—and governed as firebrand populists, invoking the dastardly foreign hand when necessary to bolster political support. More pointedly, they were accused (correctly) of leaning on government statistical agencies to fudge the numbers, to the point where the government’s official inflation statistics, which vastly understated true inflation, were discarded by all credible domestic and international observers. (The Economist devoted a column in its issue of 20 June 2014 to explain at length why they would no longer publish Argentina’s official statistics.) Eventually, even the Argentine government had to scrap its own statistics, and switch to using more credible data created by private sector analysts.

In India today, statistics on gross domestic product (GDP) and employment, among others, are increasingly problematic and are becoming decreasingly credible. No one would say that the situation is as yet as stark as the Argentine inflation statistics of yore but, for the first time in my memory, India has entered the worrisome terrain where government statistics are taken with a grain of salt because of the fear of politicization. The erstwhile Congress-led United Progressive Alliance government can rightly be accused of mainly failings, but in one area at least, it was exemplary: making credible and reliable data immediately and readily available for scrutiny.

Perhaps the most tantalizing tale, though, from the Kirchner years is the landslide re-election victory to a second term in office of Fernández de Kirchner on 23 October 2011. Observers attributed her surprisingly easy win, despite apparent unpopularity heading into the election, on a range of key factors, notably, a fractured and fragmented opposition and voters feeling generally upbeat about the economy—despite concerns about the fudging of statistics and worries about alleged corruption and cronyism under her watch. Crucially, voters’ generally positive perceptions of the economy were buttressed by strong GDP growth, an ever more generous welfare state and the sense that wealth and income inequalities had attenuated under the populist Peronist president.

Might there be a lesson here for Modi and those attempting to unseat him?

*Vivek Dehejia is senior resident fellow, IDFC Institute, Mumbai

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