One often wonders whether the message is in the language, only to find that the language itself is the message. Confused? Shouldn’t be. Simply because pawn sacrifice is something one shouldn’t worry about, when one is eyeing the queen in a gambit, to emerge as the winner takes all. The yabba dabba doo sound effects over an economic stimulus have died down, but Niti Aayog vice-chairman Rajiv Kumar has revived it by pitching for a fiscal stimulus to boost growth, with a rider that additional expenditure should be used only for increasing productivity and capital expenditure. It is a sensible argument and one that should be examined, although the finance minister dismissed it derisively in Washington. Is there one coming or can we forget it completely? Buoyed by recent economic data that point to much better numbers, the government may well consider giving it the go-by. And I will explain why.
Despite the disappointing downward revision of India’s 2017 growth forecast to 6.7 per cent year on year (vs 7.2 per cent earlier) by the IMF — owing to GST and demonetisation — data releases during the week brought cheer since:
- CPI inflation moderated to 3.28 per cent YoY in September 2017 (vs 3.36 per cent in August 2017).
- Net direct tax collections recorded robust growth, touching 39 per cent of Budget estimates in September 2017.
- Foreign tourist arrivals surged 19 per cent YoY (vs 12 per cent in September 2016).
- Trade deficit improved on account of surging export growth (26 per cent YoY) vs import growth (18 per cent YoY).
- Industrial production reached a five-month high, at 4.3 per cent YoY in August 2017 (vs 0.9 per cent in July 2017).
On the policy front, key highlights included:
- The selection of 10 themes to address the economy’s slowdown by the PM’s Economic Advisory Council in the next six months.
- The approval of two new World Bank-sponsored skill-related schemes (Sankalp and Strive) by the Cabinet.
Notwithstanding the sensitive position of the government’s finances:
- Maharashtra and Madhya Pradesh have followed Gujarat to cut VAT rates on petrol and diesel.
- Tamil Nadu has decided to implement the recommendations of the Seventh Pay Commission against meagre budget growth of two per cent YoY in salaries.
- The Cabinet has approved higher pay scales for teachers and equivalent staff.
- With 31 per cent YoY growth (vs 0.5 per cent YoY for the Centre) in states’ net market borrowings (NMB), the ratio of states-to-Centre’s NMB touched 64 per cent (on October 6, 2017) vs 49 per cent during the same time last year.
Now let’s return to the medium and the message with the language thrown in somewhere in between. The BJP has a solitary vote-catcher in Prime Minister Narendra Modi, his persona is by far the tallest and his demagoguery skills are par excellence. This has become a millstone around the party for every other day there are elections in this country. This cycle is detrimental to economic-decision making. The UPA for a decade had a PM who was not even remotely a politician, the diarchy practised by the Congress meant that the family — Sonia Gandhi and Rahul Gandhi — became the vote-catchers while Manmohan Singh dealt with the more mundane matters of running the government, although the caveat there too was vested with Mrs Gandhi and her all-powerful National Advisory Council.
Since May 2014, the amount of time, energy and effort invested by the PM alone in campaigning for state polls is a staggering number of days. It is being reprised, even as I write this — the PM is spending a considerable amount of his time in Gujarat, where state polls are due shortly. The hustings are an essential part of the Modi-Shah duo’s thinking on making Bharat a Congress-mukt nation. Besotted by this burning ambition, Mr Modi has traversed the nation relentlessly in an indefatigable manner — the Uttar Pradesh polls being a case in point. It was fought like a general election with the PM being used as a battering ram to break open the fortress. Imagine the toll that it takes on a man who is also running the nation.
Not only does the BJP have a huge mandate in the Lok Sabha, but over time the tyranny of numbers has been partly reversed in the Upper House too. Yet it resorted to gradualism and incrementalism and an extension of the UPA’s welfare economics model. Since May 2014, significantly the Indian election whirligig has moved from Arunachal Pradesh, Haryana, Maharashtra and J&K in 2014, to Bihar and Delhi in 2015, to Tamil Nadu, West Bengal, Puducherry and Assam in 2016, to UP, Uttarakhand, Manipur, Goa and now Gujarat and Himachal Pradesh in 2017. The list is endless. And the PM’s tireless imprimatur is visible with the BJP’s enlarged presence around the country’s state capitals.
But as the elections drew to a close each time, opportunity and hope beckoned that unpalatable reform would finally take place, only to be disappointed most of the time. For instance, after the Maharashtra and Haryana poll results in October 2014, Mr Modi did deliver on liberalisation. In mid-October, he rejigged bureaucrats in several ministries, most importantly bringing in a reformer from Rajasthan to lead the finance ministry, Rajiv Mehrishi. The same day he named Arvind Subramanian, a sharp and liberal economist, as his chief economic adviser. He also tweaked India’s labour laws, making it harder for 1,800 of the government inspectors who check up on labour standards to act capriciously, wrote the Economist.
Subsequently, the government deregulated the price of diesel (petrol prices have been set by the market for some years), and restarted a scheme to use bank accounts linked to Aadhaar, a biometric unique-identity scheme, to pay subsidies for cooking gas directly to families. That suggested the start of a process to target subsidies in the form of cash, to reduce corruption and stop market distortions. Then he was off again for another round of state elections, and since then true blue reform has been hard to come by. I am not counting DeMo or GST, because one was a nasty surprise and the other was a given as it was work in progress.
One can argue that the BJP has achieved the impossible over these four years — a first-time ever government in Haryana and Assam, in a coalition in J&K and a return to power in Maharashtra through a fragile alliance, and storming UP in a typical smash and grab with the Hindu vote aggregating behind the PM in a decisive manner.
Now we come to 2018, which is going to be replete with elections — Karnataka, Mizoram, Nagaland, Meghalaya, Tripura; and then the big three — Rajasthan, MP and Chhattisgarh, where once again Mr Modi’s charisma and boundless energy will be required. Agreed that Amit Shah’s back office management plays a crucial role, but without its quintessential face — Narendra Modi — one wonders how the BJP would do in the state engagements. The time taken in electioneering is obviously a no-brainer, for the focus is elsewhere.
The BJP in 2014 without Mr Modi, despite double incumbency and corruption, would not have managed to cross 180 seats. Mr Modi has been the cutting-edge differentiator on India’s political landscape ever since he rocked it in May 2014, but now he needs to deliver on many of his promises.
