Home Opinion Terms of Trade | Decoding the BJP’s success despite economic slowdown

Terms of Trade | Decoding the BJP’s success despite economic slowdown

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This column, unlike our data stories that appear as Number Theory in the print edition of Hindustan Times, does not use graphics. However, it will make an exception and use a simple table for this week’s edition.

First the context. The National Statistical Office (NSO) released GDP numbers for the quarter ending September 2022 on November 30. The headline growth number was 6.3%, exactly what the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) had projected.

Let us assume that RBI’s projection of 7% for annual growth in 2022-23 will also hold good. Let us assume further that the International Monetary Fund (IMF)’s projection of 6.1% for 2023-24 will also be correct. This means India will still be the fastest growing major economy in the world.

Here is where a comparative context is useful.

If one were to compare the compound annual growth rate (CAGR) of GDP for the current government (using the growth projections discussed above) and its predecessor, then the five-year performance of the second Narendra Modi government, purely on this metric, is significantly lower than not just the first Modi government but also the previous two United Progressive Alliance (UPA) regimes.

To be sure, the pandemic has played a major role in the sub-par indicators under the second Modi government, but its economic pain is not just a statistical construct. The difference becomes much bigger if one were to use the old GDP series to measure growth during the UPA years.

The economy-politics interface

The economic story is known. But here is the political puzzle around it.

Gujarat is in the middle of assembly elections, with half the state’s constituencies having voted on Thursday. But if there is one thing that has been missing in the Gujarat campaign, it is a narrative of large-scale economic distress.

Higher prices for crops such as cotton and groundnut, as I suggested in an earlier piece in HT, potentially explains the absence of rural distress in the Gujarat campaign. However, Gujarat is also among the most industrialised states in the country. And in this domain too, there are clear gaps in the economic story.

Most economists suggest that the post pandemic recovery has been K-shaped, with smaller businesses and the informal economy having suffered disproportionately. The manufacturing component of Gross Value Added actually saw a 4.3% contraction in the September 2022 quarter. Things were much better in the quarter ending September 2017 (8.7%) despite the back-to-back shocks of demonetisation and Goods and Services Tax (GST). Economic discontent was a much bigger narrative in the Gujrat elections in 2017.

So what explains the lack of discontent and the counter-intuitive mismatch between economic performance and its political narrative?

The easy — and lazy — answer to this question is that the Bharatiya Janata Party (BJP)’s subjective appeal (read Hindutva) triumphs over material anger of the voters and they continue to vote for the party despite material difficulties. There is definitely an element of truth in this argument and the BJP does ratchet up the communal rhetoric during elections.

However, if it were completely true, the opposition should shut shop or start a social reform movement to first purge Hindutva out of the electorate’s mind, because the BJP would keep winning elections no matter what its performance on the economic front is.

Of course, such a simplistic and convenient argument is not true. The objective fact is that the BJP is vulnerable to economic anger. Rural distress played a major role in the BJP’s majority coming down in the 2017 Gujarat elections. Policies such as announcement of PM-KISAN after the BJP’s defeat in 2018 assembly election cycle and announcement of schemes such as the PMGKY after the pandemic clearly show that the BJP is extremely careful to pre-empt economic anger among the most vulnerable sections of the society.

So what explains the relative immunity of the BJP to the economic slowdown? It is here that a distinction needs to be made between the difference in political appeal of aspirational and palliative driven economic narratives.

The distinction in economic narratives

That the India reform story has produced different sets of winners and losers – the latter being much bigger numerically – is a well-accepted political fact, notwithstanding the official spin regimes try to offer.

The current opposition especially the Congress’s main economic critique is that the Modi regime is completely biased towards the “haves” which the Indian reform experiment has produced. This is what explains the dominance of relief measures such as farm loan waivers, cash transfers and even the restoration of the Old Pension Scheme by opposition parties in India. Simply speaking, the opposition’s economic programme is overwhelmingly driven by what can be described as a palliative-focused narrative. It is aimed at reducing the pain which the reforms have produced.

The Modi government’s basic economic narrative is that not only are its welfare benefits for the “have-nots unprecedented, it has been achieved without putting any fetters whatsoever (unlike previous regimes) on the aspirational energies of those who have benefitted from the reforms in the Indian economy.

The palliative-driven narrative is extremely effective at certain times and within certain constituencies. It is effective during a crash in agricultural prices, acute drought or against policy measures which seek to tilt the balance of economic forces away from the pre-reform beneficiaries. The farmers’ protest in India’s green revolution belt against the three farm laws is a good example of the last kind.

However, what is equally true is that it is a little rich to expect the post-reform generation – their share in the total pool of voters is only going to increase – to spend their political energies in asking for palliatives for what they see as increasingly unviable and unattractive professions.

When the opposition does talk about aspirational narratives, its content and tone is hardly different from that the government. The Opposition’s protests over shifting of some big-ticket investment projects from Maharashtra to Gujarat and almost all opposition ruled states also trying to attract start-ups are some such examples.

If one were to explain the central premise of this kind of an opposition strategy, it boils down to waiting for a revolt by, if one were to borrow Frantz Fanon’s phrase, the proverbial “wretched of the earth”. This kind of strategy is more likely to work in economies that are completely crisis-ridden. India, despite all its economic weakness and (perhaps) deepening economic inequalities, is hardly an example of an economy mired in crisis.

What can be an alternative economic narrative that the opposition can champion in India? There are no easy and obvious answers to this question. They are even more difficult for the opposition, especially the Congress, because some of its most important economic ideologues are as wedded to the neoliberal economic framework that sees so-called reforms as the only way forward for the Indian economy, just like the key advisors and thought leaders in the current government. It is also very unlikely that theory alone will generate useful and, more importantly, politically scalable answers to this question. However, what it also true is that unless the opposition starts engaging with the question sincerely, the BJP’s economic narrative will continue to be more influential.

Every Friday, HT’s data and political economy editor, Roshan Kishore, combines his commitment to data and passion for qualitative analysis in a column for HT Premium, Terms of Trade. With a focus on one big number and one big issue, he will go behind the headlines to ask a question and address political economy issues and social puzzles facing contemporary India.

The views expressed are personal

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