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The starkly divergent tracks being followed by the economy and the ruling party’s ambitious political thrust are too obvious to be ignored. From the start of the Narendra Modi government’s first term, it has been evident that for the government, politics trumps the economy — and this despite Modi’s message on the stump in 2014. Today, the dichotomy is all the more evident: The economy is less important than re-writing the basic rules of political engagement by giving effect to the Sangh Parivar’s long-held shibboleths, for which you could argue that the Bharatiya Janata Party has won an electoral mandate.

A picture of TN Ninan, chairman of Business Standard Private LimitedThis happened once before, in Indira Gandhi’s battle for political supremacy and an even bigger mandate. That provoked her, half a century ago, to launch a legislative lurch to the economic Left: Broad-spectrum nationalisation, restrictive labour and other laws, and tight land legislation. The economy is still paying the price for that primacy given to politics. Will history repeat itself?

Large changes don’t come without friction, and there is plenty of that going around — quite apart from a pervasive ugliness. That may be part of the new narrative that includes the prospect of a disruptive National Register of Citizens. But however dominant the BJP has become, the domestic political situation shows contrasting pictures at the central and state levels, and therefore continuing challenges to the BJP. The attempt to secure the heartland with the Hindutva agenda has now pitted it against the periphery that has large minority populations of various kinds. The consequences are unforeseeable. Transitional arrangements like the Inner Line System in the Northeast are being hardwired and indeed extended, dividing the country in new ways. That still does not offer solutions in Assam, while Kashmir remains locked down for a fifth month.


Also read: Modi’s CAB proves that concerns & fears of northeast people don’t matter in Indian politics


Internationally, the reasons that led Western liberal democracies to prefer India to authoritarian China, and in important ways to make shared values a bedrock of bilateral relations, have come into question. Critical voices are being raised in the US and Europe, and will get louder. In the neighbourhood, the repercussions are already evident in Bangladesh, while a slower Indian economy will find it steadily more difficult to confront the challenge from China, which has not lost momentum as India has. As the fifth-largest economy, India will remain an attractive market, but the loss of momentum cannot but find reflection in international choices. It does not help that economic diplomacy has reversed tracks on trade and tariffs, threatening trade friction.

While it would be reasonable to expect some level of economic recovery in 2020, the obstacles in the way of a desperately required reversion to earlier growth rates are formidable. The financial sector’s problems are not over, and small and medium enterprises in particular continue to struggle. The problems on the farm front are real, and exporters are hobbled by an unreal currency policy. The macro-economic story includes an impossible fiscal situation since the Centre is unable to pay its bills; unpalatable tax choices because of fundamental problems with the goods and services tax (made worse by indiscriminate pre-election rate cuts); and the danger of stagflation underlining the limits of monetary policy. The room for manoeuvre is getting limited.

The GST revenue shortfalls mean that the government’s commitments on the public provision of private goods (including pre-election cash pay-outs to farmers) now run ahead of the exchequer’s capacity to bear the cost without serious fiscal slippage and a possibly unaffordable level of borrowing that will send up the levels of government debt in relation to GDP. It has not helped that heavy investments in the transport infrastructure have not seen expected returns, while the power sector continues to be bedevilled by serious viability issues.

The BJP’s push for political dominance and rewriting the rules of engagement represents a serious misplacement of priorities in these circumstances, and may be impossible to pull off. Perhaps the calculation is that economic recovery will have been achieved before the next general elections come around, but such facile assumptions can come unstuck if current directions are not reversed quickly. That is what should be taking up more of the government’s attention.


Also read: India’s shock GDP growth rate is a crisis Modi govt should not waste


 

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11 Comments Share Your Views

11 COMMENTS

  1. Political agenda of BJP are not strictly linked to the economic deceleration, though one can argue that Modi should rather focus on economic issues rather than political one, which are anyway long pending and by their nature will be contentious. However, this is easily said than done and political issues will be sorted out as per priorities set and economic issues are at many beyond one’s control, at least in short term. Of course, there is no doubt that Modi ought to focus equally on economic issues at political level and set clear goals for FM to achieve for many long pending structural reforms. Modi can take as much political benefits by unshackling the country of the cobwebs of the past Nehru-India economic management structure. FM can handle tactical issues linked to fiscal monetary policies but Modi has to provide strong political cover for basic structural reform. This brooks no delay, whether BJP returns to power or not in 2024, as India can no longer wait for them, especially after wasted 10 year of MMS.

  2. The CAB and management of economy are not ‘and’ decesions but ‘or’ decesions. CAB was meant to take Indians to the salaberous climes of natonalisim, have them forget their economic crisis as Modi-Shah could think about the next rabbit they would pull out of the hat.

    Looks like CAB will lead to its own morass. And the economy, less spoken the better.

  3. What a genius comment vinu. Economic management is all about making aloo cheaper it seems. Moderate inflation can be tolerated if core sectors of the economy grow much faster than inflation. Now we have inflation of 5.5 percent which is higher than growth which is 4.5.percent. No global economist even believes this 4.5 percent growth number either. It’s more like 2.5 percent or 3 percent at best. And pray what is the objective of this great hindutva project? You are an idiot if you think countries who are founded on a religious premise are prosperous. Not unless they have one natural bounty like oil. They one can be medieval like Saudi Arabia and still.prosper. We don’t have that luxury. High Economic growth for 20 years straight is the only way ahead for India to prosper. Everything else is just dope sold by wily salesmen.

  4. For some time, the conventional wisdom was that the national election was becoming a sum of state elections. That may happen once again. The safety cushion provided by having one towering figure to which the Opposition, even coming together, as it tried earlier this year, could not measure up may wilt in the harsh, unforgiving glare of what we should no longer fear to call a collapse of the economy. 2. Article 370, Ram Mandir, UCC are all bound up by an antipathy towards the minority community. That has been turbocharged with Pakistan, as National Interest this week explains. That is not a positive, constructive agenda for the country’s one billion Hindus. They are bleeding, along with everyone else, in this economic winter.

  5. It’s hilarious to read articles, even by respected men like Ninan, imploring the Govt to focus on the economy rather than Hindutva.

    Hindutva project is not about making aaloo Rs 5 cheaper in Bazaar. Anyone who thinks otherwise has no knowledge of this gigantic undertaking.

  6. Doom sayers never questioned crony caoitalism of tatas or reliance..also never admonish or single out industrialistts for their illgotten wealth and lack of integrity in siooning off bank funds ..why single out modi sitaram and shah

  7. The way things are going, a big crash is inevitable. It’s not far off. One of the most beautiful things about the 2000-2015 period was the exuberance (at times irrational – with apologies to Greenspan) that was evident in India. There was a sense of optimism. All that’s gone under the BJP.

    They have sucked the fun out of life. And that’s also affecting the economy.

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