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Narendra Modi's speech on economy is smart oratory but govt's been tardy tackling slowdown; time's running short

Prime Minister Narendra Modi is widely perceived as an astute politician -- an earthy demagogue who can charm the masses with his oratory while blending it with decisive action that catches votes to help his Bharatiya Janata Party. However, in his own eyes and chosen words, he is more of a grand statesman, willing to overlook short-term political gains for himself or his party for the long-term welfare of the country.

Which one of these views is right? Modi's latest speech to company secretaries in the backdrop of a clear reversal in economic momentum with not much elbow room for government action is strong on rhetoric to run down the Congress, but on closer look, it is a twin-track oration that conceals hints that he may be actually listening to the critics. But there is enough in the air to suggest that in walking the wedge between political brazenness and clever action, he is still on risky ground.

By likening his critics to Shalya, Karna's gloomy-minded charioteer in the epic Mahabharata, Modi sees himself as a devoted warrior-king , while his critics -- led by party-mate Yashwant Sinha and former comrade in arms Arun Shourie -- are rank pessimists.

PM Narendra Modi at the ICSI event. Image: PIB

PM Narendra Modi at the ICSI event. Image: PIB

But it is a shrewd politician we see at work when he insinuates that under his predecessor Manmohan Singh, India's economy was among the "fragile five". Though it must be admitted that Singh-led UPA fouled up on issues such as spectrum allocation in telecoms and coal linkages for power plants, it also faced two major factors beyond its control. One was the world's worst economic crisis in seven decades led by a Wall Street collapse and the other was oil prices at well over $100 a barrel, three times the level that Modi inherited. High inflation in the UPA years was also on account of increased protein consumption -- the sign of a healthier population.

Low inflation helped by cooling oil prices and the overhang of a tight monetary policy pursued by the then RBI governor Raghuram Rajan (appointed by UPA and let go by NDA) have aided Modi's government claim of macroeconomic discipline.

The NDA government certainly deserves credit for fiscal discipline and some sympathy for the fact that the banking system has inherited a mountain of bad loans (non-performing assets) on account of the irrational exuberance seen in the UPA's early years. However, on three counts at least, the Modi government deserves legitimate criticism for errors of omission or commission of its own doing.

1) Demonetisation of high-value notes announced last November is at best a non-success and at worst a failure that hurt a struggling economy in which growth slowed to 5.7% of GDP in the April-June quarter.

2) Details of the implementation of the goods and services tax (GST) ranging from computer glitches to multiple rates and bureaucratic hassles for small businesses.

3) Foot-dragging in fixing the balance sheets of banks struggling under a mountain of bad loans (non-performing assets).

Of these, the last is certainly a legacy of the exuberance of the UPA days but NDA must share the blame for delaying a response to NPAs in order to show itself as a good boy in fiscal management to global economists.

If you are looking for Modi the statesman here, it could lie in the mere fact that he is in no hurry to induce a fiscal stimulus.

Also, looking beyond the rhetoric, there are reports that suggest Modi, in fact, is listening to the critics he is slamming. He himself set the tone by talking of revising decisions as needed in his otherwise hard-hitting speech to company secretaries.

Moves are afoot to induce more government money into banks than planned in the current fiscal year. Modi's favourite bureaucrat, revenue secretary Hasmukh Adhia, is talking of easing GST pains (read: rollback). While that happens, demonetisation may soon fade out as a ghost of the past.

Where, then, is the problem? This could lie in Modi's delayed response to slow growth and ignoring strong signals -- both political and economic. Looking beyond the Sinhas and the Shouries, we could look at ear-to-the-ground think-tanks like the Centre for Monitoring Indian Economy, whose respected head Mahesh Vyas says investment proposals in the latest quarter are only 55 percent of what it was normally. Modi's namesake head of the GST troubleshooting panel says the biggest challenge is ahead in addressing key concerns.

Above all, Modi faces general elections in under two years -- and that means any corrective action to revive growth in an economy that sees a million workers enter the work-force every month must be between now and the next budget only four months away.

Modi needs to reverse the pains of the past year and show clear gains in under 18 months if his lofty promise of "Achhe Din" (good days) is to make any sense to those who might want to vote a second term for him. Just look at France, where Emmanuel Macron's charismatic ascendancy seems to be facing a reality check.

Modi may liken his critics to Shalya, but among those making uneasy noises on the economy are Sanjayas who tell the story like it is and Viduras who may be offering sage advice. The prime minister may want to go for some deep introspection and quick action if he is not to be compared with Dhritarashtra, the blind king who could see no fault in his own kind.

(The author is a senior journalist. He tweets as @madversity)

Updated Date: Oct 05, 2017 12:09 PM

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