With Gujarat Model demolished BJP looks for new issues

One of the most frequently asked questions (FAQs) in the political sphere today are: “Whythe BJP led by PM NarendraModi and Amit Shah changed strategy to use political issues to win the most crucial Gujarat elections and pushed economic issues to the back burner?

The answer is simple: The political wizard and super craftsman that Modi is, who ruled Gujarat unchanged for 20 years, first won the nomination for leadership and Prime Minister-ship within the BJP against all odds and senior leaders such as LK Advani, thought to be the logical successor to Vajpayee, used economics more than politics to sweep the 2014 general elections on an anti-corruption drive and the noted Gujarat model of development.

But off late, there has been much criticism amongst economists about how successful the Gujarat model of development has actually been, both in the home state as well it’s so called replication at the National Level. All seemed well with Modi’s economic measures starting with his powerful anti-corruption drive, restoration of investor confidence in India, pushing up India’s sovereign ratings with the biggest of rating agencies globally, bringing India closer to the world with his aggressive foreign policy initiatives and successfully reuniting the SAARC which had seemingly been fragmented with an over ambitious neighbour China trying to woo them into its net.

November 08 2016 changed all that. Officially described as a measure to unearth black money, wipe out funding to terrorists, crush Pakistan’s ISI pumping fake currency of high denominations into the Indian market, the demonetisation action actually produced collateral damage. Besides making people run for scarce currency in essentially cash driven economy, crushing the small economy, demonetisation had been viewed with suspicion in political circles as a move that was meant to wipe out political rivals such as Mayawati of BSP and Mulayam family who held most of their political funds in cash. BJP successfully won the UP elections winning an overwhelming majority of seats against all odds and predictions that Mayawati was on the rise and Akilesh could retain most seats.

It was economics that won the elections and not the Ram Mandir issue. But in Gujarat BJP changed track…… because Modinomics with Demonetisation and GST seemed to produce much collateral damage hitting small businessmen, a bulk of large number of voters in the business dominated state.

GST came as a severe blow to merchants in Gujarat as the various slabs hit them hard making the government to do a rethink on reclassification of the five tier slab extending mostly from 5% to 28%. So political issues such as appeasing the patedhar community and protection to the Muslim community (the abolition of triple talaq found echo amongst Muslim women dividing the minority vote). The Gujarat model was not talked about even though opposition led by Congress made muted criticism of this being a failure as BJP had successfully diverted attention.

Economists present differing opinions on the Gujarat model of development with some of them saying that the PR man that Modi is, he successfully window dressed the model in the 2014 general elections but cleverly put it behind on the back burner in timefor the 2017 assembly elections.

Here’s why: Let’s look at the criticism as published in the media. In an article in a newspaper,  Jayati Ghosh , leading economist, Jawaharlal Nehru University, says: “ The myth of Gujarat’s economic growth was effectively punctured in 2014 by the impressive volume co-edited by Indira Hirway, Amita Shah and Ghanshyam Shah (Growth or Development: Which Way is Gujarat Going?, Oxford University Press, 2014). They showed that much of the high growth so effectively advertised by the Modi state government was really a continuation of past trends which in turn were largely due to Gujarat’s advantages in agriculture and manufacturing, aided by the easy availability of land and infrastructure facilities such as electricity – all of which predated chief minister Modi. “

But in addition, further economic growth under Modi’s tenure as chief minister was heavily reliant on attracting large corporate investment through large subsidies and incentives of various kinds. This meant that the income growth was very unequal, so that the benefits of the growth did not percolate to the people as propagated by the ‘trickle-down’ hypothesis, says Jayati Ghosh.

Given Prime Minister Modi’s famous invectives against corruption, the multiple favours given to large industry as part of the strategy of encouraging industrialisation also meant that Gujarat was one of the states where ‘crony capitalism’ flourished, Jayati Ghosh claims.

Certain industrial groups, she alleges, were particular beneficiaries of the economic policies of the Modi government in Gujarat, such that the rise of the groups like the Adanis was almost coterminous with that of the Modi-controlled government in the state. Meanwhile, the large incentives provided to large corporate players (but not to small and medium enterprises) in terms of cheap or free land, water and other infrastructure created both extremely distorted markets for these as well as adverse fiscal consequences, she further claims. The huge expenditure on incentives and subsidies left less public funds for social sectors, so that Gujarat had much lower per capita expenditure on social sectors compared to other states as similar levels of per capita income, and indeed performed quite poorly in this regard among the major states.

Another Economist Maitreesh Ghatak,claims the growing gap between income growth and conditions of life, including the fact that Gujarat’s social indicators are generally much worse than comparator states with similar per capita GDP, and are only middling among all states.

Electorate outside Gujarat was easily  influenced  by   ‘Modinomics’ and voted for him as they thought he alone could generate positive economic transformation and productive employment generation across the entire country, using the magic he had already produced in the state of Gujarat, opine economists . “But the hard reality of lack of development would presumably be hard to conceal from the people of Gujarat themselves. Despite that, they continued to vote for the BJP, which even experienced rising vote shares over successive state elections”, the economists observed.

Since the economy emerged as a major – even critical – aspect of political discussion in the state, it was put on the back burner because economic problems brewing for some time were becoming more pronounced within and outside the state, some economists argue. From the Patidar agitation for reservations to the counter protests, from the demands of Dalit communities, to the small traders and others claiming that their livelihood has been damaged – the story is about how economic processes are failing significant parts of the population, economists claim.

But the industry associations such as CII, ASSOCHAM and FICCI bank on Modinomics to restore the economy back to the rails as the government goes all out to kickback the manufacturing sector, woo investors and enhance public expenditure considerably on public private partnership projects in the infrastructure sector to bring back growth and generate employment, both of which are big issues before the elections. So there is a line dividing the rich and the poor, how BJP walks the tight rope to woo the electorate is to be seen.

(TN Ashok)