Dismay,
Disappointment, Distrust: NDA’s Smoke & Mirrors Economy
A lot of tides have come and gone on the Ganga since the
full budget was presented on July 5th
. It was delivered by an
eager Nirmala Sitharaman. She, who is educated at the Leftist citadel JNU, and
joined the Party only in 2008.
The freshly minted Finance Minister didn’t, as Modi
himself put it, pause for a sip of water during her two hours plus read out of
the most free form budget ever presented by the Government of India.
It initially bamboozled quite a few with its covering
fire statements about a $5 trillion economy by 2024 based on a likely $ 3
trillion economy by the end of this very fiscal.
It has been only about three weeks since then, but, it
seems like an interminable age of realization. This government has begun with a
sharper left turn than all the five Jaitley budgets and the interim one
presented by Goyal.
The Modi 2.0’s roadmap for the future- is a dusted off
update of Indira Gandhi style socialism. There is scant attention to revenue
generation through growth. It resorts to welfare spending on the poor, grown up
with additional zeros better suited to 2019. There is emphasis on taxation of
the rich and disdain for “money making”.
The central idea is to blatantly reward the nearly 50% of
the voters, cutting across caste and creed, that enabled a better win for the
BJP than 2014. This amalgam of urban and rural poor is the new BJP vote bank.
That the Modi government has thought it best to focus on
this constituency by providing it tangible benefits, ignoring all others
including foreign investors, business and industry, the services, exports, real
estate and even agriculture, is the strange thing.
How does Modi 2.0 expect to pay for its welfarism and baton
twirling on the international stage? India has even become a “donor nation”.
The FIIs have already pulled out a couple of billion in
less than a month. FDI has stopped in its tracks. The foreign exchange reserves
have dipped by a like sum. The stock market, the first to give the thumbs down
to Modi 2.0, has plunged continuously since July 5th.
That the poor have done the BJP proud, is understood, but
the BJP used rich people’s money to win this election. It took the support of
the middle class that cheered Narendra Modi’s honesty, dedication and
nationalism. So how is it legitimate to
promote a vote bank, numerically heavy
as they are, at the expense of all the other stakeholders?
The BJP has developed an arrogance overnight. It is no
longer worried about the middle class opinion or vote. It has cunningly decided
they have nowhere else to go. Shekhar Gupta quipped the middle classes have
become the BJP’s Muslims.
The Opposition,
such as it is, was decimated, not once but twice, and the remainder,
particularly in the provinces, is rapidly defecting to the BJP. So future
elections to be won are being supplemented already with “inorganic growth” -
both at the assembly level and in both houses of parliament.
Modi 1.0 was no great shakes at the economy either, despite
the expectations raised in the 2013-14 campaign. Acche Din was a great, if empty, slogan in
2013, and it remains so in 2019. Except now it is being selectively applied to
the denizens of the ruling alliance, and their vote bank.
It is proudly counted in gas connections, toilets, rural
roads, echoupals, electricity and healthcare leavened with Mudra loans. The
rich, of course, are expected to continue filling the BJP coffers, and not
those of the opposition, whether they want to or not.
The NDA has still got a lot of sympathy for its line that
it needs more time to implement its grand vision for India. This vision is to
take it to the top three economies in the world, with $10 trillion in GDP. But
this is apparently designed to beguile the chattering classes.
What is going on
is somewhat different. Not only is the growth plunging, throwing lakhs of
people out of their hard to come by jobs, but the BJP is still concentrating on
mopping up more votes. In a parliamentary appearance shortly after winning in 2019 , Narendra Modi extended his other much
used slogan Sabka Saath, Sabka Vikaas into Sabka Saath, Sabka Vikaas, Sabka
Vishwas.
That “Sabka” has been reworked to exclude those who are
not electorally important. So now, and the
passing of the Triple Talaq bill for the third time in the Lok Sabha is
a case in point, the Muslims, mainly
Muslim women, are next in the BJP’s sights.
Sabka Viswas is a call sign to India’s Muslims. Whether it works or not, it is an astute
political move. It wards off criticism by firing the first volley for
inclusiveness. It blunts the charge of those who call the NDA a purely Hindu
nationalist government.
In the 2019 general election, Modi was helped, in no
small measure by a whiff of grapeshot from Balakot. Modi owes Pakistan and its
terrorist organizations, as well as the Indian Armed Forces for contributing
handsomely to his victory.
Those factors, and the risk- taking ability of his
own decision making. It let him pull off and milk the surgical strike in 2016
using crack ground troops. In 2019 he did it again using precision air strikes.
There is nothing like jingoism to make people forget their troubles and project
oneself as the great and decisive leader. It won George W Bush and Obama their
second terms. So why not Modi?
But that prompt military decision taking ability and
nerve, is never, it appears, applied to fostering the growth of the economy.
The backfiring of the “Shining India” campaign cost the NDA the government in
2004. The “Suit Boot Sarkar” jibe early in Modi 1.0 has turned Modi into a
shade of red ever since.
So Modi sticks to masses of process improvements. And
banking on infrastructure, inclusive of a modernization of the railways
designed to provide a long term boost to the lives of people.
In the short term, the government may have calculated,
spending Rs. 150 lakh crores in five years on infrastructure and the railways
will contribute 8% growth per annum.
But, Modi is already backing away from the foreign borrowing announced in the 5th
July budget. The scrutiny and accountability that the government may be
subjected to seems to be the problem. This, even as the domestic banks are
almost maxed out with government debt already. And tax shortfalls from all
sources are rumoured to be a third down.
Any other global headwinds like a conflict involving Iran
and the Western powers could further queer the pitch.
But, why is the Modi government 2.0 not promoting overall
growth instead of a quixotic backing for hobby horses like electric cars that will
not only further damage the automobile sector, down 20% already, but sequester
the fuel tax the government collects? Perhaps it is thinking of lower oil imports.
FMCG and Real Estate too have shown a collapse in
consumer demand. But instead of doing anything to revive these sectors, and
others, including Services that clocks up more than 50% of the economy, the
government has chosen to increase taxes to make up for its shortfall in
collections.
But these higher rates of taxes may not see better realizations
as people restructure and take evasive action.
There is a sharp slow-down in consumption in rural areas
too, suggesting the paucity of spending money.
That the Modi government has been covering up and fudging
economic data for at least the last couple of years is alarming. Avoiding a
public gaze prior to the elections is understandable, but inaction even after a
thumping win is inexplicable.
This sharp economic slowdown is now being highlighted by all
quarters but the government is ignoring it. The thinking may well be that there
will be a cyclic upturn in the economy in two or three quarters. The IMF
continues to give India a 7% GDP growth for this whole year and again for the
next, down from an earlier prognosis of 7.3% p.a.
A counter argument is to allow some slippage in the
fiscal deficit to say 5% from the
present 3.3% ,and use the proceeds, helped partially by higher inflation than the present 4%, to get things
going again.
Meanwhile, there is nobody to challenge the government. The BJP is busy harvesting defections and
targeting a number of state governments such as Karnataka, West Bengal, Madhya
Pradesh and Rajasthan.
Modi 2.0 can, if push comes to shove, brazen it out, and
we have to get used to our tribulations in place of the promised Acche Din.
(1,453
words)
July
26th, 2019
Gautam
Mukherjee
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