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#NotesForMrJaitley 9: Moody's Analytics proved right. Now listen to them

Neeraj Thakur | Updated on: 14 February 2017, 5:47 IST

The Narendra Modi regime took great offence when, in November 2015, a report by Moody's Analytics, one of the top three credit ratings agencies in the world, asked it to rein in the BJP's loudmouths, "or risk losing domestic and global credibility".

Its refusal to heed the warning has cost India dear economically: investors are actually staying away due to the prevailing "vicious political environment" in the country.

The Moody's report was informed by the mood of a large section of global investors, who were worried about the "vicious political atmosphere" in the world's largest democracy.

Also read: Rein in BJP members or risk losing global and domestic credibility, Moody's rating warns Narendra Modi

The report was released when the debate on intolerance was raging in this country. Sundry BJP leaders and ministers had been making hate speeches which had flared up communal passions and, indeed, led to violence.

But the Modi regime not only didn't heed the warning, it dismissed the report as the opinion of a junior analyst.

Just three months on, the government's own data proves the report was right. The global investors are actually reluctant to invest in India now, despite one full year of high-octane wooing campaign that saw Modi visit more than 50 countries.

Downward turn

As per data released by the Secretariat for Industrial Assistance, the country attracted investment proposals worth Rs 3.11 lakh crore in the manufacturing sector in 2015 as against Rs 4.05 lakh crore in 2014, a decline of over 23%.

If this steep decline doesn't shock you enough, take this: this year's investment pledge of Rs 3.11 lakh crore is the lowest in 11 years.

And this, mind you, is supposed to be the year of "Make in India", which seeks to raise the share of manufacturing in India's GDP from the current 15% to 25%.

Also read: Don't run down Moody's guy Mr Modi. He gave you a thumbs up earlier

An analysis done by How India Lives, a data analysis company, for the newspaper Mint, reveals that according to "various metrics proposed or implemented, the numbers in 2015, the first full year of 'Make in India', dipped marginally or stayed flat over the average of the previous years".

The report compares the investments made in India's manufacturing in 2015 with the average of the last two years of the UPA government, from 2012 to 2014.

Further, the number of manufacturing projects proposed in 2015 came down by 18% to 1,909 as against the 2012-14 average of 2,330. As for the projects implemented, the number declined by 5.59% to 439 compared to the 2012-14 average of 465.

Wrong priorities

The experts are unequivocal about why this has happened. "Investors are worried about the current environment in the country," says SC Rehlan, the president of the Federation of Indian Export Organisations, referring to the many controversies the NDA regime has been embroiled in over the past year.

Also read: Reading investors' mood: why Modi needs to heed Moody's advice

The outside world's perception of the NDA-ruled India is reflected by an article published in The New York Times on 21 February. Noting that 2015 was a "turbulent year on Indian campuses, with students speaking out more and more - against caste prejudice, sexist housing rules or the appointment of BJP loyalists as university administrators".

It continued, "senior members of the BJP and the Rastriya Swayamsevak Sangh, a Hindu nationalist organisation with major influence over Prime Minister Narendra Modi, have responded not with dialogue but with persecution, not with negotiation but with clampdowns."

DK Nair, a former Secretary General of the Confederation of Indian Textile Industry, says, "The investments aren't coming into Indian manufacturing for two reasons. The first reason is that the global economy is not doing well."

"The second reason is that the government is focused on the wrong areas. It needs to develop infrastructure to attract investment, but it's concerned more about cows and re-writing history books."

The Modi regime needs to understand that businesses prefer to invest in places that are politically and socially stable, which contemporary India is struggling to offer them. Measures like a single-window clearance system may push India up the Ease Of Doing Business Rankings, it won't reassure investors that their money won't be lost to political and social instability.

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First published: 25 February 2016, 9:59 IST
Neeraj Thakur @neerajthakur2

As a financial journalist, his interface with the two dominant 'isms'- Marxism and Capitalism- has made him realise that an ideal economic order of the world would lie somewhere between the two.

Senior Assistant Editor at Catch, Neeraj writes on everything related to business and the economy.

He has been associated with Businessworld, DNA and Business Standard in the past.

When not thinking about stories, he is busy playing with his pet dog, watching old Hindi movies or searching through the Vividh Bharti station on his Philips radio transistor.