Government finds itself on backfoot

Subir Roy | Updated on December 26, 2019 Published on December 26, 2019

No solution India is still looking for the right medicine to get out of the serious economic slowdown istockphoto   -  COSPV

Majoritarian politics faces a pushback, while economic policy awaits a paradigm shift

After a year of almost relentless flow of bad news, December has held out some measure of hope and cheer for those who wish to preserve the idea of India as defined by its founding fathers and codified in its Constitution. This hope flows form two developments – Prime Minister Narendra Modi backtracking on plans to take the National Register of Citizens (NRC) from Assam to the whole country; and the results of the Jharkhand elections.

If the Hindutva forces concluded from the massive victory of the BJP in two successive Parliamentary elections that most Indians were comfortable with the idea of India becoming a Hindu rashtra, then the massive demonstrations across the country against both the Citizenship Amendment Act (CAA) and the NRC prove that India is a complex entity.

Its citizens punish poor governance (the UPA rule) and reward firm leadership (the BJP under Modi), but also believe in fair and equal status and treatment by the state for all, irrespective of caste, creed and religion. India and Indians are pluralistic, and any attempt to install a particular religion or ideology as the defining one will come to grief. It is worth paying a high price to learn this invaluable lesson.

Public opinion

One of the more fascinating aspects of the anti CAA-NRC movement, I have found out from anecdotal evidence, was the number of educated young people who came out to join a public demonstration for the first time in their lives. It was reminiscent of the mood along victory processions in Kolkata during the early years of Left Front rule, when it commanded great popular emotional support across the social spectrum. Internationally, the same mood was sensed in the popular movements against Soviet style rule in Hungary and Poland.

Sensing this popular mood, the Chief Minister of one Opposition-ruled State after another came out against the NCR, after having voted for the CAA in Parliament.

After Modi backtracked on the NRC (none will believe Amit Shah rooted for it on his own initiative without the boss’s say so), came the verdict in Jharkhand, marking the near end of the BJP rule. The best part of the poll verdict was that it was clear, reducing the scope for horse trading that can seek to put in power a group marginally short of majority.

Jharkhand is notoriously poorly governed, and there is no surety that the new formation led by Hemant Soren, which will take over shortly, will do any better. If it manages to improve the lot of its dispossessed tribals even a little after the exit of a non-tribal led regime, then it will have served its purpose.

The Jharkhand results, coming after the reversal the BJP suffered in Maharashtra, underline another reality — people vote differently in Parliamentary and State elections. In the former, national security concerns, heightened for example by the Pulwama attack, dominate. In the latter, it is local issues which hold sway.

This should effectively bury Modi’s great desire to hold national and State elections simultaneously, which would have enabled the BJP in the States to ride piggyback on Modi’s popularity. Truth is, the issues are different at the two levels and need separate application of mind. Meaningful elections in a functioning democracy have to be fought over issues which are close to the heart of the voter.

Economic state

These developments come at a time when prospects for the global economy have looked up marginally because of two political developments — the end of the Brexit uncertainty and the partial calling-off on the trade war between the US and China.

If the Brexit separation between the UK and the European Union turns out to be not too acrimonious, and the electoral concerns of President Trump do not prompt him to again go for sabre-rattling over trade, then 2020 can turn out to be economically distinctly better for most nations than 2019.

The list of positive developments unfortunately do not stretch to India’s domestic economic sphere. The country is still looking for the right medicine to get out of the serious economic slowdown that has afflicted it for over a year now. Advice is available from different quarters, but since the malady seems fairly complicated, astute and out-of-the box thinking is needed.

Policy advice

The most cogent and well-thought out analysis of what is on the ground and pointers to what is needed to turn things around have come from Arvind Subramanian, the former chief economic adviser.

His sense is that the malady is made of two twin balance-sheet problems. First, infrastructure projects got into trouble, and then created trouble for banks as well. Then NBFCs and the real estate sectors made trouble for each other and created the second pair of troubled balance sheets. Subramanian’s solution is to create a “bad bank” to take over troubled infrastructure and real estate projects. Plus, he suggests raising direct benefit transfer to farmers to boost rural incomes and demand. What is clear is that conventional counter-cycling monetary and fiscal policies by themselves will not work.

While we look for what will work, it is necessary to ask why superior economic policy advice is not available within government, which has to make do with largely what economic administrators and run-of-the-mill economists have to offer. Why are the likes of Subramanian and Raghuram Rajan not around within the government?

In hindsight, the Singh-Ahluwalia-Rangarajan trio seems to have made up a formidable power bank of ideas. Does Modi like to have around him only economists who will tell him what he likes to hear? Just as it is highly sensible to have retracted on NRC, the time seems to be ripe for doing a rethink on economic policy management.

The writer is a senior journalist

Published on December 26, 2019
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