Will the politics of Modinomics work in Lok Sabha elections?

With its micro-targeted sops for key vote banks, the Modi government has effectively used the interim budget as a platform to launch its election campaign. But will it work?

Soon after Vladimir Putin took over as president of Russia in 2000, he was confronted with the Kursk submarine disaster that resulted in the death of 118 navy personnel. Putin was vacationing outside Moscow and handled the crisis from there. But he was criticised for not cutting short his trip and being in office. Putin confessed to this writer that he had learnt his first big lesson in politics: a leader must not only take action but the public must see him doing so. Putin never made that mistake again and has ruled Russia unchallenged since then.

Narendra Modi made a similar mistake in his first year as prime minister. He faced his first big farmers’ crisis in March 2015 when unseasonal rains damaged farmers’ crops in Punjab and Haryana leading many of them to commit suicide. Modi ensured that the afflicted farmers got a higher compensation and that all the grain they produced was procured at the Minimum Support Price (MSP). But he was criticised for not personally visiting the affected areas and sympathising with the farmers. An exasperated Modi told this writer: Tell me if a Congress leader has visited a farm in the past 10 years. Were there no farming calamities then? As chief minister, I used to regularly visit farmers. My job now as prime minister is to collect information, take decisions, mobilise the machinery.

Yet it is only at the fag-end of his tenure that Modi seems to have realised that more than action, it is perception that matters, especially while dealing with farmers. The india today Mood of the Nation poll conducted this January showed that 78 per cent of those surveyed felt that the condition of farmers had remained the same or even deteriorated under the Modi government. Modi himself believes that his government has done plenty to alleviate the plight of farmers. It prepared soil health cards for 170 million individual farm holdings to improve their productivity. It provided more water through completing irrigation projects. It ensured power connections to pump the water. It brought quality fertilisers by having them neem-coated to prevent adulteration. Modi kicked off the Pradhan Mantri Fasal Bima Yojana, an insurance scheme for farmers, to compensate them for crops lost to natural calamities. He raised the MSP for grains and pulses. In 2016, he promised to double farmers’ income by 2022 though it met with much scepticism from experts.

Yet both Modi and BJP president Amit Shah seemed to have underestimated the extent of the agrarian distress across the country. A huge mistake, as farmers, farm workers and their families are the single largest voting bloc in the country, accounting for over 50 per cent of the eligible voters. In the three Hindi heartland statesMadhya Pradesh, Rajasthan and Chhattisgarha key reason why the BJP lost to the Congress in the December assembly elections was that farmers seemed upset with the inability of the state governments to deal with their woes. The Congress lured farmers away from the BJP by promising to waive their loans if they came to power. What also turned the tide against the BJP was the widespread disruption caused by demonetisation, particularly for small businesses and unorganised labourers who were dependent on cash payments. Not to mention the perceived drying up of job opportunities across the country.

Budget 2019 was the last big chance for the Modi-Shah duo to make amends and regain the momentum for the upcoming general election. So Modi loosened the purse strings and doled out goodies to a broad spectrum of voters despite howls of protest from the Opposition that he had irresponsibly converted an interim budget into a campaign manifesto for 2019. For farmers, Modi had rightly been dead against waiving farm loans. But he had to bite the bullet by doling out cash to compensate them for their mounting losses. Finance Minister Piyush Goyal in his budget announced that the government had decided to pay small farmers with less than two hectares an annual lump sum of Rs 6,000 in three instalments. To ensure that the beneficiaries feel this is not just an empty promise, the scheme proposes that the current season will be covered with retrospective effect. While the sop may bring some relief to 100 million small farmers, the overriding feeling is that it was too little too late. It also ignored the 140 million agricultural labourers.

When it came to agriculture, the Modi government made the same mistake many previous governments did. It focused on boosting production rather than ensuring that incomes of farmers increased. While record grain and pulse production saw food prices crash making consumers happy, farmers fell deeper into debt and distress. What agriculture needed was a structural revolution that moved away from mindless production of grains to cultivating high value crops like fruits and vegetables. To sustain that would require vast infrastructure, including cold storage facilities and transport, apart from agro-processing facilities. While the Modi government did make an effort in this direction, it fell far short. The result is that farmers are staring at a dead end both in terms of income and opportunities, and their anger is showing. Whether the cash promised is sufficient to push them to vote for the BJP is doubtful.

The budget saw the Modi government clinically check all the other boxes that would bring in the votes for the BJP. For the middle class, Goyal offered a tax rebate for those earning between Rs 2.5 lakh and Rs 5 lakh per annum who currently pay tax at 5 per cent of their income. That announcement saw the treasury benches cheer the prime minister lustily with cries of Modi, Modi reverberating in Parliament. The sop would provide relief of a maximum of Rs 12,500 a year. It also benefits those who have incomes of up to Rs 6.5 lakh through various deductions. That means close to 3 million tax-payersnot a small number. There were also sops thrown in for the 140 million workers in the unorganised sector by offering them a pension scheme for old age, with the Centre chipping in a substantial amount. The real estate sector got some relief, but most realtors seem unenthused by the budget. (See Will the Sop Opera Work? for a detailed assessment of each sector.)

The budget didn’t directly address the jobs crisis. But Goyal told india today that the velocity of money that would result from the distribution of such largesse (the relief for farmers itself would bring Rs 20,000 crore into play) would see an uptick in the economy and create more jobs (see interview). Experts raised doubts as to whether the impact on the fiscal deficit would be the negligible 0.1 per cent Goyal claims. If it isn’t, the next government, whether it is a BJP one or not, will have to deal with high inflation and financial instability. If predictions of a mid-year global economic slowdown come true, the results could be even more disastrous. There is little reason for confidence that the opposition will prioritise fiscal prudence either should it come to power. In addition to implementing loan waivers for farmers in the three states the Congress won recently, its president Rahul Gandhi has announced a minimum income plan for the poor that could be the biggest ever dole payment made in the country.

Modi and his advisers used the interim budget to launch the BJP’s election campaign by listing out the major achievements of the government and even laying out a vision of India in 2030 that promised the moon and more. But they missed a trick by not using the budget speech to outline their plans for the next five years of an NDA government. There is no denying that, on the development front, Modi has a lot to be proud of. Particularly in terms of providing toilets, electricity, cooking gas, housing and roads. But there is still no clear vision or road map as to how his government intends to tackle the worsening job crisis. The perception is that the government is even refusing to acknowledge there is a crisis by its stringent denunciation of any data that shows it in a bad light.

As with farmers, even with jobs, perception matters and the government can ignore it only at its own peril. As an expert put it, The government says our economic growth is averaging 7.5 per cent and we are the fastest-growing economy in the world. But do you feel it? Putin mastered the perception battle and was able to retain power for close to two decades. Come May and the world’s largest democracy will go to vote. We will know then whether Modi has passed that test or not.

Courtesy : INDIA TODAY