Politics Is Back in Political Economy
Exactly 30 years ago, writing in this space, I argued that there are two companies in Reliance Industries. One sets up manufacturing plants and sells products while the other is focused on raising capital and managing it well through its treasury. They are in a symbiotic relationship. Similarly, there are two Narendra Modis: one administers the country from a vastly expanded prime minister’s office (PMO) while the other is on a perpetual political campaign to win votes by maintaining a large-than-life image in numerous ways. For ten years this strategy worked well. Mr Modi, the politician, won most of the elections using a recipe of Hindutva, nationalism and welfarism, supported by well-oiled party machinery.
On the other hand, under prime minister (PM) Modi interest rates were moderate, the fiscal deficit was under control, indirect taxes and levies were raised sharply, and higher revenues were deployed to roll out massive infrastructure projects. The stock market cheered and part of the urban elite were in raptures buying into every idea and utterance of Mr Modi, no matter how many times he shifted the goalpost or replaced old slogans with new ones. They were confident that he was on his way to a historic landslide in the general election 2024.
To the shock and surprise of most people though, the election results proved that the last 10 years were an exception. The norm of the previous 25 years—coalition politics—has reasserted itself. Before the elections, politics mattered less. Mr Modi’s popularity had ended any question about ‘who would rule India’. Now politics has entered the political economy again, as was the norm during Narasimha Rao’s regime, to later experiments with Janata Dal, the Bharatiya Janata Party (BJP)-led coalitions, to the two Congress-led ones right up to 2014.
Is coalition politics detrimental to the economy? Can Mr Modi, an autocratic leader, run a coalition government? There are strong arguments for and against both these questions. We don’t know the answer. What is more important is the answer that we know. The electorate has sent a clear message that Hindutva, nationalism and welfarism are not enough of a draw anymore. The first two don’t put food on their plate. The third delivers a bare minimum. But which voter, exposed to aspirational lifestyle streaming from Instagram, Facebook, and entertainment serials, is interested in the bare minimum?
It now appears that an embarrassing torrent of memes, catchphrases, alliterative coinages, clever abbreviations, schemes, yojanas and slogans such as Achhe Din, Amrit Kaal and Viksit Bharat, all had a ‘sell-by’ date. People are not buying them anymore. Yeh Dil Maange More. The farmers want higher prices for produce, the youth want employment, mothers desire education for their children, and wager-earners expect higher wages. Can any political formation deliver these?
When Mr Modi became PM in 2014, he made many promises. One of them was that farmers would get more than half the cost of production as profit. This did not happen. In 2016, he announced something even more lucrative: farmers’ income would double in six years. Not only did these prove to be empty promises but, in a bizarre move to reform agriculture, he tried to ramrod three farm bills through the parliament, in a high-handed manner.
The farmers went on the warpath. The government responded in an even more autocratic manner, digging up roads, placing spikes and putting up barricades. Inflation in healthcare and education, which impacts every citizen, is in double digits while the official inflation is ridiculously under 5%. Rural wages are stagnant which means they are sharply lower in inflation-adjusted terms.
The upper middle class didn’t know the real story outside their own city because mainstream media was persuaded not to report the distress on the ground. Through a fallacious logic, a K-shaped recovery was dismissed as a better alternative than everyone getting poorer. Now, the elites are suddenly worried about what else the unwashed masses would do if they remain unhappy with five kg of ration per month.
The only answer is a fundamental transformation, not more welfarism and certainly not slogans and memes. One part of the transformation is empowering the private sector, which alone can establish a long-term sustainable cycle of job creation. It may sound exaggerated but I think it is Mr Modi who should worship job-creating businessmen, rather than the other way around.
Ten years ago when Mr Modi came to power,  the hope was that he would end crony capitalism and rampant corruption that flourished under the Congress-led coalition government; and it would be replaced by a rule-based regime that would cut taxes, red tape and encourage entrepreneurship.
Instead, the climate for 'doing business' remains forbidding, taxtortion is still rife; corruption at the state and district levels has increased; oil prices remain extortive with high taxation; and continued red tape has kept the enterprise system as stifled as before. There has been little progress on 100 smart cities, while the existing ones are bursting at their seams, further sapping the productivity of people and businesses.
