Team 2019

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Modi’s reshuffled Cabinet sets the stage for BJP’s next Lok Sabha target. The slog overs begin

WHEN BJP PRESIDENT Amit Shah went into a huddle on a mid-August afternoon for over two hours at 11, Ashoka Road with 30 other party leaders, including Union ministers, it was clear that he meant business. Shah had identified 120 Lok Sabha seats outside BJP stronghold zones that had to be worked on, and he assigned five each to 25 of the leaders present. Three days later, Prime Minister Narendra Modi and Shah spent four hours at a meeting with 13 chief ministers of BJP- ruled states and six deputy chief ministers at the party headquarters, and the Prime Minister asked the chief ministers to ensure that all Central welfare schemes were implemented by 2022, the 75th anniversary of India’s independence. They all had to go into mission mode to achieve his goal of a ‘New India’.

With 20 months to go before the next Lok Sabha election, the message from BJP’s power duo to party leaders is pithy: it’s time now to hit boundaries and sixes, not just quick singles, bending backs if need be, ignoring not even the cow corners, so that the BJP can carry the bat past 2019.

In BJP’s calculations, the political arithmetic is on its side. The party has been on a winning streak, capturing nine of the 12 states that went to polls since it has taken charge at the Centre, thus posting a robust strike rate that shows no signs of flagging. The party has 33 allies across the country, giving it leverage in state-wise assessments. To top it all, it has a clear edge of added comfort: the opposition is in disarray and there is a perceptible vacuum in place of a rival to Modi. So rattled seems the opposition with Bihar Chief Minister and JD-U leader Nitish Kumar’s recent shift to the BJP-led National Democratic Alliance that it is even ready to go along with the ideas of Kumar’s dissenting party colleague Sharad Yadav, who has rather little mass appeal. The day Shah held a closed-door meeting with BJP leaders to draw up an electoral plan for 2019, a few kilometres away, the opposition was preoccupied with Yadav’s effort to rally anti-BJP parties, including the Congress, and put up a ‘show of strength’.

At Shah’s meeting, it was evident that the BJP had begun its spadework to capture the 120 seats marked out. These are expected to make up for any loss of its existing 282 seats won mostly in the Hindi belt and concentrated in states where the party has an organisational superiority. The BJP chief is now expected to begin discussing these 120 seats with the 25 leaders separately. Shah, who has travelled across the country as part of a campaign to expand the party’s footprint, will again be setting off on tours. In the first week of October, he is scheduled to undertake a pad yatra in Kerala, a state where the BJP won its first ever election in last year’s Assembly polls. Besides Kerala, other states where the 120 seats are located include West Bengal, Odisha, Telangana, Tamil Nadu, Andhra Pradesh, which together account for 161 seats overall, and some in the Northeast.

“The focus in the party is on style of functioning, ideological commitment, transparency and sustainability,” says BJP General Secretary Bhupendra Yadav, “In 2019, the party will do well in areas where it was weak earlier. This has been manifested in Assembly elections in West Bengal, Kerala and Manipur.”

If Modi was judged for his words in 2014, he would be judged for his deeds in the next General Election. In this context, the party’s promise of a better life for the electorate, raising their hopes and aspirations, is likely to be the foremost challenge for his campaign. While the poor, wooing whom has been a priority, look up to the Prime Minister and trust him to keep his word on a more equitable distribution of wealth, as many surveys find, what could still torment the BJP is the state of the Indian economy.

PERHAPS THE BIGGEST trouble spot for the BJP Government after three years in power is the country’s economic performance. One signal of this weakness has emerged in the form of official growth data for the first quarter of the current financial year. In the first three months of fiscal 2017-18, the economy grew at 5.7 per cent, in comparison with the same period a year earlier. This is the lowest quarterly figure in three years.

While the poor, wooing whom has been a priority, look up to the Prime Minister and trust him to keep his word on a more equitable distribution of wealth, what could still torment the BJP is the state of the Indian economy

Some of the factors that ended up slowing growth are clear. The Goods and Services Tax (GST)—a much delayed tax reform— has had a role in this, an effect that will wear off in the next two or three quarters. The reform was something the Government could not delay. If GST had been implemented next year, the associated economic costs of transition would have had to be borne on the eve of the next General Election. The other reason for tepid growth is a sudden rise in imports: from a rate of 2.1 per cent from October to December 2016, the value of goods and services brought in from abroad grew by 11.9 per cent in the period from January to March 2017, and then jumped by 13.4 per cent in the quarter after. Exports, in contrast, with the rupee held up by strong investment inflows, almost fell off a cliff in the first quarter of fiscal 2017-18 as compared with the previous quarter. This has dragged growth down.

