Modi 2.0: Reformist Economics or Right-Wing Politics?

Will Modi throw money at the banks as well as development schemes while maintaining fiscal discipline?

4 min read
Hindi Female

The headlines look good for Modi, but the fine print is not yet clear.

As Prime Minister Narendra Modi won a landslide victory to retain power, someone on Twitter quipped: now that they have won, will the Bharatiya Janata Party leaders take the 'Chowkidar' (watchman) tag off their handles? That might be symbolic of expectations that Modi's second innings in power on the back of an emotive national security campaign should shift to substantive issues on the economy and governance.

Sure enough, Modi's first tweet after the BJP-led National Democratic Alliance won was an amplification of the promise he made at the start of his first innings in power: "Sab ka saath, sab ka vikas, sab ka vishwas - Vijayi Bharat" (Support, development and trust for all equals a victorious India).


The mention of vishwas (trust) is new and perhaps is meant to subtly address criticism in the international media that Modi is a divisive figure who plays on religious sentiments.

His signal that he will get back from being a protector of borders to a provider of development to the millions who have voted for him will be welcomed, but
the strange thing is that the sheer magnitude of victory may raise expectations
from Modi 2.0.

He now has to balance the interests of the religious right within his party and the reformist economy lovers outside while making sure that the classic gap between growth and populist imperatives gets bridged.

That is not going to be easy because, on the one hand, there are unfinished tasks to be completed; on the other, contentious issues that he had put on the backburner may arrive on the PM's desk as part of a to-do list demanded by Hindu agenda loyalists.

The Reformer

Apart from balancing interest groups, Modi may have to deal with a persisting talent famine. His larger-than-life presidential image requires advisors, ministers and officers who can deliver things on the ground.

Key figures such as Arvind Panagariya, member of NITI Aayog, and Chief Economic Advisor Arvind Subramanian, departed half-way through Modi's first tenure to return to the USA. Finance Minister Arun Jaitley had to battle illness. We can probably list barely half-a-dozen minister-material folks to run the economy, whereas the world's fastest-growing major economy – aiming to be the next China – needs more.

If Modi’s call for “Vishwas” is about casting a net wide to invite a new crop of policy-makers and administrators, it would make tremendous sense.
Will Modi throw money at the banks as well as development schemes while maintaining fiscal discipline?

He might have to do this, though, at the cost of sidelining some people who may be stronger on loyalty than competence.

While the economy may not have been a critical issue in the general elections this year, an estimated unemployment rate of 6 percent and about 10 to 12 million people joining the work-force every year, suggests that the economy has to be fixed sooner rather than later. Key sectors such as real estate, leather, rubber and plastics are crying out for urgent attention.

The fact is that the Insolvency and Bankruptcy Code 2016, which was aimed, in Modi's first innings, at fixing a substantial non-performing assets problem in the banking system, has run into judicial and bureaucratic hurdles. Recapitalising public sector banks by throwing more cash at them means inviting a charge of fiscal indiscipline. But a new credit cycle has to begin, create capacities and spin jobs. All that takes time and effort and administrative panache.

A host of development schemes aimed at winning over the masses – be it the "Modicare" Ayushman Bharat health scheme, the PM-KISAN scheme for farmers or the one promising cooking gas cylinders for poor women – means more fiscal resources as none of these schemes have been scaled up significantly. Given the mandate that is close to a two-thirds majority, the implicit message is that these schemes must reach the scale for which they were intended.

Will Modi throw money at the banks as well as development schemes while maintaining fiscal discipline?

We will have to wait and see.


The Hindutva Icon

While all that will grab our attention, right-wing hardliners within the BJP may speak of its promise to abolish Article 370 of the Constitution that gives special status to Kashmir. They may want new measures to fulfill a long-standing promise to build a Ram temple at Ayodhya in the disputed spot where a mosque once stood.

Modi has to shed his "divisive" tag and yet manage potentially restless cadres who see him less as an economic reformer and more as a Hindutva icon.

This could well be tricky, with a poor election turnout in Jammu and Kashmir representative of the simmering discontent in the state, watched keenly by international investors. There is little doubt that Modi has to walk the tightrope on some issues despite his popularity.

To deliver on some of BJP's legislative promises, therefore, Modi might have to wait for enough strength in the upper house, the Rajya Sabha.

Will Modi throw money at the banks as well as development schemes while maintaining fiscal discipline?
BJP president Amit Shah in all likelihood will become a key minister as he has himself stormed into the Lok Sabha this election.
(Photo Courtesy: Twitter/@BJP4India)

BJP president Amit Shah, in all likelihood, will become a key minister as he has himself stormed into the Lok Sabha this election. If he becomes the home minister and tries to implement the controversial citizenship amendment bill held in abeyance to "Hinduise" India or burden some north-eastern states in pushing through the law, it might have repercussions that are tough to manage.

(Madhavan Narayanan is a senior journalist and commentator who has worked for Reuters, Hindustan Times, The Economic Times and Business Standard. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)

(This article was first published on BloombergQuint and has been republished here with permission.)

(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)

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Topics:  BJP   PM Modi   Economics 

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