Modinomics deconstructed

| | in Oped
Modinomics deconstructed

Is the Prime Minister looking beyond political arithmetic and selflessly putting the nation first, even over concerns of electoral winnabilty?

Clearly, there is a global shift towards clean money, as the era of dirty cash gradually gets flushed out of the formal economies of developed nations. To that extent, Narendra Modi is not isolated among world leaders in his policy activism at economic cleansing as India has joined the fight against tax evasion becoming a signatory to OECD’s information exchange to end base erosion. The foundations of modern states now globally rest on shrinking the informal economy and generating revenues through higher tax compliance needed by governments to deliver better amenities to its people. This necessitates citizens contributing their fair share in nation building, for which we don’t need higher taxes for sure, but we do need a wider taxpayer base. As nations unite through forums like the G20 to synchronize information sharing of tax-havens, local Governments are closing-in on the ‘robber barons’ of capitalist societies.

The Economist says crony capitalism under Modi shrunk to 3 per cent of GDP from 18 per cent in 2008; also, the black money component at 10 per cent of GDP is effectively shrinking through efficient data-mining post demonetization. Conversely, India’s top 1 per cent now hold 58 per cent of the country’s total wealth according to an Oxfam study and that inequity does not augur well as it is as much a global concern as illicit wealth. All wealth is not black money, of course, but narrowing income disparity has become a major electoral issue the world over and the next big move by governments will be to play leveler in order to seek re-election. However, disruptive reforms take five to ten years to reflect in GDP growth and convert to jobs. Consequently, Modi has suffered an erosion of his core catchment voter base of traders, youth and the upper middle class. And while World Bank or Moody’s upgrades are good news, they only act as indicative milestones that point to India being on the right side of reforms but mean little to voters.

Economic restructuring, or ‘perestroika’ as it was termed in Gorbachev's Soviet Union, is being undertaken almost concurrently by individual nations to strike at the root of corruption. Most leaders may be content with the decline in the Corruption Index, even if they personally grew wealthier. To that extent, Modi’s personal integrity ratings have soared in comparison to Donald Trump, Xi Jinping, or Vladimir Put in. While 79 per cent believed “Put in delivers a ‘controlled corruption,’ where only his cronies can reckon for the rewards,” latest WEF ratings show Modi leads the third-most trusted government in the world. Success or failure of reformist leaders must benchmark personal integrity plus the delivery of their reforms to global peers who share similar concerns on the exodus of national wealth and pilferage of national resources.

Importantly, were Trump’s, Putin’s, and Xi’s ‘perestroika’ motivated by the quest for personal aggrandizement, for consolidation of political power, or for the larger good of the country? Between personal gain and personal power, the former is moral corruption while the latter can be put down to personality traits of narcissism all strong leaders possess which is not necessarily an evil in itself. Modi's prime motivation stems from putting the ‘nation first’, retaining dominance within his party and stifling the rise of any credible opposition. In comparison, Put in runs an oligarchic and graft-ridden regime, as Russia scores poorly in the Corruption Perceptions Index. And though for Trump it’s ‘America First’, the promise on which he was elected, his Cabinet is the richest in modern history with its members worth a combined $10 billion. This apart, his dynastic propensity and ‘conflict-of-interest’ issues continue to haunt him since his ascendency. And even as Xi made fighting corruption a cornerstone of his reign, “China’s political order remains a system for funnelling private rewards to members of the ruling coalition, making Xi’s image as China’s ‘Mr Clean’ a mirage more than reality,” writes a leading analyst.

America’s forced retreat from globalization and multilateralism leaves Xi as the strongman in the fray for dominance over trade and global supremacy. Xi has consolidated his hold on an absolutist political system, complete with a semi-freemarket economy complimented by a lavish dose of hypernationalism. Also, his anti-corruption purge has been absolute in disciplining rivals and prosecuting a million party members and provincial officials, which helped him secure his hold within the party, and the party’s power over the country. However, given the differences of state structures between absolutist China and democratic India, Modi’s template ought to be on the lines of Singapore’s Lee Kuan Yew and his transformational success of the island city turning into a global financial hub. If Modi can replicate Singapore's unparalleled institutional set-up that stringently complies with the rule of law and match its continuous vigil against corruption, he will go down in history as the leader on whose watch India realised its potential.

Nationally, the impact of reforms would be gauged by the scale of victory in Gujarat, considered as a second referendum on Modi after the win in Uttar Pradesh,and thereafter how soon GDP revival converts to jobs. Globally, elections are being lost or won on GDP as the pivotal determinant that correlates to livelihoods. If growth data for the third quarter falls below 5.7 per cent, the remaining 18 months of NDA’s term could well swing towards welfarism and ‘povertarian’ politics of UPA times, as the 2019 General Election beckons. Economic restiveness runs high with growth-propellers for economic revival missing and industrialists concerned that if even India’s 200 top companies are being unable to create new jobs it is going to be really hard to generate growth that pulls all strata of society along.

So, with the benefits of reforms expected to manifest only post-2019, has Modi factored in the timing overlap to look beyond political arithmetic by selflessly putting the nation first, even over concerns of winnabilty, and placed his trust in the innate wisdom of the Indian people? Because for results to show, the progress of disruptive reforms cannot be timed to sync with elections as benefits take time to play out. Successive governments deferred radical reforms for precisely this fear of short-term dislocations, because they do not yield instant political dividends. Transforming a country’s work ethic in corporate and administrative governance is a prolonged process. For this, Modi needs time away from being a star campaigner in perpetual election-mode, as State elections invariably turn into serial referenda on reforms. And no Prime Minister can live from test to test at an average of four to six times a year that the States go to polls.

Ultimately, BJP’s winning formula for 2019 would go beyond reforms to a Ram Temple in Ayodhya, jobs for youth, and a good MSP for farm produce. Because for now, the government is unlikely to expend further  political capital to hasten the pace of reforms till 2019 and will instead allow the economy to recalibrate. So, don’t expect acchey din till the process of economic cleansing, which will put India firmly back on a higher growth trajectory, is complete.

(The writer is an author and columnist)

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