This year will be crucial for the Narendra Modi government. His strategy must take into account the complex electoral math that will confront him in April-May 2019 and at the same time focus on a strong economic and governance agenda in the final year of his tenure.
The 2019 Lok Sabha election will set India’s political and economic agenda for the next decade. If the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government is returned to office, it can execute many of the reforms it has begun. If the Congress, buoyed by its resurgence in the Gujarat assembly election, manages to stitch together a coalition government, India could be in for a spell of political instability.
Prime Minister Narendra Modi’s strategy going forward must take into account the complex electoral math that will confront him in April-May 2019 and at the same time focus on a strong economic and governance agenda in the final year of his tenure.
A winning economic and political strategy for 2019 can be broken up into specific silos. Start with the electoral arithmetic. The BJP powered its way to 282 Lok Sabha seats in 2014 — the first clean parliamentary majority since Rajiv Gandhi’s 400-plus seats in 1984 — on the back of a strong Modi wave. Public anger against 10 years of the scam-tainted United Progressive Alliance government buoyed the wave.
But beyond Modi’s oratory lies cold, clinical calculation. To win a majority in the Lok Sabha in 2019, Modi knows he needs to again sweep the north and west and also make inroads into the south and east. It is a triumph of the Modi-Amit Shah strategy that, in less than four years, the BJP has replaced the Congress as the natural party of governance. The northeast citadel has been breached. So has Jammu and Kashmir. Only West Bengal and Kerala remain unconquered.
But 2019 won’t be a cakewalk. The BJP on its own won 171 of its 282 Lok Sabha seats in 2014 from just five states: Uttar Pradesh (71/80), Gujarat (26/26), Rajasthan (25/25), Madhya Pradesh (26/29) and Maharashtra (23/48). Obviously, the clean sweep in Gujarat and Rajasthan, the juggernaut in Uttar Pradesh and Madhya Pradesh and the big numbers in Maharashtra will not be repeated. Lightning doesn’t strike twice.
Allies are another problem. The Shiv Sena could pose problems in Maharashtra. The Telugu Desam Party (TDP) has lost ground in Andhra Pradesh. The Janata Dal United (JDU) though will help the NDA carry Bihar, while canny partnerships under the North East Democratic Alliance (NEDA) will reap a rich harvest.
The first part of Modi’s 2019 political strategy must therefore be to focus on the five critical states that gave the BJP 171 Lok Sabha seats in 2014. He will need to factor an erosion in these five states of around 30 seats from Rajasthan (where Sachin Pilot’s Other Backward Classses outreach has Chief Minister Vasundhara Raje deeply worried), Gujarat (with caste schisms likely to widen), Uttar Pradesh (where an Samajwadi Party-Congress-Bahujan Samaj Party grand coalition could cause cleavages), Maharashtra (poisoned by the Shiv Sena’s lumpen politics) and Madhya Pradesh (where Jyotiraditya Scindia’s campaign could hurt Chief Minister Shivraj Singh Chouhan who faces strong anti-incumbency).
To lose 30 seats in these five big states can be partially compensated with gains in the Northeast, Bihar, Odisha and the south. But to hit 272-plus again will be a challenge. Beyond the numbers lies Modi’s second key political strategy: governance. Accountability is the key to good governance. Here the NDA government’s record has been disappointing. It hasn’t put a Lokpal in place. Police reforms mandated by the Supreme Court of India in 2006 have not yet been implemented either in letter or spirit. In the few states where the seven-point Supreme Court directive has been honoured, it has been diluted so much that professionalising and modernising the police force remains one of India’s more intractable problems.
Worryingly, the Right To Information (RTI) Act, a sharp tool to hold politicians, bureaucrats and other public servants accountable, has been step-mothered. Pending RTI cases are now in the lakhs. In Maharashtra alone, 40,000 RTI requests remain unanswered. Vacancies for information commissioners have not been filled, making the RTI almost dysfunctional.
