India's economic reality is more sobering than Modi's rhetoric suggests

INDIAN Prime Minister Narendra Modi is an effective communicator. His claim to Malaysian businessmen during his visit to Kuala Lumpur last month that "GDP growth is up and inflation is down, foreign investment is up and the current account deficit is down, tax revenues are up and interest rates are down, the fiscal deficit is down and the rupee is stable", sounded convincing and not just marketing hype.

Reality, however, is less inspiring. Industrial growth remains sluggish, the second poor monsoon in a row has reduced demand, banks are struggling to recover bad debts, the very low inflation indicates a deflationary pressure, exports have fallen sharply, the fiscal deficit is rising, domestic investment and foreign investment are down, a lower current account deficit is because of oil and commodity prices, and growth is much lower than the controversial new GDP figures indicate.

Nine major states have declared a drought this year, and 302 of 640 districts in India had a rain deficit of over 20 per cent. Farmer suicides have gone up and lower farm incomes will lead to a fall in demand for all goods, especially tractors and motorcycles. Rural India is also suffering from lower growth in farm support prices and lower wage growth.