India Beyond 2019

Shekhar Gupta takes a post-Budget look at the Narendra Modi style of leadership

THE BIGGEST positive of the past five years is that a lot of money/ value was delivered to poor India. There were three and a half good schemes. First: free toilets; second: housing via the Pradhan Mantri Awas Yojana and third: free LPG connections. The half is Mudra Loans because they are loans and not giveaways. Although, I keep telling my friends in the RBI that you will end up paying for these; just as the Punjab National Bank loans are too big to fail, Mudra Loans are too small to fail. For instance, if a vegetable seller on a cart borrows Rs. 30,000 to sell more cauliflowers and goes bust, no one is going to repossess his cart and sell it. That is why it is half a giveaway.

MORE FOR THE POOR
The Government spent around Rs 11 lakh crores upon these three and a half schemes. This is equivalent to three years’ defence budget. That much money was transferred from the exchequer to the poor. Who are the poor? They are the voters. While Malabar Hill has 40 per cent voting, the poor have about 70-80 percent voting. So, they have the power and he delivered value to those who have the votes. You may think that the government must have printed money. But, no, it did not. Where did this money come from?

TAXING THE MIDDLE-CLASS
Global fuel prices went down from $120-140 a barrel to $50-60 a barrel. Did your pump prices go down accordingly? They may have gone down five per cent. So, as global crude prices went down, Narendra Modi upped the excise duty on petrol and diesel. We complained but we kept on paying more! He knows two things: one, for those who have money, the petrol price change does not matter. The middle class who actually suffered — the scooter or two-wheeler owner or people buying cars on EMI — they are committed Modi voters anyway. He knew that he could take them for granted. So, effectively, the middle class was cleaned out to the tune of about Rs 11 lakh crore. That money was transferred to the poor on two presumptions — that the middle class as a percentage of the poor is very small and secondly, that middle class is predominantly Hindu and that is committed to voting for him in any case. This whole Rs 11 lakh crore transfer was carried out on fuel and also upping taxes at corporate and other levels. That led to the big election victory!

MARGINALISING MINORITIES
Other things happened to make the middle class and the upper crust happy. India has had a spectacular disenfranchisement of the minorities from the power structure. For the first time in India’s history, and it is the sixth year now, there is only one Muslim in the Central Cabinet and that too as the Minister for Minority Affairs. It has never happened in India, no Prime Minister, no speaker, no president, no head of any forces, no head of intelligence. It is the same with Christians. So, there has been a spectacular marginalisation of minorities from the point of power structure. The middle-class voters of the BJP are happy about this. They don’t want to hurt minorities but, ultimately, they do not want to share power with them.

PLAYING TO THE GALLERY
I am not judging this as good or bad, all I am saying is that this is how it is. The formula is simple. If you can get 50 per cent of the Hindu vote, you can rule India with the majority. This takes us to a tussle which has been going in politics since 1989. It was a crucial year since L K Advani launch his Mandir movement and VP Singh launched the Mandal movement.

What were these movements?
They were about one question: can you use caste to divide what religion can unite? Or, can you use religion to reunite what caste has divided? If Mandal succeeds then people vote on the basis of caste, so Hindus don’t vote as one. If the Mandir movement succeeds then people cut across castes and vote as Hindus. For the second time, the Mandir approach (metaphorically) against Mandal won. Akhilesh Yadav was defeated, Lalu Yadav was defeated, Nitesh Kumar is in the pocket of BJP, JDS is on the ropes. All old Mandal forces were defeated and some are joining the BJP.

GRINDING THE ECONOMY TO A HALT
There has been a downside to this. India’s economic momentum has been broken, economic growth rate has slowed. Swaminathan Iyer wrote that this budget would not take India to eight per cent growth but rather to six per cent growth. The fact is that India’s economic growth rate has come down over the past five years. This is in spite of the government changing its formula of calculating growth. India’s exports and imports are down.

There is a slowdown that you cannot miss. But should Narendra Modi care? He has won despite the slowdown in economy, despite the unemployment rate being highest in 45 years. These are facts that cannot be ignored.

So, should Modi care? In dollar terms, if you add inflation, anybody who has invested in the Sensex in the past five years has been pauperised. You would have been much better off keeping your money in fixed deposits in the nationalised banks which, meanwhile, have also gone bankrupt because the middle class will again pay for these banks to be recapitalised. The biggest gravy train for the upper crust is the nationalised banks because first you borrow from them, then you don’t repay, then you get a loan write-off, then the middle-class and the poor again repay money and recapitalise those banks. This scheme never fails in India. Again, in this year’s budget, the government is giving Rs 70,000 crore to bankrupt National banks.

BRINGING LENDING TO A STAND-STILL
Private banks are afraid to lend to corporates because they know better. They also do not lend to big infrastructure project, they lend to consumers for buying cars, house etc. Therefore, lending credit is at a standstill. Now, will Modi restart it or not? If he has the wisdom to say that it worked for the first time but it can’t work all the time. Because, 6.1 per cent employment is okay for a while but another five years of this and a lot of people will get hurt. But I will tell you one thing, that people do not change their essential style and method. You cannot.

MODI, THE STATIST
The essential feature of the Modi style of governance is simply that the state is the lord and master, and he is an ultimate statist. Indira Gandhi was a statist but she, at least, had some advisors. But Narendra Modi is much more statist because he thinks there is nothing wrong with state. He thinks it is the politicians who are dishonest and do not have brains but since he has brains and is honest, he will run the government.

So, a statist government in India will work very well. It will deliver on matters that it has to deliver. It delivered on the anti-poverty schemes efficiently and also on the areas of physical infrastructure — railways, highways, airports but not on soft infrastructure — universities, research, intellectual enquiry, these have suffered a lot in the last five years. Agriculture too has suffered a lot and will continue to suffer unless we see a dramatic change.

MESSAGE TO THE RICH:
In the same budget, tax for petrol and diesel has gone up again. But the people who vote for Narendra Modi are the same people who pay these additional taxes, so, why should he care? You are seeing a new Indian political economy that tells the rich that they are welcome to leave if they want but that he is okay with six and a half percent growth. The new template is that the growth rate can be moderate, taxes can be high and exports can be low, as long as imports are also low.

The formula that worked once. I don’t know why it should work again. I will be very happy to be proven wrong. I would love to see eight per cent growth because that will require some real reforms which, on current indications, doesn’t look like is happening.