What is Modi’s game-plan?

A motivated administration but liberals and leftists are still wary

"I can get things done!"

Finance Minister Arun Jaitley

Kumar David-March 3, 2018, 7:25 pm 

There is no denying that the Modi government is panning out in ways that, speaking for myself, we leftists did not anticipate. Both leftists and liberals were concerned, nay obsessed, with his reputation as a Hindutva zealot and feared for the safety of India’s Muslims and its sterling reputation as a secular state. Second, the left was convinced that Modi was a neo-liberal who would aggressively push a capitalist programme marginalising the poor and excluding them from the fruits of progress. Let’s be fair; neither apprehension has materialised. The Modi government has done things that would upset me if I were a Muslim but there has been no bashing of Muslims. I cannot recall any large anti-Muslim action after Modi became PM to compare with attacks on Muslims in Sri Lanka in the past.

Here is a long extract from Wikipedia about the Gujarat horror that implicated Modi but then cleared his name. Nevertheless, an anti-Muslim pall hangs over him and the BJP.

"A Concerned Citizens Tribunal Report estimated that as many as 1,926 may have been killed. Other sources estimated it in excess of 2,000. Brutal killings and rapes were reported as well as looting and property destruction. The Chief Minister of Gujarat Narendra Modi was accused of initiating and condoning the violence, as were police and government officials who allegedly directed the rioters and gave lists of Muslim-owned properties. In 2012, Modi was cleared of complicity by a Special Investigation Team (SIT) appointed by the Supreme Court. The SIT also rejected claims that the state government had not done enough to prevent the riots. The Muslim community reacted with anger. In July 2013 allegations were made that the SIT had suppressed evidence but in December an Indian court upheld the SIT report and rejected a petition seeking Modi’s prosecution".

The Babri Masjid mosque was destroyed in 1992 by a BJP crusade led by senior leader M.K. Advani but to the best of my knowledge Modi was not implicated though organisations he is linked to, the RSS and BJP, were the culprits. However, a Hindu friend whose judgement I value says this: "It was too hasty a judgement on the part of the Indian Left to dub Modi as a racist, extreme rightist and fascist. Unlike Nehru he is a strong Hindu but not an anti-Muslim. Being a strong Hindu does not make one Hindutva! It is RSS that made him a bad egg but that influence has eroded".

There are others, Ram Jethamani in India’s Sunday Guardian of 20 Feb 2018 for example, who say Modi is being demonised and add: "Not seen a single action or statement of Modi suggests any communalism or divisiveness or hatred for the Muslims". Interestingly, educated, intellectual Hindus, not Muslims, hate Modi. Hence the report card is that though his reputation as anti-Muslim cannot yet be brushed aside, there is also reason to believe that it may be exaggerated or untrue.

Modi the man of action

Readers in Sri Lanka will find a parallel between Modi and Premadasa. I would argue that the similarities are more than recognised. Modi is a doer, a man of action who gets plans executed and this reputation goes back to his days as Chief Minister of Gujarat. Though in scale they inhabit spaces that are orders of magnitude apart, there are many parallels. Both are workaholics well in control of their Ministers and bureaucracy. Both are of humble origin. Supposedly both are weak on pluralism but this has been contested in the case of Premadasa, and as outlined above in Modi’s case as well.

The most significant point to my mind is that both Premadasa and Modi were thought of as right-wingers of neoliberal orientation, but the story is turning out different. There was a side to Premadasa that was deeply concerned about the poor and the meek. He is best remembered for mass employment creation in the garment industry, low-income housing and Janasaviya and Gamudawa poverty alleviation programmes. The Colombo elites hated him; the parallels with Modi are glaring. Can either be tarnished with the neoliberal brush? I think not.

In the heat of Sri Lanka’s post LG-election political imbroglio I find it irresistible to add that Modi’s is the only Indian government that has not been tainted by massive financial scandal. The Rajapaksa era and the Ranil-Sirisena duo, in comparison, are in the dock. Economists argue about the success or failure of demonetisation, but no one says Modi made a buck out of it. Demonetisation was enormously visible and popular even among the masses who sweltered in long queues.

Modi-care and money for care

"I find the budget quite a game-changer because it brings the social sector centre-stage" said an Indian commentator referring to the grand declaration of a new publicly funded health insurance scheme that will cover half the population with potential pay-out of Rs 500,000 per family per year. It is touted as the largest healthcare programme in the world when it gets up and running; I think largest in number of people covered. The needed cash flow is estimated as $4 billion per year and may reach $7 billion, but the allocation in Finance Minister Arun Jaitley’s 2018 budget is just $310 million; where is the rest to come from?

