Narendra Modi's MSME loan gambit is a two-pronged strategy; eases note ban pain, crafts shrewd poll plank

Lest it be said that India’s big jump in the World Bank’s Ease of Doing Business ranking this year is only for multinationals or big business entities, Prime Minister Narendra Modi seems to be turning his eyes inward to help micro, small and medium enterprises (MSMEs), building  on the MUDRA loan brand he has assiduously nurtured as part of his rainbow array of business-friendly policies. MUDRA loans of up to Rs 10 lakh totalling more than Rs 82,000 crore have been disbursed in the current financial year alone so far.

But make no mistake, there is more than economics to this week’s gambit than a Rs 1-crore loan being made available in 59 minutes. The details of the scheme has electoral politics written all over it, with a “semi-final” round in BJP-ruled Rajasthan, MP and Chattisgarh only weeks away and a general election looming months ahead.

Modi’s rain of loans may remind us of the Congress party’s ’loan mela’ culture of the 1980s that saw small farmers and rural entrepreneurs being given loans as if they were prizes at school functions – complete with photo opportunities for ministers.  The BJP’s style, however, seems different in a way that may alter both politics and economics. MSME loans typically have an urban orientation, but more important,  every person blessed by a MSME loan is a potential party activist – or can be talked into being virtually one. While the MSME “support & outreach” programme as a title sounds bureaucratic, the finance ministry’s announcement that central ministers are likely to visit remote districts to ask entrepreneurs to make use of the new facilities has electoral logistics written all over it. What we are about to witness is a national roadshow of political evangelism. [caption id=“attachment_5417381” align=“alignleft” width=“380”]  File image of prime minister Narendra Modi.[/caption] Small business entrepreneurs, unlike the shadowy big business beneficiaries of crony capitalism, tend to wear their happiness on their sleeves.  If they are evenly spread out as it seems, ministers and MSME beneficiaries can become the hubs and spokes of a political campaign. Somewhere in this, PM Modi can address two nagging concerns his BJP-led NDA government has faced. One is the criticism that the 8 November 2016 demonetisation of high-value currency notes crippled small and medium businesses running on cash payments and the other is the widespread belief that the imposition of GST (goods and services tax) across the country has hurt small businesses such as the textile and diamond trading units of Surat or the plastic industries of Ludhiana or the hosiery factories of Tirupur.  In fact, Surat’s textile traders have said a third of their workers, estimated to number 400,000, had lost their jobs as a result of the GST. Interest rate subvention to MSMEs essentially helps millions of units reimburse themselves to a certain extent for the additional costs they incur in the administrative expenses associated with embracing the GST, in addition to the pain of collection and/or paying taxes. By the government’s own data, MSMEs account for 63 million units that employ 111 million people. At four family members per job, they roughly account for a third of India’s population. In terms of both direct votes and the ones they can bring in by putting in a good word in their neighbourhoods,  MSMEs can be to a more urbanised India what small farmers used to be in the Congress heydays in electorally crucial rural areas. Having globe-trotted on the one hand and cultivated everyone from US President Donald Trump to the World Bank on the other, the prime minister may have set the stage for his being on the world map, but ‘Brand Modi’ as a local electoral phenomenon needs more than the ‘Gujarat model’ on which he promised his achche din (Good Days) when he came to power. By directly taking charge of 100 districts in a 100-day plan, PM Modi is clearly putting his own personal image on the block.  To imagine what could happen in this period, we only have to visualise posters or videos on the MSME programme with images of the leader in each of these districts – possibly aided by government-sponsored publicity budgets and speeches by local BJP leaders elaborating on the benefits of the scheme.

What we are about to witness is the 21st Century equivalent of what in Indira Gandhi’s times used to be the 20-point programme in the backdrop of her garibi hatao (Remove Poverty) slogan.

By helping pharma companies and also using online applications for the MSME outreach, Modi is also blending elements of his ambitious Ayushman Bharat for health and Digital India initiatives in an interconnected web. But the best-laid plans can go awry.  With everything from increased procurement prices for farmers to easy small business loans coming in the last lap of  BJP’s five-year political journey in power, the real question is whether the administrative machinery will match PM Modi’s promises with speedy action on the ground and whether that will be enough to combat an increasingly belligerent Opposition keen to form a grand alliance betting on the anti-incumbency factor. The Opposition’s big question – ‘Where are the new jobs?’ – remains hanging in the smoggy pre-Diwali air of New Delhi. A lot would depend on the energies of local bank managers and administrators and district-level heads of the BJP functioning under party president Amit Shah. Shah must be prepared to lose more sleep than he is used to. (The writer is a senior journalist and commentator. He tweets as @madversity)