By S. Sethuraman
The Modi Government has sought to sidetrack gut issues in economy’s decline, playing populism ahead of 2019, with a new promise to ensure electricity to all households in the country before the end of 2018. For economy watchers, his sop is revival of the discarded PM Economic Advisory Council (EAC), reconstituting it in his fourth year of office, to “analyse” issues and “advise” the Prime Minister thereon.
But this political gimmick cannot wash away any of the chronic ills besetting the economy with growth slowdown touching a low of 5.6 per cent (GVA) in the first quarter of 2017/18.Inflation is on rise, food and fuel in particular, also compounded by GST hassles, while the latest lowering of weather-dependant kharif foodgrain crop estimates would add another layer to the bleak price outlook in this fiscal year..
Manufacturing continues to be on low key and there are hardly signs of revival in investment or easing of stresses in the state-owned banking system. Government is cognizant of what needs to be done to restore health to the banking sector but there is dilly-dallying both in regard to enforcement of an action plan agreed on in consultation with RBI or moving forward on recapitalisation of select banks to facilitate resumption of stalled bank credit.
The Prime Minister and his political advisers had apparently decided that it would be politically unwise, at this stage, to concede ills of the economy, greatly attributed by critics, to demonetisation and a hasty launch of GST. For Mr Modi, demonetisation remains a total success, if nothing else it could at least be claimed to “clean up”, the economy of the future.
To give in to other sectoral weaknesses as well, would amount to admission of failures in the “maximum governance” theory of the Modi Government. With RSS cadre reports also of signs of dissatisfaction in the country over emerging trends, a political strategy was considered expedient in run up to 2019.
Developments in UP entrusted by Mr Modi to Yogi Adityanath are far from salutary and the most recent student unrest and police actions in BHU add to unedifying spectacles in this largest state, a hunting ground for BJP. All this at a time when BJP leadership under Mr Amit Shah is determined to firmly secure the party’s hold on power in Gujarat, MP, Chhattisgarh and Rajasthan in state elections before Lok Sabha poll 2019.
Apparently sensing a weakening of the ground under them, given the visible unrest among students in the country along with continuing farmer distress and new agitations for reservation in jobs, the Modi-Shah duo held an extended session of BJP’s National Executive to ward off immediate perils.
There was resounding endorsement of the leadership and its economic and foreign policies – areas where opposition attacks on the majoritarian party had become strident. The Prime Minister was praised in particular for his handling of Doklam dispute with China and the assertion of India’s interests in its vital region.
Moreover, the Pime Minister had the party adopt his “Sankalp Se Siddhi”, (“New India Movement” 2017-22). a Modi five-year plan for BJP’s continued dominance in the polity. He has also been promoting at the same time, in a reversal of history, an iconic status for the RSS idealogue, Pandit Deendayal Upadhyaya in place of Jawaharlal Nehru, the architect of Free India.
A six-point political agenda in BJP Political Resolution seeks to rid the country of poverty, terrorism, casteim, communalism, separatism and corruption to realise the Prime Minister’s vision of a New India by 2022. Mr Modi has been seeking “transformative changes” to usher in a New India. First, Niti Aayog, his creature, was to come up with those changes. Its tentative plans made no headway.
And the Ayog itself has now become headless and there is no indication whether it remains in place. For, the Vice-Chairman Mr Arvind Panagaria has already relinquished office and returned to academia (USA) while the No.2, Mr Bibek Debroy, renowned economist, has now been named Chairman of Prime Minister’s Economic Advisory Council.(EAC).There are four other part-time members, noted economists.
The current economic slowdown involves issues of macro-economic importance and the new EAC may perhaps be asked to address them. Whether the new mechanism hit up by Mr Modi in a critical situation is asked to do so or not, a difficult situation is sought to be under-played by senior BJP Ministers. Mr Gadkari, Minister for Transport, called it “teething problems” for GST while Finance Minister Mr Arun Jaitley, in a lowered tune, talked of “a little dip” in growth in the first quarter.
Mr Jaitley had earlier admitted to too low a growth in April-June which cannot be lightly dismissed and investment and related policies would have to be looked into. In Government circles, even a degree of fiscal stimulus was not ruled out. The other prevalent view is such a boost for growth may be of little consequence beyond worsening fiscal deficit at a time of a global write-down of India’s growth outlook this year.
Even the RBI is expected to bring down its August growth estimate for this year at 7.3 per cent (GVA) when the Monetary Policy meets early in October. Despite rising CPI and WPI prices, Government would rather like RBI to turn accommodative from neutral monetary stance.
So, on a day the country was keyed to look for a composite economic package to be announced by the Prime Minister to stimulate growth recovery, with both fiscal and structural measures to strengthen demand and supply along with some reforms on further opening up the economy, the Modi Government has shown itself more concerned with populist schemes to entice the electorate in 2019. (IPA Service)