Narendra Modi has been the Prime Minister since 2014. How has the economy performed since then and how does this compare with the UPA years of 2004-14?

The usual way of making the comparison is to trot out all the numbers. Savings, investment, fiscal balance, current account balance, forex reserves, poverty ratios, inflation, unemployment etc all get some attention. But this method, while necessary, is not sufficient.

To see why we have to go back to what the BJP had promised in 2014. The core promise was that it would ensure that the private sector would lead the Indian economy the way it does in all other successful economies from Australia in the east to the US in the west.

How potent this message was came home to me and my then colleague Vinay Kamath in April 2013. We had gone all over India meeting the owners — not CEOs — of large business houses. Without exception they said they would vote for the BJP as they saw a real opportunity for growth if it came to power. A few said they were old Congress supporters, going back to the 1930s, but were now fed up with it.

This turnabout was very strange because since 2004 it was the UPA that had given them huge freedom, which some of them had misused. The previous nine years had, in fact, been wonderful for the private sector — despite the CPI (M) which was supporting the Congress but was not a member of the government or the UPA, and was trying to block everything.

The animal spirits that Manmohan Singh spoke about in his 1992 reform budget were on full display in those years. Yet, here were top businessmen saying they wanted the BJP to form the government in 2014. That’s how powerful the BJP’s message and its messenger were.

But what’s happened since then is the exact opposite. It’s the public sector that’s leading the economy and it’s the private sector that’s making up the rear, a reluctant participant.

Thus, in 2012, private investment had reached a peak of 27 per cent of GDP. Currently, it’s around 18 per cent, maybe less. This despite all the tax incentives and import protection that’s been extended. This is not quite what the BJP had promised.

There are a whole bunch of economic and non-economic reasons that are customarily trotted out for this by critics and defenders of the government. All of them have some substance.

However, the fact remains: the private sector has pretty much withdrawn from the game. Its absolute investment numbers may look good but as a proportion of GDP it’s quite a disaster story.

What has happened

Where keeping the main promise is concerned, the contrast with the Congress story of the 1970s is stark. During 1969-71 it promised socialism, which meant an increasing role for public investment and a decreasing role for the private sector. Over the next decade, it delivered on that, even if not via investment then certainly by sweeping nationalisation. That’s the key point: it delivered on a policy. The BJP hasn’t. Instead, for political reasons, it has resorted to massive welfarism, or expenditure. There’s absolutely nothing wrong with this because it ameliorates the lives of people.

The problem is that it leaves them where they are. It’s like giving a blanket to someone who is sleeping on the pavement. The guy blesses you and wants food as well.

The Indian economy’s tragedy is that regardless of whether it was the Congress’s brand of socialism — industrial investment, permanent jobs with pensions — or whether it’s the BJP brand of ‘achche din’, productivity hasn’t improved except in areas that have escaped political attention.

You may well ask: does welfarism come at the cost of the private sector? The UPA showed that it doesn’t. MNREGA was a consequence of that conviction.

The BJP also seems to think so except that the private sector isn’t cooperating. This is the mystery that the BJP has to solve. It will have to do a lot of introspection to figure out why.

Different approaches

I have one explanation. The difference between it and the Congress, right from the start in the early 1950s, was the respective approaches to economics and politics. Until the 1970s the Congress focused on the economy while the BJP focused on politics.

The Congress shifted focus to politics in 1969. The BJP has never once shifted its focus from politics. But while the pursuit of power was at the national level till 2014, it’s at every municipal level now. That’s not good.

Its economics used to be non-existent earlier and is now largely managerial but not intellectually sophisticated. It’s this that the party has to fix now.

Just as it has a clear socio-cultural worldview, it must develop an economic one too that is consistent with 21st century realities. Political success without economic success helps the party but not the economy.

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