Gradual Economics, Aggressive Politics

Gradual Economics, Aggressive Politics

The Modi Government, almost six months in power, is still robustly mindful of its political and electoral agenda. It is in near perpetual campaign mode, and means to create a ‘Congress Mukt Bharat’. As it sees it, along with over a third of India’s voting public who support the BJP; Congress is the root of many evils, distortions, and hypocrisies that have long bedeviled this country.

The big contrast with NDA 1, which was a massive raft of a coalition, when the Government chose to ignore the Party apparatus, causing its defeat after just one term, could not be starker.  

Perhaps half of Prime Minister Narendra Modi’s strategic attention, in tandem with his gifted alter-ego and Party President Amit Shah, goes towards relentlessly winning State Assembly elections as they are scheduled. There is no resting on laurels, no relaxation into flattered complacence. Theirs is a two-term agenda, and the second term will, if all goes to plan, see a majority in both houses, with all the important states also in the BJP fold.

Of course, this winning of State Assemblies via excellent organisational ground work, popular candidates, and Modi’s inspirational campaigning, must be accompanied by a further surge in vote share. It is already projected at an average of over 35% nationally, with the rural and urban vote showing equally, but it could cross the half way mark, if the BJP has its way.

Delhi, Jharkhand and Kashmir are next on the anvil, and none of them will be lost if the BJP can help it. Even the recent addition of a number of the new ministers is evidently with an eye to winning on its own in Bihar, Punjab and Uttar Pradesh later. And perhaps, also in West Bengal.

This time, not only does BJP have a majority of its own, but those political parties still in actual or tacit alignment with Congress, not exactly numerous, are out in the cold too. The old secular –communal shibboleths are redundant with the voters, and they are fed up with the chronic non-performance. 

Some electorally diminished regional parties, realising that the alternative is the political wilderness, are hastening to offer support to the BJP. This has been seen in Maharashtra, and to some extent, is unfolding in Kashmir too, where the comfortable, if inimical, bipolarity of the NC and the PDP, is suddenly under siege.

The political dexterity of the BJP,  in Government at the Centre and several of the States,  harnessed in tandem with a strong party organisation,  well- coordinated with the RSS and other support groups, is unprecedented, and proving very effective. Even brand extensions, such as Swatchh Bharat have put paid to the AAP, and added endorsements from a host of cricketing ,Bollywood and other celebrities.   

That Shiv Sena, out-dated and out- manouevred, is having trouble digesting its changed fortunes. This is likely to isolate the Sena, not only on the national stage, but in its own backyard  of Maharashtra as well.

The SP, JD(U),RLD, in an opportunistic family-firm Yadav triumvirate, are hoping to stop the BJP in Bihar and Uttar Pradesh. But should they fail, they are likely to fall in line soon enough in order to forge an equation with the Centre.

In the midst of such excellent politics, what is the Modi Government’s preferred pace of economic reform and change?

So far, it seems to be stately and gradual, with only the diesel deregulation qualifying as a big-bang reform. And this too was aided by a substantial  reduction in crude prices. A barrel of oil is $30 lower than its all-time highs.  

But, at the same time, there have been small  liberalisations and administrative changes to economic policy, almost on a weekly, if not daily basis. And other actions that benefit ordinary citizens such as accepting self-attestation on documents  and the recent digitization of proof of life for over one crore pensioners. These moves, in themselves, are most welcome, but put together and cumulatively, do succeed in shifting the narrative substantially. The diplomatic projection work overseas has been spectacular and extremely well received.

The 2015 Budget is under preparation. But neither Finance Minister Jaitley nor Prime Minister Modi are suggesting, lest it provide ammunition to a down and out Congress, that it will contain any Margaret Thatcher style sweeping privatisation, or Reaganomics tax cuts. At least, certainly not all at once.

However, the Airports Authority of India, 51% of NPA ridden public sector bank equity, and Air India, may well be headed for a sell-off, along with other non-performers with assets. These are often large PSUs and lose huge amounts of tax payer money, despite many incompetent  sarkari efforts towards their revival.

But there is not a word about shrinking the size of the unwieldy and expensive Government itself, for example.   

With all this deft nuancing, the nagging question is, how much will actually get done, and by when?  India desperately needs FDI and FII funding, as we simply do not have enough domestic resources to finance our plans. And the foreigners are watching and waiting for a serious acceleration of the ‘red carpet not red tape’ promise made.

So will things happen as part of the next Budget or outside of it? Will it happen in 2015 or later? Will the Insurance Bill find passage, and succeed in raising the permitted FDI quantum to 49%?

The Government, ham-strung because of inadequate numbers in the Rajya Sabha, may need to resort to a joint session, or ordinances, or both. There is the Insurance Bill, and GST , and changes in the Land Acquisition Act, changes in Labour Laws, scrapping of manufacturing taxes demanded by foreign investors such as Japan, etc. etc. as the ‘King of Siam’ might have put it. 

But the tea leaves augury is indeed good. Notable bureaucratic reinforcements in the shape and form of Arvind Subramanian and Rajiv Mehrishi, have been added to the MoF. And most recently, the political bench strength has also been enhanced by inducting Harvard educated Jayant Sinha into the MOS slot at the Ministry of Finance.

There is little on the reforms front that has been made obvious as yet. Inflation may be down, for example, but when will the Government actually cut interest rates?

The formula being followed  seems to be definite and bold about political consolidation. When it comes to economics however, the style is to give nothing away before the action. However, the emphasis on the Railways and Defence, both equipped with brand new can-do Ministers, seems to indicate that a strong surge of investment and modernisation will soon be seen in these sectors.  

(1,101 words)

November 11, 2014

Gautam Mukherjee