Narendra Modi’s speech at the golden jubilee celebrations of the Institute of Company Secretaries of India last week at New Delhi’s Vigyan Bhavan was the first sign that the Prime Minister is a worried man, and that he found it necessary to rebut criticism about the state of the economy. The rhetoric was not sweeping any more. He was not pointing to the 60 years of non-performance of Congress governments. He came down to brass tacks as it were, and cited figures for the past three years of UPA-2 and compared it with three years of his own government. Whether it is convincing or not, it showed that Mr Modi was seriously engaging with his critics. At a later point in the speech he promised that the government was ready to heed the critics and take on board their concerns. The bombast was gone, and so was the unbridled belligerence and contempt for his opponents. The October 4 speech was preceded by the formation of the Prime Minister’s Economic Advisory Council to be headed by Niti Aayog member Bibek Debroy, and it was followed by the tweaking of the Goods and Services Tax rates, which would help small and medium enterprises.
The imperious attitude of the Prime Minister and other BJP leaders in the government and party appear to have been shed for the time being. There is a note and tone of humility. Of course, this is election time in Gujarat and Himachal Pradesh, and later in Karnataka. Mr Modi, a past master of political histrionics, can modulate his tenor and manner. There was also the huddle of the PM, finance minister Arun Jaitley and BJP president Amit Shah on Thursday preceding the GST Council meeting. The Opposition, including Congress vice-president Rahul Gandhi, are taking advantage of the Modi government’s discomfiture over the economy, and has mounted a sustained attack on the government’s failures on the economic front. This offensive is turning out to be more effective than the ones about cow vigilantes, intolerance and about secularism. The ideological war against the Sangh Parivar, comprising the Rashtriya Swayamsevak Sangh and the BJP, was too nebulous, and the Modi government was quite happy when the cow, minorities and faith were the talking points. But when the focus shifted to the economy, Team Modi feels cornered, and it has gone on the defensive. The BJP is showing signs not only of nervousness but also ticks of panic. The swagger has been muted. It is one of the joys of democracy that no one remains invulnerable for too long, and chinks have started appearing in the Modi armour.
This is indeed a battle of nerves between political players, and it has very little to do with the real state of the economy. The growth rate of 5.7 per cent for the April-June quarter of 2017-18 does not indicate an economic crisis, much less a meltdown. The impact of the November 8, 2016 demonetisation is lingering and that of the July 1, 2017 rollout of the Goods and Services Tax is likely to last for a quarter or two more. Even the ever-cautious Monetary Policy Committee (MPC) of the Reserve Bank expressed the certainty that there would be a recovery of growth in the subsequent quarters of the financial year, though the overall growth rate for 2017-18 has been revised to 6.7 per cent from the earlier estimate of 7.3 per cent, and this despite the prospect of a fourth-quarter (January-March 2018) growth rate of 7.7 per cent. The economy is passing through a cyclical trough, and it will get out of it. Demonetisation and GST have caused temporary dents in the economy, but nothing more.
It is the political fallout of these two measures that is hurting the Narendra Modi government and the BJP. This would not have damaged the fortunes of the government and the party if they hadn’t been so arrogant in the first three years in power. It is the exaggerated claims by Mr Modi, finance minister Arun Jaitley, party chief Amit Shah and others about the economic miracles that were being wrought which turned out to be tinny and humiliating. The Biblical saying of pride going before a fall is what describes the state of the ruling party, and it has nothing to do with the state of the Indian economy. There are embedded challenges in the economy, and the Modi government would not be able to respond to them only with grand gestures. Some issues are beyond the control and competency of any government. For example, there is nothing much that a government can do to stimulate exports when global demand is subdued. Similarly, there is a limit to what it can do to spur growth on the home front. Different players and sectors must kickstart the economy on their own. Policy interventions do not help much. What the government can and should do is to create an atmosphere of confidence and stability. Cow vigilantism and anti-minorityism, sabre-rattling against Pakistan, and nudging the media to make anti-China noises spoil the air, and introduce elements of uncertainty and anxiety in the stakeholders, which includes ordinary people as well as captains of industry.
One of the tough lessons the Modi government has to learn as it enters the penultimate lap of its five-year term in office is to surrender its bragging rights. Governance is best done quietly and effectively. At election time, the voter looks at the governance record and not at the speeches of the Prime Minister at political rallies and other platforms. What Mr Modi should claim is not that the economy has grown dizzyingly, but that it has remained stable despite the folly of demonetisation. People will forgive policy follies and even failures if Mr Modi and the BJP maintain a low profile, however difficult or even impossible it may be.
