Budget 2017-18: Cover-up Gimmickry

Narendra Modi has often claimed that elevation to the prime minister’s office in New Delhi was historic and inevitable. Last November, he attempted to consolidate his position in Indian history by making a pre-emptive announcement that invalidated Rs.500 and Rs.1,000-rupee notes valued at Rs.15.44 lakh crore or 86 percent of currency in the Indian economy. To counter the rain of criticism that greeted this diktat, Modi and his band of propagandists fielded cheerleaders — journalists, academicians, publicists and businessmen — to obscure and obfuscate the absolute mayhem the arbitrary announcement caused.

In this context, it would be instructive to examine the consequences of demonetisation.

• It crippled informal sectors of the economy in which most dealings are in cash. Contrary to government propaganda, ‘black money transactions’ are simple currency exchanges outside the banking system. Reserve Bank and government of India data (2011-2015) indicate the cash economy contributes mightily to the national economy: 45 percent of gross value added; 40 percent of capital formation and nearly 67 percent of investible funds.

• A study by the Confederation of Indian Industry (CII) estimates that prime minister Modi’s demonetisation diktat knocked the stuffing out of the informal economy which employs more than 90 percent of the country’s workforce and generates almost 50 percent of national income.

• According to CIBIL, a credit rating agency, the formal sector of the economy was also badly singed. It reported a 30 percent decline in overall credit offtake with a 60 percent nosedive in November-December 2016. 

• CIBIL also noted that distress was acute in rural and semi-urban areas and within the lower middle class, citing a dramatic decline of 40 percent in loans for automotive two-wheeled vehicles.

• Union labour ministry data indicates a 20 percent increase in demand for unemployment relief under MNREGA, the welfare scheme for the poorest. This suggests a reverse flow of migration from city to country.

• In the country’s eight largest cities, the real-estate sector reported a decline of 44 per cent in housing sales, a 16-year low.

• The All India Manufacturers Association which represents small and medium enterprises reported a 50 percent loss in revenue and a 35 percent cut-back in employment.

• According to estimates of economists at the National Institute of Public Finance and Policy, national GDP growth rate is likely to plunge from 7.56 percent in 2015-16 to 6.1 percent in 2016-17.

Against this backdrop, the prime intent of the Union Budget 2017-18 presented to Parliament on February 1, is a cover-up to obfuscate the impact of demonetisation on the economy which was already slowing since 2014. When awareness dawned that the ill-conceived hasty demonetisation stunt would backfire, the Modi government became unhinged and unclear about its response. The prime minister’s justification was a weird analogy that just as surgery is best performed on a healthy patient, the currency ban was a timely move against black money because the economy was in good health. 

The Union Budget 2017-18 therefore betrays persistence of gimmickry: the presentation date was advanced to circumvent Election Commission restrictions on state-specific proposals; the railway budget was merged into the main budget and meaningless tax concessions were announced for the organised sector. A classic example of playing to the gallery was the scrapping of the Foreign Investment Promotion Board whose role has already been severely circumscribed to the point that less than 20 percent of all proposals are cleared by it.

The budget could have acknowledged that the currency ban made it impossible to predict revenue of the next fiscal year. It could have ignored the spending limits imposed by the Fiscal Responsibility and Budget Management Act of 2003 to boost economic growth. The government could have announced major cuts in indirect taxes as these levies have a cascading impact on the economy and substantial cuts would have helped hapless citizens whose livelihoods are threatened by the demonetisation diktat. Instead, the finance minister played around with rejigging direct tax rates and slabs and offered hollow concessions including tax rebates to small and medium enterprises.

In the final analysis, Modi’s budget simply continues the disinformation campaign surrounding the demonetisation bloomer. Initially, he sought to portray it as a “surgical strike” on black money. When it became clear that it had no impact on unaccounted cash, he billed it as a “masterstroke” against counterfeit currency and terror funding. When that too proved inadequate, he positioned it as a strike against the rich on behalf of the poor. When even that didn’t catch on considering the credible “suit-boot sarkar” charge made against him by the opposition, he simply dropped the subject. Budget 2017-18 reflects this. 

