Right foot forward
PM Modi shouldn't let bad PR come in the way of doing what is right for the nation
The next one year will be his toughest test yet.
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If social media were to be a reliable indicator of public mood, then going by the turn of the tide in the past two weeks, the Modi effect is over and BJP has already lost 2019.
While some have prematurely anointed Rahul Gandhi as the prime minister-designate, others are still not too sure. But, they seem to be in no doubt that it is "game's up" for the BJP. Alas, India is a country of 1.3 billion and the population on Twitter is hardly representative of the masses.
However, going around the country - as this writer has to for a living - one does sense anger and disenchantment on the ground. Businessmen are unhappy and crib in private, though they are afraid to speak up. Traders and the shopkeepers are cursing because business is slow and the GST has added to their woes. Builders and real estate barons are stuffed with inventory up to the neck on which they have RERA (Real Estate Regulation and Development Act) breathing down too. The patience of the middle-class seems to be wearing off. Rural India is gasping for breath with the oxygen line of MNREGA (Mahatma Gandhi National Rural Employment Gurantee Act), doles and sundry subsidies choked.
The good part of the story is that, the government is aware of the ground reality and not living in denial, even if it is a trifle defensive. If the top triumvirate of Modi-Shah-Jaitley tried to ride over the criticism of demonetisation with bravado, the GDP numbers have come as a rude reminder of the underlying crisis. This realisation has been reflected in several reactions and statements of ministers both on the political and fiscal front.
When the going gets rough even relatives turn foes.
The finance minister has hinted at a fiscal stimulus. The petroleum minister – after a rather strained PR exercise on how taxes on petrol and diesel contribute to nation building and a large part of it goes to the states in any case – has finally come around with assurances of a price correction in the coming weeks.
Finally, the formation of prime minister’s Economic Advisory Council is a signal to industrialists and investors that the government is seized of the problem. Some would interpret the extension of Arvind Subramanian’s term as chief economic adviser in the same vein.
The prompt intervention of the Centre, notably the prime minister and Amit Shah, on the BHU harassment and molestation case shows a new resolve to not let unsavoury incidents get out of hand earning the government bad press and social media bashing. On another front, calling all Patel organisations (including Hardik Patel’s team) to the negotiating table while Rahul Gandhi is touring Gujarat reveals a new pragmatism.
For the first time in the past five years the BJP seems to be losing the perception battle and its hold on the popular narrative. This has not only energised the opposition, especially the Congress, to go for frontal attack on the government, but boosted the moral of the “I-told-you-so” constituency in the media and intelligentsia who, in any case, had little love to lose on the Modi government in the first place.
When the going gets rough even relatives turn foes. So, while Subramanian Swamy was always Arun Jaitley’s bête-noire, Arun Shourie, another estranged BJP-ite never made any secret of his bitterness. The latest to join the bandwagon is former finance minister Yashwant want Sinha. In a scathing piece, Sinha has roasted the finance minister for mismanaging the economy.
However, he has neither analysed the reasons that led to the present situation nor offered any solution. Interestingly, while even when denouncing demonetisation and GST, he leaves the blame squarely at the footsteps of Arun Jaitley’s office.
Arvind Panagariya, on the other hand, has been more circumspect. That is perhaps expected, since as the vice-chairman of Niti Ayog, he was very much part of the establishment till recently.
He has rightly given the government credit for steady fiscal consolidation over the past three years, a fact that was generally acknowledged by all until doomsday prophets arrived. He argued the situation is not as alarming as it is being made out to be and warned the government against knee-jerk interventions.
Panagariya feels there can be no quick fix to the GDP numbers and short-term action lie in the domain of the RBI in terms of interest and exchange rate corrections, as the strong rupee is hurting exports.
TN Ninan, the doyen of financial journalism in India, incisively pointed out that the falling GDP trend had started in 2012, and did not happen overnight. Similarly, it will not recover in just a few quarters with any minor tinkering. The next leap of growth can only come from large-scale economic reforms for which the government has lost precious time in the first three years, and now it is probably too late to attempt without jeopardising its prospects for the 2019 Lok Sabha elections.
The point of convergence between all the analysts seem to be that, there are no silver lining immediately visible nor any silver bullets available off the shelf. Heavy public spending is unlikely to pull us out of the trough, besides the government does not have deep pockets to get extravagant at this late hour.
Increasing the budget deficit will trigger inflation, which if not accompanied by job creation can boomerang with vengeance. They key lies in kick-starting private investment, but how soon that will yield result is debatable.
Narendra Modi is one politician in over two decades, who had the mandate to carry out hard choices for the nation. He had, arguably, started on that path with the Land Acquisition Bill. But, its setback put him on the defensive and a “pro-poor” over-correction mode. Instead of ushering in big-ticket reforms, he chose to invest his entire political capital in demonetisation and GST.
He probably banked on higher revenue collection to provide funds for more social welfare schemes like Ujjwala (Yojna) and the just launched Saubhagya (scheme), which had the potential of yielding rich electoral dividends. But, for now, the calculations seem to have gone slightly awry.
However, the situation is far from being out of control and certainly the bottom has not fallen off the economy for people to panic. The government would, therefore, do well to keep its head down and avoid any acrobatics.
The composition of the Economic Advisory Council with some members like the public finance expert Rathin Roy, who was sharply critical of demonetisation, indicates an openness to accept diverse points of view.
Therefore, it would be safe to assume that the Modi government will be on a damage control mode coasting along till the elections that will, in all probability, be brought forward to pre-empt anti-incumbency gaining momentum.
Signs of this can be deciphered in Modi setting a new goal post for 2022. But, the next one year will be Narendra Modi’s toughest test yet. He will have to skilfully steer the ship and at the same time control the narrative.
The latter would mean not being sensitive to the WhatsApp forwards, barbs on social media and op-ed diatribes in local and international press.
But, Modi has been a master at that. He should not let bad PR come in the way of doing what is right for the country.