That Old 70s Formula

Narendra Modi - India Economic Summit 2008 by World Economic Forum
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Modi’s ‘development agenda’ has regressed from the far-sighted one of 2014 to the old populist tropes of past decades.

Selling a development agenda is tough. In the 2014 general elections, Mr. Modi seemed to have succeeded, and many of his new supporters believed they had voted in an era of economic transformation. By the time the UP election came around, Prime Minister Modi had stopped holding out any such hopes. Though garnished with the vague thematic nostrum of “Sabka Saath, Sabka Vikas”, Modi’s campaign promises have regressed to the 70s formula of handouts, characterised by the socialist leaders of Latin America, and our own Ammas and Behenjis.

None of these would even begin to move the needle of development for a region as backward as Uttar Pradesh. The state’s Human Development Indicators are on par with Mauritania and Pakistan, and for it to join the 21st century, UP would require transformation along many fronts.

The most important, in my belief, is the state of education, which is dismal, by any measure. Only 10% of 5th grade children in UP government schools can perform a simple division. Preparing these children for productive jobs would require a root-and-branch reform of primary school education, for which our government has not even the glimmerings of a plan. Much simpler instead to make loose promises, as the BJP star campaigner did – you won’t have to pay bribes to get jobs, as these will be offered based on marks. The implication here is that the government, the mai-baap, will provide gainful employment to the deserving. It doesn’t matter that the government has run out of fiscal ammunition to provide jobs. Uttar Pradesh is in particularly dire straits, with a deficit that is almost 6% of the state’s GDP, double the agreed ‘responsible’ norm of 3%.

If PM Modi’s campaign promises are to be believed, this fiscally stretched government will also provide housing for all. Living conditions, particularly in eastern Uttar Pradesh, are appalling, and the promise of better housing is alluring, the stuff of dreams that 3rd world leaders from Eva Peron to Imelda Marcos sold. But our government machinery can’t repair potholes in the capital city, even with budgets in place. The sheer scale of the housing problem in UP defies solution by a top-down approach, presumably funded by a broke exchequer. But it sure makes for a stirring campaign speech.

As does the promise of doubling agricultural income, particularly attractive in UP, where sluggish industrial growth means that 75% of rural households are still dependent on agriculture. This electoral promise comes without a concrete plan. The convenient implication is that the munificence of the government will ensure higher agricultural prices, more state subsidies, and higher agricultural income. The reality of a ballooning, unaffordable food subsidy and a horribly corrupt food distribution system is not allowed to impinge on this seductive dream. There isn’t even the faintest intimation of how the government will help deliver such development to the 200 million people of UP. As in education, the fact is that the 3 year old Modi government has no cogent plan to make Indian agriculture more productive.

Much more convenient, then, to promise loan waivers for farmers. Same-old, same-old, the latest in a long line of waivers from Indira Gandhi on. Conveniently, two-thirds of India’s banking assets are owned by the government, allowing such promises to be fulfilled. But our public sector banks are reaching the end of the road, with Non Performing Assets (bad loans) at all time highs. The central government does not have the means to refinance the banks, and shore up their capital base; almost a decade after the financial crisis of 2008, we still have no plan to rescue the government banks. The end of this particular road is nigh, but till government banks hit the wall, promises on their behalf still make for successful campaign speeches.

In his UP campaign, Prime Minister Modi also promised to reduce corruption, largely without reference to demonetisation, which had been sold with the same objective. The narrative of demonetisation was of the corrupt rich versus the bleeding poor. This is an enduring message of third-world leaders, and much simpler to explain than the reality of corruption in our nation – vast discretionary powers to government functionaries, appalling difficulty in doing business, or transferring land; opacity in political funding. Each of these realities have created huge vested interests, and the political capital required to combat them is huge.

No national leader since Indira Gandhi has captured as much political capital as Prime Minister Modi. If anyone can tackle the reforms required to transform India, it is him. But his electoral messaging does not hold out any such hopes. It is locked in the old tropes of the under-developed world – rich versus poor, and the promise of delivery by the all-powerful state, embodied by the all-powerful leader.

About the author

Mohit Satyanand

Mohit is an entrepreneur, investor, and economy watcher. He is Chairman of Teamwork Arts, which produces the Jaipur Literature Festival, and has business interests in food processing, education, and a wide range of start-ups.