Mindless activism is the root of Goa’s political stasis

Contemplating the election just completed in Goa, my mind wandered to a Sunday afternoon a few years ago. At lunch in a friend’s place near Panjim, I found myself under assault by an “activist”. He challenged my assessment that the “India against Corruption” protest, then in full flower, was just another anti-Congress formation. My interlocutor was the well-spoken scion of an influential Goan family and he took umbrage at my assertion that Anna Hazare, the figure head of the protest, was a congenital publicity hound.

Sadly, the conversation degenerated into a diatribe with the activist scolding me for my views on politics, economics and society. There was not much subtlety in his charge that people such as I must be held responsible for the state of affairs in India, tainted as it is with political corruption, skewed economic priorities and consumerist societal norms.

Fast forward to 2014, post the Hazare protest: A group of “activists” led by Arvind Kejriwal emerged to form the Aam Aadmi Party. Kejriwal’s group did surprisingly well in the ensuing elections to the assembly and was able to form a government with support from the Congress. The rest is history.

Read | Goa elections: Re-polling at one booth in Margao constituency on Tuesday

Last year, when AAP announced it would contest elections in Goa, which is a particularly fecund political environment for activism, I was not surprised. All these years of living in the haven, I was witness to the mindless activism that challenged the long-reigning Congress on any and every development scheme or project. Bringing to bear their networking skills and media clout, activists went hammer and tongs after the Congress on often unsubstantiated charges of corruption. In the event, they did not change the fluid and corrupt politics in the state or root out corruption; they ensured the rise of the BJP.

The entry of AAP to Goa politics has been made possible by the cosy fit with local activists. Coasting on word-of-mouth publicity, AAP brought to bear its propaganda skills to project a victory in the just-completed election to the assembly. Many people, with a foot in both places, Delhi and Goa, are understandably appalled. In their view, Goans have regarded them with hostility as outsiders spoiling the Goan environment with their South Delhi ways. But Goans see no contradiction in embracing a Delhi-centric political party with roots in the rough-and-ready exurban areas of the National Capital Region.

This election was held against a national backdrop in which there is a massive pushback against the BJP and a growing disenchantment with the politics of AAP. Sensing this, the Congress put in place ambitious revival plans. It opted for a seat-sharing arrangement with: Two seats for Goa Forward, a year-old party pledged to defeat the BJP; one for Atanasio Monserrate’s United Goan, a party sworn to keep the secular vote from splitting; and it has decided to support an independent candidate.

Read | Punjab, Goa polls done, spotlight shifts to Uttar Pradesh

Aside of the seat sharing arrangement, the Congress is likely to benefit from a split in the BJP vote. This is because of an alliance between Maharashtrawadi Gomantak Party, Shiv Sena and Goa Suraksha Manch, a new party floated by a rebel RSS member, Subhash Velingkar, head of the influential Bharatiya Bhasha Suraksha Manch. This Right-wing alliance, which had been instrumental in the BJP victory in 2012, threatens to jerk the rug from under the BJP.

The Congress sources in Goa and Delhi say they have long believed Kejriwal’s AAP was a front floated by the saffronistas to divide the Congress vote, especially in two-way contests as in Punjab and Goa. Their response to the split in the BJP vote in Goa is a nudge and a wink to suggest the Congress stands to make a huge gain because this split will take more votes from the BJP than AAP will from the Congress.

Though polls predict a hung assembly, the mood in the Congress camp is upbeat.

(An edited version of this post will appear in http://hindustantimes.com, February 6, 2017.)

Narendra Modi: One-term PM?

Gujarat is a small, relatively homogeneous state. Its people are entrepreneurial, focused on business and count their success in accumulated assets; not for them the glamour of a corporate career or the power of a government position. To them, government is somewhat ceremonial in the state and a complexity best avoided at the center. They want to just get on with it, providing for their families and future generations, with travel thrown in as a major diversion.

