Is the Modi government UPA-3 in the making?

This article has been co-authored by Suryakiran Tiwari and Subhash Chandra.

 |  Breaking views  |   Long-form |   22-01-2016
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In our previous article we discussed how BJP is slowly acquiring the characteristics of the Congress in the manner in which the party machinery functions and is controlled. In this part we will explore if indeed the NDA government is beginning to look like UPA-2 and on course to become UPA-3.

To start with, we reviewed the BJP manifesto of 2014 and on key issues, and compared the performance of the NDA government, as of today, with those of the UPA governments. The information is summarised in the chart below:

graph-embed_012216033835.jpg 

Better than UPA

On a majority of issues, the NDA government is either on par or better than the UPA.

On the two major election issues of price rise and corruption, the NDA government has so far done a very good job.

1. Retail inflation: This was in double digits (10.92 per cent) in 2013 when Manmohan Singh was the prime minister. It has been brought down considerably to 6.37 per cent in 2014 and 5.84 per cent in 2015 under Narendra Modi. Falling crude prices have played a role here though.

2. Corruption: The country was reeling under scams under the UPA (CWG, coalgate, 2G scams and so on). In 20 months of the NDA, no scam has come to the fore. A disclaimer here is that it takes a few years before any such scam is brought to light. But we would like to give the benefit of doubt to the Modi government.

3. Economic growth: GDP growth suffered during the last years of the UPA with growth slowing down to 5.1 per cent and 6.9 per cent in 2013 and 2014 respectively (after revision in the formula for calculation of GDP by the Modi government). Under the NDA, GDP grew by 7.3 per cent in 2015 and by 7.2 per cent in the first half of 2016. India gained the tag of the fastest growing economy in the world.

4. Foreign direct investment: India's FDI investment increased from $33.9 billion to $59.4 billion which marks a 75 per cent increase while greenfield investments have increased from $25.4 billion to $64 billion, recording an increase of 152 per cent in 2015.(Source: United Nations Conference on Trade and Development)

5. Energy: Coal production is expected to be 550 million tonnes (a rise of nine per cent) in FY2016, leading to savings of $2.5 billion towards the import bill. This is commendable given the inefficiencies state-run miner Coal India has suffered for years now.

Same as UPA

The big news, however, is that the NDA is on par with the UPA on around 60 per cent, or three out of every five issues.

1. MGNREGA: Modi publicly criticised the scheme in Parliament, saying it reminds of the Congress' failures. However, in the BJP government's first full budget in FY 2015-'16, it increased the allocation for the scheme from Rs 34,000 crore to Rs 34,700 crore, with an additional Rs 5,000 crore in case of tax buoyancy. While some changes have been made through direct benefit transfer and changes in material usage, the fact is the programme reaches less than 20 per cent of the poorest.

2. Disinvestment and improving PSU inefficiency: There is hardly any progress in either improving the efficiency of PSUs or disinvestment. In the last financial year, the government used the old UPA method of getting Life Insurance Corporation of India (LIC) to support its disinvestment programme. Instead of using disinvestment as a source to fund its programmes, the government has doubled the excise on petrol and diesel keeping the benefits of the fall in crude prices to itself for managing its fiscal deficit targets.

3. FDI in insurance: The BJP government opposed increasing FDI limit in insurance beyond 26 per cent during the UPA rule, However, when it came to power, it increased the limit to 49 per cent.

4. Retrospective tax: While the BJP opposed retrospective tax under the UPA regime, it has not taken any steps to repeal the tax in the two budgets it has presented so far, though it keeps opposing it even now. Very recently, Union finance minister Arun Jaitley has been quoted as saying, "Retrospective tax law hurt India, scared away investors."

5. Pakistan and Kashmir policy: There are many overlaps on this front as well. The BJP and Modi were very critical of Manmohan's policy of talks with Pakistan. On a boarder level, the policy adopted by the BJP is very similar. It has also restarted talks with the neighbouring country and there is some sort of confusion with a "stop-go-stop" approach being adopted. It has done little to help Pandits return to Kashmir. While the BJP supported the integration of Jammu and Kashmir with India and hence an abolition of Article 370, it has conveniently put the issue aside and is sharing power with a party radically opposed to this - the PDP.