All these indicators got worse under the BJP despite an absolute majority backed by supportive constitutional institutions and media. Does anyone expect these markers to improve now under a climate of more politics and less economy? Assembly elections are coming up in three key states of Maharashtra, Jharkhand and Haryana. The other political Mr Modi will get busy once again in campaigning. There is no time or opportunity for him to make transformative changes that will improve education, health or labour productivity, or lower the frictional cost of doing business – changes that can trigger sizeable and sustainable job creation. We will just muddle along as we have done in the past.
(This article first appeared in Business Standard newspaper)
3 weeks ago
Its our country's population thats preventing what is possible. have seen people sp male , produce as many more babies, without thinking how he is going to feed then with earning he is getting
4 weeks ago
So far none has answered the question with certainity and accountability "who or which Government :would improve education, health or labour productivity, or lower the frictional cost of doing business – changes that can trigger sizeable and sustainable job creation in our country".
Meenal Mamdani
Replied to Jambunathan comment 4 weeks ago
This is a silly question.
There is not one person or one government that can do what India need.
Policies are formulated after discussion between experts and these policies are discussed in parliament.
A responsible Opposition will comment on the positives and negatives of the Bill and then it is adopted and implemented by not just one govt but successive ones.
Multiple people are involved in identifying a problem, formulating a solution and implementing it.
That is what is needed in our parliament, a thorough discussion of a proposed policy but under Modi the parliament has become a rubber stamp. Important decisions made by a committee and then ramrodded through parliament.
No one individual, not even Nehru, no one single party, not even INC, can claim the entire credit for any policy.
4 weeks ago
The major skill of an entrepreneur is in managing the environment and in feudal societies like the Indian subcontinent it is much more so
4 weeks ago
Business Standard, The Wire, The Hindu, Firstpost, Print, The Indian Express, Gujarat Samachar, The Financial Express and to some extent even TOI are known anti Modi propaganist who never see anything positive under Modi. It is very easy to highlight negatives and malign someone without making any mention of the positives. They are paid to create narratives from outside India. No wonder this is one such piece of misinformation being spread to set narratives before assembly polls in key states.
Kamal Garg
Replied to harsh_61 comment 4 weeks ago
Just like Raghunath Rajan.
4 weeks ago
Absolutely, with aspirations running high & Mobile internet in hands-

BJP NDA government needs to clearly ficus on FARMERS & PRIVATE Businesses from MSME to Large Corporates generating more Job opportunities for "largest YOUNG population of world".
4 weeks ago
Well written with hard facts.
This ruling dispensation and the leader are very much articulated to use all the resources in hand to improve their electoral prospects and it will continue for 5 more years without break. The citizens can enjoy the free ration and go through the grind without any clue about growth.
Meenal Mamdani
4 weeks ago
Sadly Modi started believing the hype created by him, anointing himself as not merely human but descended from gods.
Modi needs good administrators as well as good policies. Both of these are available in India but Modi thinks that he alone has the answers, just the way he announced demonetization and closed down the entire country with less than 8 hours notice.
Modi is very good at politicking, misusing government agencies to harass opposition politicians, enticing defections from other parties to topple state governments, etc.
But in coalition politics he needs to be patient and conciliatory, qualities that were absent in the last 10 years as they were during his reign in Gujarat.
Let us see what he makes of the chance he has been given to leave a more competent, less communal, image of his term in office.
4 weeks ago
I can understand that the article should have appeared in Business Standard. Can the author say with certainity and accountability who or which Government :would improve education, health or labour productivity, or lower the frictional cost of doing business – changes that can trigger sizeable and sustainable job creation"? Just because a conglomoration of opposition parties without any acccountability and common leaderhip "have won a couple of seats here and there" lets not come to the conclusion that the last ten years were bad for Indian Economy. Lets not forget the bad effect of covid and the way in which it was managed not only in India but our help in managing it all over the world, especially the smaler countries. At the same time , yes , for the first time in India, the middle class were taken care as never before. But they are the backbone of the economy and they are needed. Aid packages were properly targeted to the needy and middlemen were by and large eliminated through direct benefit scheme. Understandably, the class which depended on this income are in deep trouble . They encourage people to write these kind of articles . However, there is no doubt that politics will be back in poliical economy which unfortunately may not be good for the country.
Kamal Garg
Replied to Jambunathan comment 4 weeks ago
So far, no indication of an overbent Modi under coalition pressure as used to happen earlier and if that's what the author or others expect as "normal coalition management", probably they need to rethink and rewrite their mindset.
Replied to Jambunathan comment 4 weeks ago
In democracies, politics and economics are strange bedmates.
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