The Gujarati believes that governance with a light touch is best. For the first decade of its existence, the state government coasted along building assets: roads, power stations, factories, pleasant cities and not getting in the way of a thriving mercantile culture.

Things began to change with the decline of the textile industry, the backbone of Gujarat’s thriving economy. Politics began to dictate outcomes. The state was overwhelmed by civil disturbances including large-scale religious and caste riots. This set the stage for the populist Navnirman movement that gave way to the rabid bigotry of the BJP.

There are interesting coincidences surrounding the rise of the BJP in Gujarat and emigration from the state to the US. With the amendment of the US Immigration and Nationality Act in 1968 to allow relative petitions leading to permanent residence (green card) and citizenship, a veritable flood of middle-class people from Gujarat immigrated to the US through the 1970s. By the 1980s, they had established small businesses and begun to prosper.

Like most Gujaratis, the US cohort retained its insularity: not engaging with the host culture, refusing to blend in but especially remitting savings to families back home. Most of the money was transferred through informal channels. I can remember some people wanting to advertise in my India Tribune newspaper offering more rupees to the dollar and cash delivery to specified persons and addresses in Gujarat.

As the quantum of remittances in unreported cash grew, investible surpluses held by recipients also grew and were ploughed into real estate projects. An array of brokers and fixers emerged to facilitate such investments, usually by bending bylaws and circumventing other legal inconveniences. They became the forerunners of the BJP that came to dominate Gujarat politics, banishing the genteel idealists who served Gujarat since its formation.  In their place arose a horde of scofflaws and bigots to grasp at political power.

From these murky swamps emerged a man of overwhelmingly modest intelligence but with remarkable amounts of cunning, Narendra Modi. Starting out with the Kutch earthquake in January 2001, he successfully undermined the incumbent BJP chief minister Keshubhai Patel. Modi used the earthquake to promote himself as a development icon. In reality, he merely coasted on a global disaster relief effort that was mounted in the aftermath of the earthquake.

Right at the outset though, his claims to have created an industrial and infrastructural miracle in Kutch were challenged by Edward Simpson, a highly-regarded anthropologist from the School of Oriental and African Studies (SOAS). In his book, The Political Biography of an Earthquake: Aftermath and Amnesia in Gujarat, India, Simpson argued that not all the changes in Kutch following the earthquake were for the better, and that in the years following the quake, divisions between Hindus and Muslims in Kutch widened.

But with his headline management skills, Modi successfully staved off questions about his role in Kutch by focusing on the development story while stoking the communal fires. As he vaulted to the chief minister’s position after Patel’s ouster, Modi appeared to have crafted a winning election strategy in which the rhetoric was development but the actual organizational play was to polarize the electorate on an anti-Muslim platform.

The following year, 2002, he put it in play following the burning of the train in Godhra and asserted his dominance on Gujarat politics and on the BJP for the next 12 years without ever being challenged about outcomes and intent. Finally, it enabled him to vault to the Prime Minister’s office.

There was one crucial difference, however. As Gujarat chief minister Modi delivered both seats in the assembly and a large vote share. As Prime Minister, he chalked up the first single-party parliamentary majority in three decades but with just about 31 percent of votes. And that’s where the rub lies. Nearly 70 percent of the electorate did not vote for him. Consequently, the questions began to fly thick and fast from virtually the moment he became Prime Minister.

To avoid these questions, Modi took to what Ravish Kumar, the highly regarded anchor of NDTV India, called “eventocracy” facilitated by a “comedia.” Essentially, this meant remaining silent until the questions became persistent and shrill and then with the active collaboration of mainstream media, changing the subject to emotive issues like nationalism, patriotism, terrorism and Pakistan. Or else staging events like the BRICS summit, Madison Square Garden, Wembley or campaign rallies in which the melodrama quotient is insufferably high with quivering voice and tears in his eyes: “beat me first, I have taken on vested interests that will not rest until they have killed me, give me 50 days.” Also high in these rallies is abusive content and whataboutery in which he mocks, derides and rails at opponents.

