Was Modi’s Speech Socialist In Tone? Definitely Yes

So, ultimately, there was no wielding of the big danda against black money and benami property holders and corrupt babus. Instead Prime Minister Narendra Modi pulled out a host of goodies from his pitara as a thank-you-for-bearing-with-me gift for sections that were said to be most affected by Operation DeMo. The speech was an acknowledgement that certain sections had been hurt more than others and needed some relief.

Delhi-ites disappointed about not getting a ladoo per family for standing in queues for their money, as the new Delhi BJP president Manoj Tiwari had promised, shouldn’t be cribbing any more.

For all those hugely disappointed with the decidedly underwhelming speech, here’s a question – who told you the speech would be about tough announcements, chest-thumping about the success of demonetisation or even transferring money into accounts of the poor? The problem is we ourselves worked up hype and are now blaming Modi for letting us down. The only person who should be sulking about this budget-like speech should be finance minister Arun Jaitley, but who knows what’s in store in the budget?

But let’s stop sneering about the big picture – or the lack of it - and let’s focus on looking the gift horse in the mouth. Will the ameliorative measures provide the succour they promise?

The one announcement that deserves to be commended without reservation is that of transferring Rs 6000 into the account of pregnant women to encourage institutional deliveries and improved nutrition. Modi did mention that this is a pilot project in 53 districts, but he kept quiet about the original name of the scheme and its launch year. This was the Indira Gandhi Matritva Sahyog Yojana, a conditional cash transfer programme for pregnant and lactating women launched in 2010. In 2013, it was subsumed under the National Food Security Act. What Modi announced was a national rollout of this programme. Never mind Modi’s churlishness in not acknowledging that this was initially a United Progressive Alliance (UPA) government policy, it would be churlish to not appreciate his announcement. India’s high infant mortality rate and maternal mortality rate required such an intervention.

The announcement on fixing the interest rate on fixed deposits up to Rs 7.5 lakh of senior citizens at 8 per cent for 10 years is a clear attempt to woo the urban middle class. Interest rates had started falling because banks are flush with funds and this was worrying retired persons who only had pensions and interest income to live on.

But which are the farmers who are going to benefit from this? As this article points out, informal sources dominate the lending scene in rural areas and the small and marginal farmers have negligible access to institutional credit; it is the better off farmers who benefit more. Sure, Modi’s announcement is about existing loans and not about correcting the skew, but it is important to keep this fact in mind.

There’s a similar problem in the case of the sops announced for the small and medium enterprise (SME) sector. Modi announced that government guarantees for loans for small businesses doubled from Rs 1 crore to Rs 2 crore. Anil Bharadwaj, secretary-general of the Federation of Indian Micro and Small and Medium Enterprises (FISME), welcomes this but points out that less than 5 per cent of MSMEs have access to institutional loans; over 95 per cent of these businesses take loans from informal sources at steep interest rates. Besides, he says, this measure will have to be accompanied by a shoring up of the capital base of the Credit Guarantee Trust Fund for Micro and Small Enterprises.

Modi asking banks to raise the credit limit for small industry from 20 per cent of turnover to 25 per cent and increase working capital loans from 20 per cent to 30 per cent for companies that do digital transactions are good palliatives, but the real problem the sector is facing, notes Bharadwaj, is the absence of demand. With cash limits remaining for some more time, he’s not sure if just these measures will help.

It’s not clear how the sops for low-cost housing – interest subventions and hiking the targets under the Indira Awas Yojana – are going to help, unless it is to give a fillip to the construction sector, where there have been significant job losses.

Going back to the big picture, was Modi’s speech socialist in tone? Yes, it was, and in case anyone missed it, he expressly invoked socialist icons – Ram Manohar Lohia and Jayaprakash Narayan - and dyed-in-the-wool Congressman K. Kamaraj. This is yet another reminder that people should stop seeing him as a Indian reincarnation of Thatcher-Reagan. He’s really a modern-day, more business-friendly Indira Gandhi in his economics.

And, yes, this was also about the Uttar Pradesh elections; (even Operation DeMo was about that?) Prime Ministers are political animals, not technocrats. And as election-oriented political speeches go, this did make the grade.