Course-correcting in the new year

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New Delhi | Updated: December 31, 2018 5:12:37 AM

Losing critical state elections, standoff with RBI, and the farm fiasco overshadow Modi’s good work, make him look vulnerable

Narendra Modi, GST collections, MSP, LPG cylinders, Ayushman Bharat, HPCL, LICFor a prime minister who charmed the nation with the promise of a brand new kind of governance, this has been a let-down; this has as much to do with unreasonable expectations as Modi’s rhetoric.

At the beginning of the year, prime minister Narendra Modi looked infallible, and the country’s mood was relatively upbeat. Industry was growing at 7.5% versus 2017’s average of 3.5%, inflation remained under control for over two years, GST collections were looking up, direct taxes were remarkably buoyant and an independent study said around seven million jobs were being created every year. Above all, even the worst-case scenario had the BJP losing just the Rajasthan elections while retaining both Madhya Pradesh and Chhattisgarh; the massive hikes in MSPs were seen as buttressing the BJP’s prospects, as was the impressive Ayushman Bharat health insurance scheme in addition to the work on roads, railways, distribution of LPG cylinders to village women, subsidised housing, the new insolvency law to prevent defaulters from getting away …

At the end of the year, although the oil crash has ensured the macros look much better than a few months ago, things look quite different. The BJP lost all three state elections, although Madhya Pradesh was very close, and this has brightened the Opposition’s chances in the general elections; and the statement by Nitin Gadkari where, apart from praising Nehru’s secularism and advocating tolerance, he said, “people should refrain from artificial marketing” suggests that the RSS is sending out a message that Modi needs to course-correct if he is to win in 2019.

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At the end of the year, apart from the Rs 80-90,000 crore shortage in GST collections, the dominant image is of the government forcing the RBI Governor to resign by trying to curb RBI’s independence, of trying to create a police state by wanting to track even messages on WhatsApp (the criticism is partially unfair, goo.gl/qhWiSN), of reversing its etail policy after billions of FDI dollars had come in, of taxing start-ups unfairly even though the stated policy is to encourage them …

Till date, the government has built 63 lakh houses under the PMAY in rural areas in FY17-19 and 12 lakh houses in urban areas since it assumed power, it has given 5.86 crore subsidised LPG cylinders, insured 18.9 crore people under low-cost life and accident insurance schemes and its insolvency law has helped banks recover Rs 3 lakh crore already… In short, its performance has been exemplary in many areas, but nothing tells the story of the government’s inability to get it right in a critical area, as the recent elections show —and its ability to buy its own rhetoric—than the agriculture story.

After two years of drought and prices collapsing when the monsoon was normal, it was clear farm distress was acute, and that is why the government proposed a sharp hike in MSPs and promised to find a way—in the budget speech—to compensate farmers in case they never got the MSP. Despite this, and the prime minister’s boast of having created a pan-India market through e-NAM, on average farmers are getting prices that are 20-25% below the MSP for most crops. When farmers are being shortchanged by around Rs 1.5-2 lakh crore (goo.gl/N31V63) every year while Modi is talking of doubling incomes over the next four years, this does sound a lot like what Gadkari called artificial marketing.

The much-hyped Ayushman Bharat that was supposed to give a Rs 5 lakh insurance cover to 50 crore people was not just delayed, in its first three months, it has treated just 6.4 lakh persons at an average cost of Rs 13,281. The ambitious crop insurance scheme has been plagued by long delays in settlements and the number of farmers covered has fallen a fifth, from 4 crore in kharif 2015 to 3.2 crore in kharif 2017.

For a prime minister who charmed the nation with the promise of a brand new kind of governance, this has been a let-down; this has as much to do with unreasonable expectations as Modi’s rhetoric. Indeed, while Modi’s anti-Nehru credentials had most believing there would be Vajpayee-style privatisation, apart from not being able to sell Air India, the government’s big moves have been getting ONGC to buy HPCL and LIC to buy IDBI, and a few more such deals are on the anvil. If the government has a legitimate grouse that no one has given it credit for having helped banks get back Rs 3 lakh crore of loans, no one has blamed it for the lack of PSU reforms causing a Rs 11 lakh crore relative loss in market value of PSUs since it came to power either.

Ironically, while the year is ending with suggestions that Modi adopt Telangana-style acreage-based income support, the Shanta Kumar panel set up by Modi plumped for this and elimination of subsidies in early 2015; Modi junked this in favour of more gradual farm reform. And while bureaucrats worry about its costs—`2 lakh crore a year—the fact is the Centre and the states spend as much on subsidies that accrue to just the rich farmers, and there has been no attempt to cut back on these subsidies.

In the run-up to the elections, if Modi has to retrieve lost ground, he has to move quickly on income support to farmers instead of the hackneyed farm loan waiver he tried in Uttar Pradesh, he needs to slash subsidies and replace them with a sharp increase in cash transfers into people’s bank accounts (DBT hasn’t grown fast enough) and he needs to stop making claims that are easily debunked. Farmers quickly saw through the MSP promise—how Modi’s advisors convinced him they could deliver on this is a mystery—and government claims of a massive hike in jobs-creation fly in the face of dismal consumer-spending. And given the natural tendency for rhetoric to get shrill and communal in election season, a special effort has to be made to keep the army of motor-mouths, trolls and self-styled gau rakshak mobs in check.

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