As of now, the prognosis is mixed.

In its analysis of the quarterly data, HSBC India notes: ‘[It] is important to note that the moderation in growth that India is experiencing is not just demonetization led, which will reverse with remonetisation (i.e. the adequate printing of notes by the central bank). A careful look suggests that growth had begun to slow from the middle of 2016, well before the demonetization episode. In our view it was led by the rolling off of the oil bounty. This driver of growth does not exist anymore. As such, we believe there are downside risks to our already below consensus flat growth forecast of 7.1% [year-on-year for fiscal 2017-18].’

These are cyclical factors that have their own rhythm, and with proper coordination with the central bank, they can be smoothened out over time. The bigger challenge for the Government to ensure a pick-up in growth lies elsewhere: managing the troubled banking system. With a huge pile of bad loans, India’s banks confront a two-fold problem. For one, they badly need to be re-capitalised. The sums required for this are clearly beyond the Government’s means at the moment. For another, with such weak finances, banks—especially public sector banks—are in no position to lend aggressively. If there is little lending, banks’ core business is hit hard. At the same time, there is little demand for loans. Seen together, these two sides of the same coin add to India’s growth woes from another angle: investment growth is bust. The Gross Domestic Product (GDP) data released on August 31st shows this clearly: investment grew at a sclerotic 1.6 per cent in the April-June period this year over the same quarter of 2016-17. Unless this perks up, India can only dream of expanding again at 8 per cent plus—a trend seen for some years in the previous decade.

If these numbers appear hard to decipher, a closer look shows even bigger challenges ahead for this government. The data shows that in the first quarter of this fiscal year—from April to June—farm sector growth fell to 2.3 per cent, year-on-year, in constant terms (a comparison with 2011-12 taken as a baseline). If this seems low, then consider this growth in terms of current prices—what farmers experience when they sell crops in local mandis. Calculated this way, agricultural growth in the same quarter collapsed to 0.3 per cent. In the previous quarter, this figure was 7.9 per cent.

Every member of the Cabinet is aware that Modi and Shah will monitor Mission 2019 closely. Shah has been laying emphasis on a long-term plan that envisions the BJP as a permanent party in power. Performance is vital to its success

The distress was felt most acutely in states that have large agricultural populations. From Punjab to Madhya Pradesh and from Maharashtra to Uttar Pradesh, reverberations of a deflation in agricultural commodity prices were heard in the corridors of power. From demanding loan waivers to holding violent protests over the stagnant prices, farmers were on a warpath during that period. Government after government had to buy peace with expensive—and in some instances, almost ruinous—farm loan waivers. In some, Madhya Pradesh being an example, some forward-looking measures was adopted. The state government began exploring the option of paying farmers the gap between the Minimum Support Price (MSP) recommended by the Centre and the prevailing market price. This works both ways: in seasons of distress, farmers get what is due to them as an MSP, while in times when demand for farm output is higher; they gain over and above the MSP promise.

These are at best symptomatic responses and not prophylactic steps. In spite of rapid urbanisation in the last two decades, rural residents still account for two-thirds of the country’s population. For the most part, farmers are content to eke out a life of subsistence. But every decade or so, once rural indebtedness crosses a threshold, it has political ramifications that no ruling party can afford to overlook. When this is combined with a fall in output prices, a rare and politically explosive situation emerges.

What the BJP faced in the summer of 2017 was this pincer hold of loan burdens and falling farm prices. In state after state ruled by the party, either loan waivers were quickly announced without any political wrangling—UP and Maharashtra being two cases—or ameliorative schemes put in place, as in MP. This display of political astuteness has bought peace for the time being. But it won’t be enough, at least not for long.

One solution that finds favour with activists of all stripes is the demand to implement the report of the MS Swaminathan Commission. The national commission for farmers, which issued a number of reports in the last decade, virtually promised them the moon. Among other recommendations, its suggestion that an MSP be calculated as 50 per cent higher than the weighted average cost of production is held out as a sort of key to the farm conundrum. More broadly, the Commission has asked for public investment in agriculture to be upped. It is no secret that this has virtually collapsed since the late 1980s.