Easily, the mother of all diversionary tactics was demonetization, his draconian assault on the monetary system. Everyone but the mainstream TV news channels could see the widespread pain it inflicted on the average person but especially the poor and rural populations. But Modi and his cohorts refused to acknowledge just how vindictive and arbitrary it was. They laughed at first, saying the people lined up in banks and at ATMs were black money hoarders. Then they changed the subject to digital payments, cashless economy, and surgical strikes on terror funding and counterfeit banknotes.

But the questions still persist. No amount of headline management and propaganda including suspect opinion polls and feel good stories in the media can change the facts about demonetization: it was a disastrous ploy that hurt virtually the entire population of India; it was an ill-conceived attempt to divert attentions from legitimate questions about the palpable lack of governance; it was a body blow to the economy that could take years to nurse back to health.

Clearly Modi has no answers about the black money cornered by his November 8 announcement; he has no idea of when a semblance of monetary stability will be restored. But he is campaigning for the upcoming state elections as though his life depends on it, cleverly bending the narrative to suggest he is leading a fight against black money, never mind that he has been accused of taking payoffs from a dubious business enterprise and is engaged in a Watergate-style cover up, using government agencies and arbitrary transfers of inconvenient officials.

By staging event after event, finessing the narrative propagated by the pliant and unquestioning media, he hopes to dodge accountability. Many believe though this time, the impact of his idiosyncratic manoeuvre is just too overwhelming. In Gujarat 2002, where his victims were, by and large, a minority; demonetization pits the wishes and hopes of more than a billion citizens against him. That’s why Modi is going to such lengths to convince selected audiences he has the support of the vast silent majority that has suffered because of the black economy.

Back in the real world, many economists are predicting a massive deflation led by huge drops in employment, in investment, in trade. The GDP is expected to plummet to the original Hindu rate of growth.

The countdown begins now; at stake is whether people will be swayed by his fantasies or hold him responsible for the massive damage demonetization has perpetrated on the nation. The way things are going, he could be a one-term prime minister. But there’s no telling what other knee-jerk options he could pull out of his bag of amoral cunning.

(An edited version of this post will appear in http://timesofindia.com, January 14, 2017.)

Misinterpreting the mandate

Narendra Modi ran the 2014 election campaign, asking for a mandate in his name; the party was secondary. In the event, he helped the BJP secure 282 seats in Parliament, an absolute majority. The last time any party singly won so many seats was in 1984 when the Congress won 404. Modi seems to have interpreted the mandate as an irreversible affirmation of his popularity as a leader, right up there with the luminaries who won India its independence, then nurtured its democracy and diversity and finally transformed it into a dynamic new player on the world stage.

There are two ways to understand Modi’s unrealistic assessment of his own popularity. One, he single-handedly took the BJP’s tally of 18 percent in the 2009 election to 31 percent from 18 percent, its traditional share of the vote. Two, Modi may have been right in interpreting that he broke through beyond the Hindutva vote to new constituencies with his message of development and governance. Clearly, though, that is a temporary surge that can disappear very quickly as Rajiv Gandhi found in 1989.

A mature leader with greater experience in national politics would have looked beyond the absolute majority. In 2004, when the Congress-led the UPA coalition to an unexpected win, Sonia Gandhi and her colleagues took the sober view that it was a rejection of the BJP’s “India Shining” narrative tacked on to the party’s baseline Hindutva agenda. Accordingly, the Congress view was the party’s communal core remained intact but new adherents, who had, by and large, voted the BJP for change, pulled out, disappointed in the lackluster performance of the Vajpayee government.

Likewise, had Modi been a more contemplative leader, he would have recognized that 69 percent of the electorate spurned both his Hindutva appeal and his promise of development and governance. Looking at a glass that is one-third full as a huge improvement over less than the traditional fifth, Modi thought he could do just about anything and get away with it. He was used to that in Gujarat, where his writ ran because the number of seats in the assembly matched the vote on the ground.

