Swaminathan Aiyar: Hold your horses! Wait for real results before making big moves: Swaminathan Aiyar

“It said, Mr Modi has done so well for you and Mr Modi guarantee now I will give you more of the same. So, if he is going to give more of the same, then as far as I can see, the market should be happy,” says Swaminathan Aiyar, Consulting Editor, ET Now.

Clearly, with the resounding win with what the exit polls are suggesting, it seems like a third term for the Modi government with a resounding victory at that. How are you reading into what the exit poll predictions have thrown up?
Look, all I can say is that exit polls vary from one another and from the actual outcomes very substantially. And this happens not only in India, it happens in other countries. In America, for instance, they thought John Kerry was going to be beating Bush. It turned out not to be the case. They thought Hillary Clinton will beat Trump, it turned out not to be the case. So, I would say it is a pure gamble. If you invest on the basis of the exit polls, I would suggest you hold your money a little until you actually get to the proper results. Now, what will happen if, in fact, the NDA gets returned with maybe a slight increase in the total numbers? As far as I can see, it would be a sign of continuity. The market will say this is what Modi promised. What did after all the Modi manifesto say? Did it promise all kinds of radical new changes? No, it promised more of the same.

It said, Mr Modi has done so well for you and Mr Modi guarantee now I will give you more of the same. So, if he is going to give more of the same, then as far as I can see, the market should be happy. Now, of course, there are some people who would argue that if Modi has so much political capital, why does not he do something like farm reforms, land acquisition reforms? I am afraid those things are so politically difficult that I do not see Mr Modi trying to tackle those very thorny subjects again. So, if you get more of the same, I would say if you just had a year in which you have done 8.2% GDP growth, completely, completely way above all the expectations, I remember the beginning of the year the optimist like the chief economic advisor saying we might do 6.5, some pessimists said 5.5.

Now I know that there is a difference between GDP and GVA. Even GVA to go by 7.2 in these conditions, I would say this is really a remarkable achievement.

I will throw another ingredient in the melting pot. If one looks at Modi 1, there were big ticket reforms which were done in areas of financial inclusion. Jan Dhan, UPI was rolled out. Modi 2 was all about making India more Atmanirbhar, defence, manufacturing, China plus one, PLI schemes. What to your mind could be the standout reform or the standout push of Modi 3.0?
Look, Modi 2 was very seriously disrupted by COVID, by Ukraine, and if you like in this last year it was disrupted again by El Nino. So, these were extremely difficult times. Modi soldiered through it and I would say that if now for three years in a row, you had more than 7% growth, the first year I would neglect because it was a recovery from COVID. But in the next two years if you have done so well, at a time when a number of other countries, look at all your neighbours, Pakistan is with the IMF, Sri Lanka is with the IMF, Bangladesh which is the same GDP as us, Bangladesh is with the IMF. And we are rock solid and doing 8.2. So, Mr Modi will say, there may be certain reforms that failed.

He failed to persuade the farmers that we have to change the entire farming system and there was this huge farm revolt against him. He retreated and said, okay, I am not going to take this on.

In Modi 1, he, for instance tried to take on land acquisition. He retreated. Again, in Modi 2, one of the things that he retreated on perhaps was whether we have a national register of citizens, which the Muslim community is extremely afraid of, that is a non-economic subject. But I mean, these were some of the areas Mr Modi has shown that he is capable of retreating when he comes across a very serious resistance.

But he will plough ahead and he will be extremely satisfied with what has actually happened. I will just say this. In some ways he has been lucky. I wrote a column the other day saying, India’s greatest achievement, not Modi’s greatest achievement, India’s greatest achievement in this Modi era has been the rise of global capability centres.
According to various estimates from various sources, we now have perhaps up to 4,000 multinationals with a total revenue of more than 100 billion. These guys are exporting an enormous amount and that has saved our bacon.
If you just look at the merchandise trade deficit, it is humongous. But we have been saved by service exports, especially GCCs. However, Mr Modi is not the person who was responsible for the rise of global capability centres.

It was just globalisation. The world over, people are running around saying, where can I get the best brains because I need the best brains for this high-tech society and you will find that India, second only to China, is producing the largest number of STEM graduates, 2.3 million, I believe, every year, of which the engineers are at least half a million or 600,000.

So, they are coming to India not just for low-end work. They have started coming to India for high-end work and now for R&D. There was one Deloitte report suggesting as much as 42% of the guys involved in the GCCs were in engineering R&D.

The more recent one says they are massively into artificial intelligence. So, the multinationals of the world have started to take India as an R&D centre. Indian companies have never been good at R&D. They do not do very much R&D. But India has become an R&D centre because of the globalisation and the MNCs coming in.

So, this to my mind is a very positive thing. Meanwhile, Mr Modi is trying to go ahead on something like PLI, the productivity-linked incentive for manufacturing.

Let us be frank. I mean, while Apple has come in, beyond that nothing very much has happened. They budgeted about $26 billion for PLI. Actual disbursement is only one billion so far. You will say it will pick up. There is a promise in one sector here and there. But overall, it has not changed India very much.

What has changed India is this cumulative reform process that has taken place over the last 30 years, plus, I would say, the rise of GCCs, without which we would have been in quite serious trouble on the balance of payments and they in turn have now become the nurturing ground for a very high-tech breed of scientists and engineers and they will not remain in the GCCs. They will also come out and joining Adani, Ambani, Tata, and everybody else.

I will just say this much, there is a feeling among lots of people that there is a fear of saying, I did not vote for Modi. There are lots of people who say, therefore, be careful about exit polls because the people who are voting against Modi may just not respond to you at all, you may be missing them or people may deliberately be saying, I voted for Modi when I did not. So, I would say, at this particular point of time we should still make allowance for the fact that the actual result may be very different from what the exit polls are saying. So, let us hold our horses. Let us not come to the conclusion that the exit polls are accurate and let us therefore come out with our real views after the real results will come.