Political Economics

article

Completely out of the box. That’s what Modinomics claims. Merging economics firmly into his political agenda of perpetuating a Sangh rule over India, Modi is making for accountability the basics

ALAM SRINIVAS

ALAM SRINIVAS

Alam Srinivas is a business journalist with nearly three decades behind him working for The Times of India, India Today, Outlook Financial Express and Business Today. He is the author of Cricket Czars: Two Men Who Changed the Gentleman’s Game

In the beginning, there was euphoria. Then a breather or a kind of a retreat! After a lull, the swelling surge started again. It crashed through the dam, it lifted everything in its vortex, and it engulfed everything in its tsunami waves. This happened the day the results of the Uttar Pradesh assembly election were announced. Over 300 seats for the BJP alone! It was the culmination of a topsy-turvy political process that began in May 2014, or possibly in September 2013, when Narendra Modi became BJP’s prime ministerial candidate.

Why did we begin with politics in a piece that’s supposed to chart out the economic changes in the past three years of Modi’s regime? The answer: politics has become completely enmeshed with economics. Today, the decisions taken by the finance ministry, or any other economic ministries, are rooted in political objectives. They are part of a new form of social engineering – I wouldn’t call it reengineering as it’s totally different from what has happened in the past – to attain political goals. Economics has been woven into the art of winning elections, and this isn’t limited to the welfare schemes and subsidies.

Political Economics

In a sense, politics, economics and social agenda is one and the same. There are wheels within wheels and, after a while, one cannot distinguish the economic spokes from the political and social ones. In fact, many a times, the political spokes take on economic hues, and the economic ones acquire social colours. What seems isn’t there. And what’s hidden may be the most important cog. Since the wheels keep churning in a whirlwind fashion, even the acutest observers fail to realise their true path, and the distances they have covered.

During the demonetisation debates, the overriding question was whether it would curb corruption, or was it a fruitless exercise? Modi loyalists said a big Yea to the former, and the critics derided them. However, everyone focussed on the wrong issues. The real motive of demonetisation was to rewrite the existing rules of corruption, or rather rewrite all the rules of election politics, as it was pursued until November 2016.

In those crucial minutes of his speech, Modi forced every major political party, national and regional, to rethink its game plan. Indira Gandhi did the same when she banned political donations in 1969. Until, the Congress was controlled by the ‘Syndicate’, which sat on the moneybags. The unholy Bania-Brahmin alliance, as it was popularly called, gave a select few access to the money, which they doled out to their favourites. In a sense, the backroom boys, the puppeteers decided who will become the prime minister. Gandhi obviously wanted to snap the strong legal cash links. She did it with aplomb. In the new world, it was a level-playing field.

The field was slanted towards Gandhi, when she took a related step – the nationalisation of the banks. Now, another source of legal money, which went to the industrialists, who financed the Congress, was in her hands. She could command who would get the money; she would command how part of the money would be siphoned off into her party’s coffers. In the process, the country saw the rise of new corporate players, who owed allegiance to her. Indira was India Inc, and India Inc was Indira. The rules of politics changed.

Mimick Indira

Modi has achieved the same result with demonetisation, coupled with new laws like the one on benami assets. Most of the political parties, and especially the regional ones, stored their finances in cash. The suave ones in the landscape of national parties laid aside more funds in easily-convertible benami assets. Both these sources became difficult to tap. Cash was gone in a jiffy. It was another era of level-playing field.

Now, every party had to begin afresh. And the most advantageous was obviously the party in power.

One of the critical reasons for the success of the regional parties lay in the ease with which they could blame the centre for the lack of resources to pursue growth and development in their states. As a chief minister of Gujarat, Modi had blamed the UPA regimes for the latter’s refusal to part with adequate funds. This rule too was changed within the first two years. The centre shared more of its revenues with the states; it’s a different matter that this was also forced upon the centre because of the recommendations of the Finance Commission.

In 2013-14, the states and union territories together got 40% of Plan Revenue Expenditure that the Centre spent. In 2014-15, the situation was completely reversed – the Centre got 38.5% of the Plan Revenue Expenditure compared to the states and union territories. Since then, more money has been transferred to the states, which have the independence to spend it. Even if they have to use it on centrally-sponsored welfare schemes, they had the independence to decide their priority areas. In a stroke, the ‘financial’ or ‘lack of funds’ excuse vanished.

Clear Skies

Henceforth, the state governments will be directly assessed by their voters on parameters such as growth and development. No longer can the chief ministers hide behind the Centre; the former had to deliver results, and visible ones. In a way, this changed the rule about governance.

It is true that the Centre lost its financial levers to award its own state governments. But it is also clear that voters can now see the leaders who get things done, and those who don’t.

Skill India and Start-up India are two schemes that directly point to how economic policies can be entwined with political objectives. Modi has realised the importance of addressing the country’s demographics – appeal to the growing number of youngsters. All of them want good jobs. Skill India is a means to up the ante, and provide lucrative jobs to a larger number of voters. However, it can easily boomerang on the BJP in a few years down the line.