Modi does recognise that there is a grave agrarian crisis and wants to modernise the sector, but the budget is unable to address the financial challenge. Doubling agricultural income in four years seems another impossible pipe-dream; but 2019 is election year and though Modi is ahead of the pack, victory is not yet guaranteed. Without money it will be an empty promise. Economic prudence is the watchword on the lips of the wise but political wisdom will trump it; the same lesson the Sri Lanka government is in the process of learning right now.

How are funds for these two, as well as for significantly enhanced public investment, which are not forthcoming from current revenue, to be found? Here are few numbers for readers who do not live with a statistical almanac in their pockets. GDP in 2017 was $ 2.5 trillion and growth rate hovers around 7%; expected fiscal revenue in 2018 will be $370 billion, expected 2018 expenditure including capital programmes $460 billion, so the fiscal deficit is $90 billion – all numbers rounded. [For comparison Sri Lanka’s 2017 GDP was about $85 billion – 3.4% of India’s - and our growth rate has been 4.5% in recent years].

The question, since the days of money printing have come to an end, is where is the money to implement these programmes to come from? Annual expenditure on these two is $7 billion, and other essential infrastructure (railways, highways and ports) will add another $3 billion making an annual total of $10 billion. But this is not staggering. It is 2.7% of current revenue (a mere 0.4% of GDP). The way forward is a little more borrowing (debt), taxing the rich more and aggressively targeting tax avoidance. State revenue currently is only 15% of GDP in India compared to over 50% in Denmark, Finland, Norway, Sweden and Switzerland, 36% in the EU, 26% in the US and 25% in Turkey. More money for health-care and farmer support, by higher revenue collection, is feasible. On these two points, Modi will stand firm.

The right-wing Indian Express and anti-Modi "radical" economists like Jayanthi Gosh at JNU shake their heads: "The scale of increased spending that is required for all of this is unlikely to be met, given self-imposed constraints of fiscal responsibility. Expect a lot of talk, not action". Methinks the lady protesteth too much. Hair pulling and chest beating by elite left intellectuals and the right-wing media is a quarrel with Modi-populism. The right-wing media and the elite-left will be ignored; Modi feels confident of electoral victory in 2019 thanks to populism and can-do aggressiveness (the polar opposite of Ranil and the UNP). He will persist in his strategy; conversely, Sirisena and Ranil, despite a kick in the teeth on 10 Feb, continue to fumble.

Disposal of state assets

I would support the disposal of unproductive state assets, except what are called "key public goods", whether productive or not. In the case of Sri Lanka this would include petroleum and the CEB, the telecommunications backbone (SLT), railways, water supply and highways. Massive restructuring of all, of course, is needed to enhance productivity, but that’s another story. I also favour trade pacts with China, India and Singapore and the leasing out of real estate and harbours for reasonable periods to support economic development zones. Leasing out for 99 years is madness.

In this frame of mind, I find the sale of some state assets by the Indian government to raise funds for populist measures (Modi-care, farmer-support) appropriate. Privatisation of Air India will fetch about $7.6 billion according to Bloomberg but the government will have to transfer $4.7 billion of short-term debt to some government instrument. Still $3 billion is good money. The government owns 9% of cigarette maker Indian Tobacco Company which it can flog for $5 billion. It owns a minority stake worth $7 trillion in Hindustan Zinc and a more valuable stake in Oil & Natural Gas. It should not consider privatising the latter two. But there are other useless encumbrances be rid of. Finding money is not an insuperable obstacle.

Though demonetisation was controversial an after-effect has been that a huge number of new tax payers have emerged out of the woodwork. Tax evaders got a fright; next time may be less lucky. The government seems determined to go after them. The Modi-BJP outfit, for all its shortcomings, will get something done, but in poor Lanka a month after the electoral drubbing signs are that Ranil-Sirisena will get very little done in the next two years. Yes, this piece sounds optimistic on Modi; maybe the reason is my despondency at home.

The big shadow hanging over India is the China-factor including India’s recent setback in Nepal, Indian Ocean security concerns and the relationship with America. The relationship with the US will not come on an even keel till Trump goes. But foreign policy considerations are beyond the scope of my word count today.