6. Land Bill: After three ordinances on the Land Bill and not being able to get the Bill passed in Parliament, the NDA government withdrew all its changes to the UPA Bill and in effect agreed to the same Bill passed by UPA for the fear of backlash by farmers.

7. Black money: While the government has initiated some steps on the issue, by and large, no major initiatives have been taken to curb black money, particularly in real estate.

8. Uniform civil code: There is little to distinguish between what the Congress did about the uniform civil code and what the BJP is doing at the moment. The uniform civil code was an important part of the BJP manifesto.

9. Jumbo ministry: Modi took oath with 45 ministers and a lot of noise was made as to how a lean government was formed by merging various ministries. Within six months, the council of ministers was expanded and increased to 66, a tad below 77 of under UPA-2.

Worse than UPA

The bad news is that the issues on which the NDA trails the UPA - rural development and education - can have a critical impact on the country's future.

The performance on rural development has already hurt the BJP in state and local elections in Bihar, Gujarat, Maharashtra and Chhattisgarh.

On the economic front, two aspects are quite worrying. Exports have been declining this year and expected to reach $250-260 billion (a fall of 20 per cent) owing to a fall in commodity prices.

Secondly, there has been a devaluation of the currency. Modi criticised rupee depreciation during Manmohan's tenure and made it a big election issue. During Manmohan's entire tenure of ten years, the rupee depreciated by 33 per cent from 45 per dollar to 60 per dollar.

During Modi's rule it has already depreciated to 68 levels (a fall of 13 per cent). While this is better than many emerging markets, our less sophisticated neighbours Bangladesh and Pakistan have sustained this period with fairly stable currencies.

Why is the NDA on par with UPA on most issues?

With 20 months in power, the Modi government is realising that it is one thing to criticise while in opposition, but once in power you have to grapple with the reality and even appreciate the difficulties which the previous government faced. Modi criticised many policies of the UPA while in opposition and during his election rallies even ridiculed some of its programmes. However, since taking over the hot seat, he has actually continued with the same policies and programmes which he earlier criticised. What's the reason?

1. Desire for re-election: The Modi government is so keen on getting re-elected in 2019 that the party is unwilling to antagonise any voting base by dramatically changing the structure of the economy and the country. Given the broad coalition that voted the party to power in 2014, the results in Delhi, Bihar and Gujarat have served notice to the government that nothing must be done to upset the applecart.

2. Quality of ministerial talent: The ministers in the Modi government, apart from a few, are quite weak, so much so that the prime minister had to reach out to defence minister Manohar Parrikar to move from Goa to Delhi. The finance minister has no track record in finance or the economy and the education minister neither has the pedigree nor the ability to come up with a compelling vision for India's primary education. The policy of keeping out seniors which would have disrupted Modi's authority has not helped.

3. Bureaucratic talent and inefficiencies: While bureaucrats are coming to office on time and becoming more responsive, the bulk of the bureaucracy is mired in inefficiency, corruption and a lack of skills. Modi has made no breaks from the past in the overall work culture as well as the architecture of India's 200-year-old bureaucracy, which actually needs a complete overhaul.

4. Inability to work with the Opposition and forge a consensus: The scale and size of Modi's victory created tremendous insecurity forcing much of the Opposition to gang up against him. However, the Modi-Amit Shah jodi's aggressive campaigning even in state elections has left many of these Opposition parties little leeway in striking deals with the BJP and help it push through major legislation in the Rajya Sabha. Insecurities have cropped up even amongst long term allies - Shiv Sena, TDP and Akali Dal - all of whom have different grouses against the prime minister and BJP.

5. Divided attention between party work and government: Modi and his ministers are spending a lot of time in state election campaigns as he has been the face of the BJP. A corporate culture in which Shah seems to have been given targets on the number of state elections to be won has put a lot of pressure on ministers to win in their respective constituencies.

6. Policy constraints: One of the main reasons rural India is struggling much more this year is because the government has maintained low increases in minimum support price (MSP) in order to control inflation. Rural spend too has been increased by only about three per cent over the last budget. Both of these measures were carried out to keep food inflation in control. However, a failed monsoon exacerbated the situation further in rural India.

To sum up, the NDA has performed better than the UPA so far in the first 20 months of its rule. This is clearly reflected in the popularity ratings of Modi. However, it would significantly need to improve its "worse" and "on par" performance indicators to increase its chances in upcoming state elections and the 2019 general elections.

Writer

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