In the 1970s, JP (Jai Prakash Narayan) mobilised millions of youngsters, especially in North India. Although the ostensible slogan was corruption, the real desire that drove the students to protest was their perceived delink that they saw between education and jobs. Those were the days, when a person would have completed a BA, MA or PhD, and yet remain without a job.

Remember the 1971 song from the movie, Mere Apne, “BA kiya hai, MA kiya, lagta hai vo bhi awain kiya, kaam nahi hai varna yahan, aap ki dua se sab theek thak hai” (I have done BA, I have done MA, but it seems it wasn’t worth it, I have no job but, with your blessings, everything is fine).

Future Horizons

Imagine a scenario in 2022, when there will be tens of thousands of skilled people, who will have acquired them in the hope of getting jobs, and jobs. Employment can be generated only if the country grows at a frenetic pace. More importantly, jobs will happen only if the right skills are imparted. In the race to skill people, most institutions are giving any skills, just to achieve targets. No one knows if those skills can result in proper jobs.

A report in the Patriot, a weekly tabloid, said that according to the HRD ministry “only 40% of the engineering graduates are employable. In 2015-16, over 8,500 institutions spewed out over 33 lakh graduates, of whom only 16.6 lakh found employment.” If this is true of the highly-educated and skilled people, what will happen to the lowly-literate and skilled ones of the future?

The situation is the same in the highly-showcased IT sector. Nasscom believes that a large proportion of the Indian software employees are unemployable. In fact, one has to now retrain and re-skill the engineers and science graduates.

Dark Scenario

A similar dark scenario can be sketched out for Start-up India. A stark truth about start-ups is that only one out of 10, or two out of 10 succeed. The majority of the entrepreneurs fail. Imagine a situation a few years from now, when the country is saddled with tens of thousands of failed self-employed, who have taken loans and used their families’ money to start new businesses? In a country like the US, where bankruptcy is the norm, there is no stigma attached to it, and where bankrupts can bounce back – like the US president, Donald Trump – business failure is an accepted norm. But this is not true in India.

For decades, welfare and subsidies were used to create and nurture vote banks. You wish to garner rural votes, announce farm loan waivers. You wish to woo the poor women, give gold and mangal sutras for the marriage of their daughters, or buy them a cycle and a laptop. Free housing, free electricity, free water, subsidised food, subsidised fertilisers… well, the list seemed long and never-ending.

Modi isn’t really dismantling this mind set of freebies, but he is changing it bit by bit. He wants people to pay; he wants to subsidise them in cash.

The chullah-cylinder scheme is the best example of this new combination. Ask the middle class and rich to give up their rights on subsidised LPG cylinder, and give it to the poor women. In a bid to encourage the rural women to use the cylinder, give them free gas chullahs. In addition, ask the new users to pay the market price for the cylinders; the subsidy amounts will be deposited directly into their bank accounts.

Twisted Welfare

This is a twisted form of a welfare state, and it has both grave economic and social connotations. It’s a capitalist form of welfare-ism.

In practice, the poor are given subsidies because they cannot afford to pay the market prices. But in the new form, the government wants them to pay the much-higher market prices for gas cylinders, fertilisers and food, and depend on the government to transfer the balance amounts into their bank accounts within days. For, if it takes weeks and months to complete the transfers, the poor will have no money to even buy the food. Efficiency is the key here, and bureaucratic and banking inefficiencies are the real peril areas in India.

A recent media report cited problems related to the Direct Benefit Transfer (DBT) or cash transfer scheme. One, it said that to use DBT for subsidies, “it is necessary to overcome the roadblock that currently exists in the banking system, especially in rural areas.”

The rural poor are illiterates, and most have no access to the banking system. In a specific criticism of the LPG scheme, the same article said that despite the various schemes and incentives, “LPG will remain an uncompetitive fuel for about 50% of such households which continue to depend on firewood, cow-dung patties and other biomass that are essentially free.”

Social-economic engineering

A few weeks ago, Modi came out with a new slogan, P-2, G-2, which translated into pro-poor and good governance. This is finest of the wheels-within-wheels and various political, economic and social cogs-in-those-wheels strategy. It encompasses politics (read: elections), economics (read: incomes) and social issues (read: empowerment).

The pro-poor policy encompasses three initiatives – Jan Dhan, Jal Dhan and Van Dhan. Jan Dhan is financial inclusion, which was discussed before, and is related to connecting the banks to the poor.

Jal Dhan is to find means to further exploit the country’s water resources to provide irrigation sources across the country. This has economic and social facets; economically, farm incomes may go up dramatically, at least for a few years and, socially, the poor gatecrashes into the next socio-economic category.

Van Dhan fits in beautifully with the ongoing RSS efforts to win over the tribal populations. In this case, the use of forest resources will be made effective to improve the lives of the poor, whose lives are based on the produce.

All the three efforts are predicated on a single achievement-good governance. As Modi has repeatedly said, nothing will work for long – not the slogans, not the achievements – unless a system is in place to ensure effective and transparent governance. The people have to see the results, and perceive its fairness. This is why he emphasises on e-governance. As he said, “E-governance is easy governance, effective governance, and also economic governance. E-governance paves the way for good governance.” Period!

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