For a while it appeared as though the absolute majority in Parliament was a Teflon coating: Lalitgate, Vyapam, FTII, a series of faux pas in India and overseas, the loss in Bihar, the botched-up attempts to dislodge Congress governments in Arunachal and Uttarakhand, rank communalism and beef politics, JNU, Hyderabad, Pathankot, Kashmir, Uri…nothing seemed to stick. This emboldened him to swear and sneer at opponents, favour cronies and generally stride about the landscape like some colossus batting off scam and scandal, fraud and failure.

Until the demonetization, that is. On November 8, Modi’s megalomania finally went haywire. In one fell swoop, he knocked the bottom out of the nation’s money supply; with a dramatic announcement, he invalidated all 500 and 1000 rupee notes, a full 87 percent of the currency in circulation, valued at over 200 billion USD. The speech, as always cunning, contained a cadence of dog whistles that seemed to suggest that in his 30 months as prime minister, the Indian economy has become one of the bright spots in the world and in single-handedly achieving this, he had the support of 125 crore Indians.

His televised address will go down as the biggest display of chutzpah since George W Bush’s announcement of the “shock and awe” campaign against Iraq in 2003. Unlike Bush, who seemed to have become a neocons mascot and pretty much went along with the program, Modi conveyed the decision was his and his alone.

As the magnitude of the disruption became clear, Modi backtracked. A narrativewas issued suggesting the following: demonetization was devised by “concerned officials who wished to shield those in high positions in banks across the country from the consequences of the crony-oriented lending that they had been doing especially since 2006, the year when Narasimha Rao’s liberalization policy was fully substituted by the UPA into a faux Nehruvian economic policy that combined Fabian socialism with Wall Street ways.”

In other words, holdovers from the corrupt UPA are responsible. “Prime Minister Modi was presented with the issue in such a way that turning down the scheme was out of the question,” the narrative quoted “senior officials” as saying. It goes on to add that Modi “raised several queries, especially on the impact on the common man and only when it was conveyed to him that steps were being taken to minimize hardship did he agree to the measure.”

So there you have it. It’s all the doing of the corrupt UPA that still has its talons hooked into the bureaucracy. It’s not clear from this story if the Modi government plans to prosecute former Prime Minister Manmohan Singh, former Finance Minister P Chidambaram and UPA Chairperson Sonia Gandhi for promulgating this draconian edict.

As the shock and awe receded to reveal huge lines at banks and ATMs, millions of harassed citizens and dozens of deaths, it became apparent the demonetization was flawed. Certainly, the implementation was disastrous; increasingly, however, the intent has come into question. Modi needs to answer for this cynical, ill-conceived and mean-minded “masterstroke.” What are the reasons for it: to end the black money menace? To deal with counterfeit currency? To spike terrorist funding? To speed transition to a cashless economy?

If we accept Modi’s assertion that the demonetization was aimed at bringing black money into the system, there are questions of his government’s track record. With his photo writ large over advertisements, Modi has claimed that in two-and-a-half years, his government has brought black money worth 1.25 lakh crore rupees “out in the open.” This is braggadocio considering that in its last two years, the UPA government netted 1.31 lakh crore. This is just the kind of statistical fact checkthat people have started to make. It’s clear that other than his core supporters, no one is taking Modi’s assertions at face value anymore.

He may have the support of 282 MPs but has just 31 percent of the vote. Shouldn’t he have had wide consultation? Shouldn’t he have taken the opposition into confidence? After all, everyone is on the same side as Indians first and the Opposition would have supported any move that is in the larger national interest. The reason he didn’t, leads to questions about intent. Such a massive disruption should have been planned better. That it wasn’t, leads to questions about competence.

Just 31 percent vote share, dubious intent and evident ineptness are reasons for the nationwide protest that was reported all over the world as a massive uprising against demonetization. Most credible analysts believe that such a huge blow to the economy, to citizens will cripple India for years.

(An edited version of this post will appear in http://http://blogs.timesofindia.indiatimes.com, December 3, 2016.)