Modi must utilise the best ideas of his predecessors
India can’t possibly even dream about double digit growth without further fundamental reform, especially of labour markets, financial markets, and greater privatisation of public sector units PSUs — to say nothing of simplifying the Goods and Services Tax into a single rate with minimal exemptionsUpdated: May 25, 2019 19:27 IST
Over the last couple of years, in many conversations, Bharatiya Janata Party (BJP) supporters expressed concern that with the way things were going, prime minister Narendra Modi and the BJP would be lucky to hang on to 160-180 seats, making his continuation as PM unlikely. I disagreed, arguing I have more faith in Modi and BJP party president’s Amit Shah’s electoral magic.
While I consistently predicted a Modi return, even I am stunned by the scale of the victory. Let me also be clear: my opinion, that Modi would come back big, was not based on any statistical model or scientific polling, but simply a gut instinct. That instinct told me that, unlike the genteel Rahul Gandhi of the Congress, Modi and Shah always play to win, never to come an honourable second. For one thing, the stakes, were they to have lost, were too high to contemplate.
There’s no question Gandhi had improved his game and managed to lead the Congress to some key victories in state assembly elections in the Hindi heartland last December. But the party was slow to get its electoral act in place, squandering the first two to three years and finally waking up after Gandhi was elevated to the post of party president. In the end, it was too little too late, with a diffused campaign focused on issues that failed to resonate, such as the Rafale controversy, which did not dent Modi’s personal appeal to many voters.
Whatever the reason, the fact is Modi won a handy re-election in the context of a struggling economy, controversy over fudged and suppressed data, clear evidence that all was not well in many sectors of the economy, to say nothing of the unresolved jobs crisis. To all of those, including me, who argued Modi urgently needed to address these issues, there is now an easy political answer: he did not have to. Modi supporters can now blithely dismiss such issues as irrelevant, or that they are “urban legends” propagated by an out of touch liberal elite. One Modi appointee even branded my comments on the economy as “vitriolic”.
The irony is this: the need for reform after yet another five years of wasted opportunities is more pressing than ever. Yet the sweeping magnitude of Modi’s win — campaigning on everything other than the economy — tilts the political economy heavily against any further reforms. And let us be clear. Rolling out a plethora of branded schemes and projects is no substitute for genuine structural reform even if we grant some people voted on that basis. Indeed, Modi is going to double down on his preferred model, a version of East Asian state-driven capitalism, presided over by a strong leader such as himself, his exemplars being Singapore and Malaysia.
But, we know such a model can’t work in a large, complex, and principally private sector-driven economy such as India. The truth is, after 1991, and through the late 1990s, the PV Narasimha Rao and Atal Bihari Vajpayee governments unshackled India’s private sector and laid the foundations for what we have today.
These reforms, now well in the past, are nowhere nearly enough to sustain growth, as the data themselves reveal. India can’t possibly even dream about double digit growth without further fundamental reform, especially of labour markets, financial markets, and greater privatisation of public sector undertakings — to say nothing of simplifying the Goods and Services Tax into a single rate with minimal exemptions. This was one of the Congress party’s more sensible manifesto ideas, and Modi would do well to stick true to form and pluck the best ideas of his defeated predecessors.
But, I wouldn’t hold your breath, as the people have spoken. It affirms to Modi that all of his choices in his first term were correct: including whimsical policy measures such as demonetisation or fielding a terror-accused as a Lok Sabha candidate. This is going to be Modi’s New India.
Rupa Subramanya is a Mumbai economist
The views expressed are personal
First Published: May 25, 2019 19:26 IST