The oddest thing about the Indian elections in which Prime Minister Narendra Modi just crushed the opposition, was the total lack of any real debate about the country's most serious economic question: What will generate growth and jobs?
For the ruling Bharatiya Janata Party, (unlike for former U.S. President Bill Clinton) election outcomes apparently have nothing to do with the economy, stupid.
But nobody should think that Modi's emphatic win mandate reflects any satisfaction whatsoever with the economic state of affairs. A painful reminder of the underlying realities came days after the BJP declared victory, with first quarter gross domestic product figures showing an increase of only 5.8%. While this may be high by other developing countries' standards, it was below forecast and far short of the level needed to create sufficient jobs for India's still-youthful population.
It suggests that GDP growth for 2019 will be under last year's growth of 7%, which was itself the lowest in five years. Worse, these numbers are based on the GDP definition that the Modi government revised in 2015, which had the effect of boosting the declared GDP data compared to the previous Congress party government's methodology.
More importantly, while there is much argument about the exact extent of joblessness, there is widespread agreement that unemployment is at a 45-year high today. The government has ceased publishing data for several years, while private economists such as Samiran Chakraborty of Citigroup in Mumbai, calculate that a country which needs to generate a million jobs a month, given its young population, was in fact generating about that many a year.
"A status quo election isn't that promising when the incumbent is out of new ideas," observe economists at Pantheon Macroeconomics in the wake of the landslide. That was in contrast with the last elections in 2014 when the BJP "was scoring open goals against the then ruling Congress... amid many long-standing structural problems that linger on today."
"The party's manifesto this time was light on specific policies and largely aspirational, perhaps in a bid to detract from the economy's patchy performance in recent quarters," they add.
Even where economic promises resonate with people, execution on the ground remains questionable, whether it is in constructing toilets which make for grand photo opportunities but lack water connections, or giving subsidies to farmers which come after long delays with middlemen taking huge cuts.
Young people who move to the cities to escape villages where agrarian distress is widespread, have to go further and further from home. There they can find only the lowest-end service jobs, as watchmen, drivers, or gardeners, or work on construction sites with no prospect of upward mobility. The air-conditioned offices of modern high-tech India are an unreachable dream.
In many of the villages in the north and central heartland of the country women toil in the sun. Their husbands and sons have left to seek work in the cities, but what exactly they do isn't clear to many back home. If they are lucky their husbands have left them a smartphone, as a tenuous link. At election rallies, singers chorus imaginary conversations between spouses in which the women ask their husbands how to cope with falling prices for their produce or the high cost of the goods they have to purchase.
The situation will only get worse. A new study from JPMorgan shows how GDP growth in emerging Asia no longer automatically translates into big rises in jobs and income for labor.
"Since 2012, both wages and employment slowed in the last six years," writes Sin Beng Ong. "While this is positive from a corporate and inflation perspective, the impact on the labor market and households is less so."
The study points out that this development holds true both for service-based and manufacturing-based economies. Sadly, given the role of technology in supplanting jobs, the worsening trend can only intensify. Already work in call centers and back offices is going to computers, not new graduates, even if they can speak English.
Moreover, it is probably too late for India to adopt the East Asian model of moving up the value-added chain in manufacturing for export. India with its infrastructure problems and lack of scale will likely not be able to follow Vietnam and Bangladesh in taking advantage of rising wages in China and the shifts in supply chains triggered by the trade friction between the U.S. and China.
If the economic outlook is bleak, the financial picture is even more so. The cost of capital is high in India. And while some economists expect the Reserve Bank of India to cut rates as soon as June, as inflation recedes on the back of falling oil prices, there are other reasons to be less optimistic.
The fiscal deficit is expected to be 50% larger in the first half of this year than at the same time in 2018, Citigroup economists say. The public sector borrowing requirement is now almost 9% of GDP.
India also faces a double crowding out, when it comes to borrowing.
First, the government is squeezing the private sector when it comes to obtaining funds. And secondly, as other countries -- notably China -- look to attract money from abroad to finance their deficits, they will provide extra competition for borrowers such as India on international capital markets.
Even if the RBI does cut rates in coming months, foreign investors will likely demand higher yields from Indian borrowers if they are to be persuaded to help New Delhi fund growing deficits given the foreign exchange risk and the difficulty of hedging a weak rupee.
To be sure, there are some bright spots, especially those generated by technology. Where governments, especially local governments, are dysfunctional, young internet-based startups can make a huge difference. If teachers never show up to work, even poorer students can go on to their parents' smartphones and find some low-cost educational apps that at least partially compensate. Fintech companies will give credit to an aspiring shopkeeper in a way that banks or traditional nonbanks never would. Villagers no longer have to travel for hours to get a medical diagnosis because they can now go online.
However, for these glimmers of light to turn into a sunny future for the country, much more needs to change -- and Modi needs to drive that change. Sooner or later, the economy must once again top the national political agenda.