P Chidambaram: How long can hot air keep balloon afloat?

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Updated: May 24, 2015 4:58:40 AM

In the elections held in 2014, the Congress lost and Mr Narendra Modi won, and I say that advisedly. No one remembers the promises made in the BJP’s manifesto or what the party’s then tall leaders said.

Narendra Modi swachh bharatInitiatives like Swachh Bharat or Jan Dhan cannot qualify as economic reforms, much less developmental or job-creating initiatives

IN THE elections held in 2014, the Congress lost and Mr Narendra Modi won, and I say that advisedly. No one remembers the promises made in the BJP’s manifesto or what the party’s then tall leaders said. No one remembers what Mr Rajnath Singh, as president of the BJP, said or did or promised — the only memorable episode in which Mr Rajnath Singh featured was when he suggested a billboard with the slogan ‘Abki baar, BJP sarkar’. Within minutes the billboard was taken down from the website and the slogan was replaced by ‘Abki baar, Modi sarkar’.

The enduring image of that election was Mr Modi, his hologram, his speeches and promises, and his declared position on various issues ranging from Chinese incursions to terrorism to bringing back black money to the value of the rupee. Mr Modi won the election for the BJP and for nearly all the BJP candidates. Wherever he went or spoke, he projected Mr Modi and promised development and jobs. And the ultimate promise was that if you voted for Mr Modi, achhe din were round the corner.

Development and jobs
One year later, it is time for a term report.

Mr Modi remains the dominant figure on the political scene. He dominates the BJP, the government, the media space and public discussion. However, he has little impact on Parliament. It is sad that in a parliamentary democracy the Prime Minister is not the dominant figure in Parliament — but Mr Modi is not the first prime minister to have failed in this regard. He has also made known his dislike for the media by avoiding press conferences or one-on-one interviews. His communication strategy is strictly a one-way street.

That leaves the two important metrics for measuring economic progress: development and jobs.

Hard data come after a lag. Meanwhile, the best way to measure progress on these two metrics is to ask people what, in their view, are the most outstanding achievements of—or what they recall about—the Modi government.

p-chidamaram

According to a Times of India-Ipsos survey (May 16, 2015), Swachh Bharat came on top with Jan Dhan and Make in India at a distant second and third. According to Maven Magnet’s Conversational Research (Economic Times, May 17, 2015), the three top initiatives that elicited a ‘favourable’ response were Jan Dhan (73%), Make in India (70%) and Swachh Bharat (69%).

Those surveys are a good place to start. For the record, let me say that neither Swachh Bharat nor Jan Dhan figured in Mr Modi’s speeches during the election campaign. He did emphasise job creation but did not coin the slogan Make in India until he spoke on August 15, 2014.

Swachh Bharat and Jan Dhan cannot qualify as economic reforms, much less developmental or job-creating initiatives. Swachh Bharat is a social goal or value that must be welcomed, as we did its earlier version, Nirmal Bharat Abhiyan. Jan Dhan is an administrative tool, the same as the No Frills (or Zero Balance) Account, and we welcome the 12 crore new accounts opened under the NDA as we welcomed the 24 crore accounts opened under the UPA until March 31, 2014. Make in India, however, is a clever slogan and a copywriter’s dream, and highlights the importance of the manufacturing sector in both development and job creation.

Data contradict claims
Now, let us look at the hard data that would be relevant to ‘development’ and ‘jobs’ (see table).

There are more red lights than green. Yet the GDP is estimated to have grown at 7.4% in 2014-15, although the RBI has warned of a downward revision.

It is not difficult to see what is going right and what is going wrong. When a determined effort was made by the UPA government in 2012-13 to contain inflation and the twin deficits (fiscal and current account), I predicted that the economy will revive in 2013-14. It did, and when the UPA passed on the baton to the NDA in May 2014, the GDP had recorded a growth rate of 6.9% in 2013-14. That momentum and the unexpected bonanza of a collapse of oil prices have carried the NDA government through 2014-15.

The causes of worry
However, there are worrying signs:

  • Investors are in wait-and-see mode, hence credit growth is sluggish;
  • Wages and disposable incomes are depressed, hence aggregate demand is low;
  • Projects remain shelved or stalled because there is neither a policy nor persistent action on removing the bottlenecks;
  • There is no evidence of new manufacturing industries or manufacturing jobs, and that is reflected in the poor performance of the core sector;
  • There is no Big idea on bold, structural reforms,  the FSLRC recommendations are on the backburner, and the Direct Taxes Code has been dumped.
  • How long can the hot air of rhetoric keep the balloon afloat? The kindest thing that can be said about the Modi government is that it has lost only one year—and, of course, its sheen.

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