Narendra Modi won't be unduly worried about economic slowdown as NDA govt continues with 'pro-poor' push

A perception has gained ground that the prime minister has made a mess of the economy, and under his stewardship we are hurtling towards doom. Perceptions win elections. Does this mean it is curtains for BJP in 2019? Or does Narendra Modi have another game up his sleeve? First, let us look at the narrative.

It is difficult to pinpoint the exact moment when it started building up but a close estimate would be publishing of figures that India grew at a measly 5.7 percent in the quarter ending June 2017. The nascent narrative was boosted by doses of withering criticism of government’s policies from some of its own senior leaders.

File image of Prime Minister Narendra Modi. PIB

File image of Prime Minister Narendra Modi. PIB

The perception was apparently 'certified' when the prime minister launched a passionate defence of the government's economic track record and policies. Some commentators, including yours truly, have contradicted the claims, arguing that it is a little flippant to take Modi's defence as a tacit admission of guilt.

Be that as it may, the narrative has infused hope into previously hopeless Opposition ranks. Modi's detractors have suddenly rediscovered their voice. They are suggesting that this economic disaster is caused by the prime minister's hubris since he is too insular to listen to anyone. They are also saying that it is just a matter of time before the palpable anger among voters is reflected into the ballot box.

All this could be true. If indeed the economic slowdown is chronic, and not transitory, then it is bad news for India and good news for the Opposition. All they need to do is to carry the message home that Modi has botched up and let the government stew in its juices.

Cries of eternal economic damnation, however, are unsupported by facts. There is no doubt that there is a slowdown. Not just the indicators or institutions who are suggesting it, even the prime minister's own council of economists are in agreement. The key contention, therefore, isn't whether there is a slowdown, but whether it is transitory in nature with the short-term shock in both demand and supply giving way to a stable correction in indices.

Both the IMF and World Bank, which have lowered India’s GDP growth forecast, appear optimistic. They posit that Modi has initiated deep structural changes in the economy, and the reform process may soon begin to show results.

"The reform process has been significant. We think that certainly in the medium and long term, the growth will reflect the seriousness of Prime Minister Modi’s government in making those reforms," World Bank chief Jim Yong Kim recently told reporters in Washington. He added that GST "would be very good for Indian growth, but for now the sense is that companies are waiting until that passes before really making investment and taking action. So, our sense is that this (slowdown in growth) is temporary," according to news agency PTI.

The IMF, while noting that India has been a bit of an outlier among emerging markets in reflecting a relative slowdown, observed that the tax reform by the Modi government is "among several key structural reforms under implementation that are expected to help push growth above 8 percent in the medium term", according to a report.


Recent indicators reinforce the possibility. India's factory output rose to a nine-month high of 4.3 percent in August while retail inflation remained under control at 3.28 percent in September, according to data released by Central Statistics Office (CSO). This is a substantive jump in Index of Industrial Production (IIP) from the 0.9 percent in July, the first month after GST was rolled out in a midnight session on 30 June.

The August 2017 growth in industrial output appears to be a broad-based one "led by all three sectors (mining, manufacturing and electricity), and five of the six use-based industries (except infrastructure/construction goods)", according to a report in The Hindu Business Line.

The newspaper also notes that "13 of the 23 sub-sectors of manufacturing with a weight of 27 per cent in the IIP, recorded a contraction."

These are, however, indicators. And data is open to interpretation. An uptick in the economy may be underway, but that doesn't sufficiently dispel the notion that the economy is under siege. It is undeniable that the trader community is seething. A forced formalisation of the economy and implementation woes of currency ban and GST have turned BJP's core support base into unrelenting sceptics. Social media, where once it was difficult to find a voice a critical of Modi, is now awash with such criticisms.

The salaried middle-class feels overtaxed, unattended and restive. The SME sector is gasping for breath. Private investment is down and jobs are nonexistent. Little wonder that Opposition sees a chink in Modi’s armour, and Rahul Gandhi has spent the better part of his Gujarat campaign ripping apart the prime minister's policies and bad-mouthing big businesses. The section of media which could never reconcile with Modi’s ascension now detects a palpable "change in mood" (that intractable Hindi word mahaul is more accurate).