What is often left unaddressed in such reports is where the money for such noble causes will come from. India’s political economy over the past quarter century has been heavily tilted in favour of subsidies over investment, leaving precious little to plough back in productive activities ranging from education to improving agricultural productivity.

Many of the Modi Government’s apparently piecemeal steps—if one includes a disparate group that ranges from skill development initiatives to crop insurance to ending the run of subsidies—form part of a plan to change India’s political economy without saying it explicitly. In effecting such a transformation, it faces a number of challenges. Any effort to reduce subsidies immediately attracts the charge that the Government is ‘anti-poor’; a chorus of voices has been primed to say this at the very mention of a cutback. Second, even for the most determined administration, it is a difficult transition to manage. It is hard to completely end subsidies in a country that has been used to them for so long. Further, India is in the process of adding on one of the largest working-age populations in the world. Between 2017 and 2027, the country will have 234 million more people in that age bracket. This means that in another 10 years, according to ‘UN World Population Prospects, 2017’, over a billion Indians would be in that group. Educational opportunities have to be provided even as jobs that meet their aspirations are found for them.

From now until 2027, two more governments would have been sworn into power. In the tight space between the melee of everyday politics and long-term planning, re-shuffles in the council of ministers seem like a weak device to push India in the right direction. But, from cleaning polluted rivers to building highways on time and from imparting skills to the youth to ensuring that India is guarded well, is there any alternative? What the Modi Government needs to do is solve short and long-run problems at the same time. It must bridge the present with the future.

COME 2019, BJP leaders maintain, the Government’s track record on social sector schemes should be sufficient to tide over the broad economic concerns. “When we inherited the economy, it was growing at 4.5 per cent. We have [raised] the growth rate. Inflation was 14 per cent and is now less than 5 per cent. The lending rate has almost halved. Today, there’s a government that is decisive. There’s no policy paralysis; FDI inflows are the highest ever,” says BJP leader R Balashankar. According to him, schemes like the Jan Dhan Yojana and gas connections for the poor are vote-catchers.

The underperformance has been on two big innovative fronts—skill development and the Clean Ganga Mission. In what could be the last reshuffle of Modi’s Council of Ministers before 2019, the skill development and water resources ministries have been handed over to two ministers who are considered performers. Surface Transport and Shipping Minister Nitin Gadkari has been awarded additional charge of water resources, and Petroleum Minister Dharmendra Pradhan now has the skill development portfolio, with Anant Kumar Hegde, a new face from Karnataka, as his junior minister.

“We have to create a momentum,” says Pradhan, “Skill should be part of formal education. An ecosystem should be created. There should be a people’s movement for self- employment, livelihood, etcetera. That’s why a new department was created.” By an official forecast made in 2012, the count of skilled manpower in India would need to increase by 100 million within 10 years. Midway to 2022, however, existing jobs are being squeezed by automation and other forces of technology. Addressing this has called for new solutions, say senior ministers. “There is scope for skilled manpower in sectors like wellness—for example, yoga,” says Pradhan, “The Centre, states, local governments and industry have roles to play.”

Meanwhile, the Ganga, which flows through nearly 150 Lok Sabha constituencies, is also an ideological mission for the BJP. Gadkari, who had been working on the project alongside former Water Resources Minister Uma Bharti, has now been entrusted the task of fulfilling the party manifesto promise of ensuring the ‘cleanliness, purity and uninterrupted flow’ of the Ganga, ‘a symbol of faith in India’. This was the association for which the related ministry had been handed over to Bharti, a saffron- clad sadhvi, in 2014.

Every member of the Cabinet is aware that Modi and Shah will monitor Mission 2019 closely. Shah has been laying emphasis on a long-term plan that envisions the BJP as a permanent party in power, according to a party leader. Performance is vital to its success. With Modi’s Cabinet reshuffle an exercise to get the batting order in place, the Prime Minister’s surprise has been the elevation of Nirmala Sitharaman—who was minister of state for commerce—to the post of Defence Minister with Cabinet rank. It has been lauded as an out-of-the-box move, the kind Modi has acquired a formidable reputation for. Sitharaman is the first woman to hold the Defence portfolio since Indira Gandhi, who held it as Prime Minister, and this sends a message of gender equality to half the electorate.

There are also a few state elections coming up that Modi and Shah are paying attention to. In a few months, Assembly polls are due in Gujarat, their home state which the BJP has ruled for 25 years, and in Himachal Pradesh, a hill state that holds symbolic value. The country’s top two leaders know only too well that nothing in politics happens by accident, not even luck.