Terms of Trade | The year-ender essay on India's political economy

A weakening of parliamentary opposition or even independent institutions does not mean the BJP is immune to democratic pushbacks.

This is the last edition of Terms of Trade for 2023 and I will stick to the tradition of the year-ender column by focusing on what I think will be the big political economy question for the year ahead.

The political developments in 2023 show that the BJP has been more successful than the Congress. (PTI)

Last year’s edition had described it as “whether 2023 and the period beyond it, brings more strength to the Congress or the BJP will depend on how the former handles its political challenge and the latter its economic challenge”.

The political developments in 2023 show that the BJP has been more successful than the Congress.

Towards an election year

The biggest political event next year is the general election. While self-preservation dictates that one should stay clear of making electoral predictions in India, there is very little evidence at hand to suggest that the Bharatiya Janata Party (BJP) and Narendra Modi are facing strong headwinds for retaining power for the third consecutive time in 2024. The biggest reason for this assertion is the Congress’s recent losses in the three key Hindi-speaking states, Rajasthan, Madhya Pradesh and Chhattisgarh.

If the situation does not change between now and May 2024 and Modi comes back to power, there is only one question to engage with and it is: Will the BJP’s third consecutive victory under Narendra Modi undermine the state of democracy in India? A lot of political commentators in India and abroad have been making this argument for some time now.

A big year for democracy…

A lot of the commentary around democracy in India is centred around the state of institutional functioning and political competition in the country. There are legitimate grounds to argue that the former has worsened. However, this is not the first time the country has witnessed something like this, and unlike the Emergency, the weakening of other institutions compared to the executive does not seem to be abetting public anger at the current moment. Political competition, by the looks of it, has increasingly tended towards the BJP since 2019 at least in the more populous Hindi-speaking regions of the country.

But neither of these factors are sufficient conditions to declare the death of democratic pushback to the BJP. In fact, a careful reading of the political economy dynamics since 2014, including in 2023, shows that the BJP has been extremely careful in course-correcting and counter-strategizing to protect its fortunes from these democratic pushbacks.

…In large part due to BJP’s course correction

As far as the opposition is concerned, its success and failure, ironic as it may sound, are both rooted in how the BJP has engaged with these issues instead of seeking an outright political collision. The argument is best explained by some examples.

Discouraging states from providing bonuses over and above the Minimum Support Price (MSP) was one of the first policy prescriptions the prime minister made when he first assumed power in 2014. While there was very little political pushback to this decision when it was announced — at least in the realm of parliamentary politics — the BJP paid the price for the democratic discontent against it in the 2018 Chhattisgarh elections, when the Congress inflicted a crushing defeat on the BJP in the state.

The popularity of Congress’s paddy bonus promise was one of the key factors behind the 2018 results.

In 2023, the BJP waited until the last moment to go back on its stated policy of not offering bonuses to paddy farmers and eventually outmatched what the Congress was giving in Chhattisgarh, in its manifesto released on November 3. This clearly shows that the BJP high command realised that the change in policy stance was absolutely necessary for winning the elections in the state. The BJP’s U-turn on the paddy bonus issue in Chhattisgarh is just one of the many examples where the BJP has changed course on key policy issues to cut its political losses.

The party’s recourse to what its top leadership often derides as freebies — the cash transfer to women scheme in Madhya Pradesh or a significant increase in subsidies on LPG cylinders — in the latest state election cycle is another example. In fact, one can make a general point that democratic pushback is one of the biggest reasons why the Narendra Modi regime has not gone the full ‘Thatcher-Reagan’ neoliberal route in economic policy, the way many commentators expected it to when it first came to power in 2014.

The rollback of farm laws, holdover on the new labour codes and perhaps even a partial rollback of the New Pension Scheme — a committee headed by the finance secretary is examining it — are reflections of this democratic tension between what the BJP wants to be and what it actually is in the realm of economic policy.

India’s opposition can legitimately take some credit for this recalibration of BJP’s economic stance. It is another matter that many of these recalibrations have actually damaged the political prospects of the opposition parties.

Rollbacks on political decisions, too

There are other examples worth taking note of. The party’s flip-flops vis-à-vis its leader BS Yediyurappa in Karnataka — it keeps taking and giving leadership to him in the state — is one. The high command would love to have somebody more pliable in charge, but it has realised that an angry Yediyurappa’s political clout is big enough to damage the party’s prospects in the state.

Similarly, the fact that the amended Citizenship Amendment Act’s rules have not been notified despite being passed almost five years ago shows the BJP’s acknowledgement of the pushback this issue can generate in some parts of the country, especially the north-eastern region where the BJP has been steadily gaining ground post-2014.

The only difference between the democratic pushback to the BJP on the economic and non-economic fronts is that the latter is more localised in nature and the agents of such pushback primarily lie outside the fold of the parliamentary opposition.

What does the future hold?

As far as the economic part of this is concerned, cyclical movements in the economy will continue to play an important role in how committed the BJP is to its desired goals of pushing reforms and adhering to fiscal prudence. Having said this, it needs to be underlined that the BJP is also creating a new political economy landscape by pushing its own version of a centralised welfare state which is anything but anti-big business. This also allows the BJP to keep the discontent from India's extremely unequal economic growth trajectory from exploding. In fact, the next generation of these schemes, such as the National Rural Livelihood Mission’s “Lakhpati Didi” programme of giving sizeable credit to 20 million women is aimed at creating a new class of beneficiaries which will be largely independent of existing power structures within Indian villages and also not entail additional fiscal burden on the government but cultivate a deep-rooted political loyalty for the BJP among the underclass.

The non-economic part of this is that increasingly things will tilt in favour of the BJP’s current leadership as it centralises power within the party and achieves a hegemonic status for its core Hindutva agenda, even within the ranks of the opposition parties.

If the opposition has to have any realistic shot at converting these democratic pushbacks into tailwinds for its electoral chances, it must start engaging with the BJP’s new political economy rather than putting all its eggs in the exploit-cyclical-economic-anger-and-old-social-equations basket.

If not that, then what?

This is easier said than done given the fact that the bipartisan consensus on the welfare/freebie route to win elections offers very little scope for either a programmatic differentiation between the opposition and the BJP or old-school class-based collective action.

Yet, the fact that this question has received very little attention from both political actors and commentators who are otherwise critical of the BJP shows that this cohort is willy-nilly, guilty of giving a walkover on the most important source of BJP’s political power.

This is also a reflection of the fact that almost all of the opposition’s leadership has never quite engaged with or challenged the new political economy which has slowly but steadily gained ground in India in the three decades of economic reforms, in the hope that a mix of welfare and old social equations will be enough to bring them back to power.

Though the communist Left in India is the most marginalised it has ever been, quoting Lenin, the biggest communist leader the world has ever seen is not very out of place to conclude this column. “Without revolutionary theory, there can be no revolutionary movement. This idea cannot be insisted upon too strongly at a time when the fashionable preaching of opportunism goes hand in hand with an infatuation for the narrowest forms of practical activity,” Lenin wrote in What is to be Done. Nothing could be a better description of the predicament facing India’s opposition at the moment.

Every Friday, HT’s data and political economy editor, Roshan Kishore, combines his commitment to data and passion for qualitative analysis in a column for HT Premium, Terms of Trade. With a focus on one big number and one big issue, he will go behind the headlines to ask a question and address political economy issues and social puzzles facing contemporary India.

The views expressed are personal