This is where Modi's detractors underestimate his political acumen. If the Opposition has a narrative, so does Modi. And it is an equally powerful one, albeit almost totally under the media radar. We see small anecdotal references every now and then. For instance, columnist Neerja Chowdhury gives an account of a domestic help in a recent The Economic Times piece.


She writes: "A maid living in a Mumbai slum and working in a middle-class home summed up the situation last week. Lamenting the rise in the price of gas cylinders, vegetables and a host of other items, she talked about life becoming increasingly difficult. Who would she vote for next time? "Modi," she replied. Why? "Because he has done good for the poor." What good? "My brother and sister and several adivasis in our village have got gas cylinders. And he plans to do more good for the poor."

Interestingly, the column goes on to talk about the "other end of the spectrum", where an upper-middle-class housewife is disillusioned with Modi’s "autocratic" ways and may opt for NOTA this time.

We hear incessantly about the latter point of view and very little about the former. This is because mainstream and/or social media are almost exclusively urban middle-class domains. It is a fact that Modi has done next to nothing for the middle class except a token reduction in fuel cess or an assurance to traders that government will turn a blind eye to past avoidance of taxes. Their anger at being left high and dry has added to the perception (mahaul) that Modi is "doing nothing".

It is difficult to believe that the prime minister is insular to this frustration. However, he is unlikely to go beyond a point in addressing that frustration. This is because Modi believes that the narrative for 2019 won't be the same as 2014. If the earlier one was about 'hope' and achhe din flowing from UPA's corruption and policy paralysis, the 2019 story will be about the 'poor'.

There could be many reasons behind this shift in Modi’s strategy. We will try to see how this is working out.

The Uttar Pradesh Assembly polls give us a fair indication of how the media is practically clueless about the sectors that it doesn’t represent. There is substantive goodwill for Modi among rural women due to the significant success of Ujjwala scheme. Reports say that it has surpassed its target "by a third this year" and the government is well on its way to allot five crore free connections to rural women by 2019.

The salutary effect of successful implementation of such a scheme, targeted at a voiceless section of the populace, is not easily quantifiable by numbers. We find some indications of the goodwill in BJP’s electoral fortune in Uttar Pradesh, and Modi recently took it to the next level by targeting last-mile implementation of free electricity connection to over 40 million "willing" households by December 2018 at a cost of Rs 16,320 crore. The 'saubhagya' scheme may result in electoral saubhagya for BJP because like fuel, electricity is a basic need that has a cascading effect in uplifting the fortunes of the poor.

The scheme, reports The Indian Express, will also make for "solar power packs of 200 to 300 watt-peak (Wp), along with battery bank, for un-electrified households located in remote and inaccessible areas. This solar pack will include five LED lights, one DC fan and one DC power plug."

It is also easy to overlook the government’s stunning success in financial inclusion of the poor through opening of bank accounts. The Jan Dhan account forms the backbone of JAM (Jan Dhan, Mobile, Aadhaar) trinity and, as The Hindu Business Line notes in a recent report, includes total balance of "Rs 65,697 crore as on August 9, 2017. The rural tilt of the scheme comes across in the fact that 17.61 crore beneficiaries, out of a total of 29.48 crore account-holders, hail from rural and semi-urban branches." A total of 22.70 crore RuPay cards have so far been issued to account-holders, according to the newspaper.

Add to these the e-auction of mandis, the Pradhan Mantri Krishi Sinchai Yojana for increasing the acreage of irrigation, crop insurance program, soil and testing services and the government’s plan slowly comes into focus. Modi isn’t shying away from sending across the message either.

"From Jan Dhan Yojana to Swachh Bharat Abhiyan to Ujjawala to Mudra to Start-UP India to Standup India to Ujala, you will only see the welfare of poor in them. Who had thought that a government will come which will give free bank accounts to 30 crore poor people? Who had thought that a government will come which will provide insurance to the poor at Rs 1 per month and Rs 90 paise premium and give loans without bank guarantee to the poor," Modi said recently during the launch of rural electrification scheme.

In sum, though the economy is passing through a difficult phase, Modi won't be an unduly worried man. He believes he has done enough to hedge against middle-class anger. As for the Opposition narrative, it will be interesting to see how it holds up.


Published Date: Oct 14, 2017 08:32 am | Updated Date: Oct 14, 2017 08:32 am


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