By all counts, the Modi government has had a rough couple of weeks.

First, they had to deal with the headlines related to demonetisation, triggered by the fact that almost all the cash floating around had found its way back to the RBI. This statistic in itself doesn’t invalidate the whole exercise, as the opposition would have you believe, but the government has yet to suggest a single statistic that validates the disruption caused by demonetisation. In the aftermath of disruption, surely the onus is on the disruptor to demonstrate how we are all better off because of his disruption, and not the other way around. Vague notions of unquantifiable benefits, which will magically appear in a similarly unquantifiable ‘long term’, simply don't elucidate a thing.

Digitisation was supposed to be another benefit — and for a while the data did suggest that online transactions increased, much to the jubilation of the government and its supporters. However, after a few months, the quantum of online transactions plateaued, before dropping back to levels not significantly higher than pre-demonetisation adoption rates. We have not had access to any statistics that suggest that the benefit of digitisation was worth the cost and the pain of the disruption that it brought upon the economy.

The government points to increased tax revenue and an increase in the taxpayer base as benefits — however, this increase is very much in keeping with the long-term trend that had been established in the past decade. And rather more fundamentally, increased tax revenue is good for the treasury and not necessarily good for the citizen. Greater redistribution of wealth, does not necessarily mean that wealth creation has been augmented. Greater wealth at the disposal of the government could result in massive benefits for all through economies of scale if the money is spent wisely and efficiently. Unfortunately, ‘wise’ , ‘efficient’ and ‘government expenditure’ don’t usually feature in the same sentence.

We have had different examples of lopsided & questionable government expenditure in the past few weeks. Announcement of an exorbitantly expensive ‘Bullet Train’ between Bombay and Ahmedabad, had everyone opening up spreadsheets to work out project financing costs, interest costs, running costs and break-even points, only to be left scratching their heads in confusion. The viability of the project wasn’t explained or demonstrated by the government. I for one would love to know how it could possibly make economic sense to invest in a Bullet Train operating between Ahmedabad and Mumbai, at an astronomical sum.

I would be equally interested to understand just how much money spent on massive statues could be justified — whether in Maharashtra, Gujarat or anywhere else. Are symbols of pride worth the thousands of crores in cost? Surely we could spend that money better. Mumbai, for example, is flooded regularly by the monsoon because of its inadequate storm water drainage infrastructure. Even as Mumbai and her citizens grappled with record-breaking floods, we had foundation stones for gargantuan statues, fuelled by even more gargantuan political ambitions.

A couple of weeks ago, Amit Shah, the president of the ruling party advised us ‘not to rely on statistics’, and to focus on concrete developments ‘on the ground’, a notion which is just as strange as telling spectators at a cricket match to ignore the scoreboard.

The slowing down of the GDP growth rate over the last quarter would not be an unprecedented statistic in itself, were it not for the fact that capital formation has dropped alarmingly

And just a few days later, India’s quarterly GDP statistics were released. The past few days have seen much criticism, and several bleak predictions. Much has been made of a slower GDP growth rate and much written about the slowdown of the Indian Economy. Subramanian Swamy, a member of the ruling Bharatiya Janata Party, had suggested that India was on the verge of a depression. Yashwant Sinha, a former finance minister, somehow made a direct connection between a slowing GDP growth, demonetisation and GST, without quite explaining how, or to what extent. He also, rather astonishingly, suggested that India’s GDP growth had slowed because Arun Jaitley was overburdened. Indeed, his estimate of the importance of Jaitley’s time would make Jaitley’s time the most valuable commodity on the planet.

Those who spoke in defence of the government, made much of the ‘groundbreaking systemic reforms undertaken..., which would, in the long run, yield rich dividends’. The length of the run is unspecified, of course, and vague as ever.

Rather more worryingly, we have heard enough to suggest that this government could attempt to ‘spend its way out of trouble’, and that there could be an overrun on the budgeted fiscal deficit. Equally alarming, was the suggestion that ‘inflation was no longer a problem’.

Both of these notions are dangerous and could send India spiraling out of fiscal control. Inflation & low growth could combine in a deadly cocktail, and Subramanian Swamy’s prophecies of doom and gloom could well come true if the government and RBI decided to forsake the narrow path of fiscal prudence and inflation control.

The last quarter GDP growth notwithstanding, India’s economy has been in relatively good health compared to other Emerging Economies, and has seen periods of even slower growth in the past decade, and so the slowing down of the GDP growth rate over the last quarter would not be an alarming or unprecedented statistic in itself — were it not for the fact that capital formation (as a percentage of GDP) has dropped alarmingly, and is almost as low as it was in 2004. Capital formation is a measure of investment. Thus, if capital formation isn’t growing, then businesses aren’t investing for future growth. If businesses aren’t investing, its because they don’t forecast growth. Therein lies the real cause for concern.

There are other worrying indicators like sluggish industrial output, snippets of data suggesting a stagnation of job creation, a sub-optimal monsoon, the general state of the agriculture sector, the seemingly never-ending task of ‘bringing out’ and ‘cleaning up’ an ever-growing mountain of NPAs in the banking sector, the pressure on India’s IT sector , to name just a few, that don’t make for pretty reading.

Most of these factors have little to do with demonetisation & GST implementation. It would be incorrect to suggest that these two decisions alone have contributed to the situation as it pans out today, however convenient that argument may be for those with an axe to grind.

Strangely enough though, at the time of writing this article, India’s equity markets haven’t reacted violently to India’s GDP statistics, neither have the markets reacted adversely to the statements made by critics of the government from within the ruling party, predicting Armageddon. Perhaps the market knows best, and is dismissive of this gloomy pessimism. Or perhaps the penny hasn’t dropped yet, and the markets are currently ‘overheating’ as they hurtle towards the precipice of a crash.