Modi pledged minimum government and maximum governance when he took office. Without a Lokpal, police reforms and an active RTI ecosystem, that pledge will remain unfullfilled. While the Prime Minister and BJP president Amit Shah fine-tune the electoral math for 2019, good governance must top their priorities. It’s useful to remember that apart from serial scams, a key reason for the Congress to plummet from 206 Lok Sabha seats in 2009 to 44 in 2014 was public anger, fuelled by the now largely forgotten Anna Hazare movement, at the arrogance and lack of accountability in the UPA government. It is a lesson the BJP-led NDA must not lose sight of in the run-up to 2019.
The third political strategy Modi should focus on is social inclusiveness. The Prime Minister has to balance his core base that is unabashedly majoritarian, with the promise of vikas. Development is Modi’s calling card. But without societal cohesion, development will remain underwhelming. While the more vocal members of the BJP have engaged in majoritarian politics that appeals to Modi’s core base, he himself has steered clear of divisive politics. He has allowed the symbolism of appointing a monk as chief minister of Uttar Pradesh to send its own message to the faithful while remaining true to his pre-election pledge of development.
An important element of crafting a winning political strategy is foreign policy. Modi’s approach to Pakistan has evolved significantly from his outreach to then prime minister Nawaz Sharif at his May 2014 inauguration. Pakistan’s terror perfidy has been met with a surgical strike across the Line of Control, robust counter-terrorism in Jammu and Kashmir, and underscoring the principle he declared in a pre-election TV interview: terror and talks can’t go together.
Modi’s successful strategy over the Doklam standoff with China and the emerging quadrilateral with the United States, Japan and Australia have burnished India’s international credentials. Along with India’s win over Britain in nominating an Indian judge, Dalveer Bhandari, to the International Court of Justice (ICJ) at The Hague, Modi can now weave the emergence of India as a geostrategic power into his overall political campaign for 2019.
As I wrote in my book The New Clash Of Civilisations: How the Contest Between America, China, India and Islam Will Shape Our Century, India must punch at its true geopolitical weight: “To play a role in world affairs in line with its size, population and economy, India needs to think and act like a major power. It must fix governance at home, build a strategic foreign policy and leverage its demographic and economic assets. In the emerging world order, the India-US partnership will be as pivotal as the Anglo-US axis was for most of the twentieth century.”
Two radical reforms — demonetisation and the goods and services tax (GST) — have disrupted India’s economy. A putative gross domestic product (GDP) growth rate of 8 per cent, well within reach in 2017, has declined to an estimated 6.75 per cent for fiscal 2017-18. Both disruptive reforms could have been executed more thoughtfully. GST is now back on track. By bringing the vast hinterland of the informal economy into the tax net, revenues in the long term will rise rapidly. While GST will boost the numbers of small corporate and trade taxpayers, demonetisation will suck in individuals to elevate India’s tax-to-GDP ratio well above the current 10 per cent. A collateral benefit of both demonetisation and GST is digitisation. While the spike in digital transactions shortly after demonetisation has slowed, digital payments are higher today than a year ago and rising. To build on the incipient recovery in the economy after the twin disruptions of 2016-17, Modi must now focus on three key economic issues.
First, reform the tax system from the bottom up in the next Budget, scheduled for 1 February. Corporate tax must come down to 25 per cent as promised in an earlier Budget. This will spur private sector investment which has slowed to a trickle. The Direct Tax Code, long promised, needs to be fast-tracked. Nearly 99 per cent of tax revenue comes from taxpayers in the taxable slab above Rs 5 lakh. The zero-tax exemption limit should therefore be raised to Rs 5 lakh, saving manhours of work and resources for the Income Tax Department. Following demonetisation, several lakh suspicious transactions and accounts have come to light. It is important to bring these into the tax net. But the Finance Minister must resist a return to the raid raj. Tax reform and tax terrorism, like oil and water, don’t mix.
Second, reduce the grip of the bureaucracy. This is particularly damaging in the Ministry of Defence (MoD) and the Ministry of Finance (MoF). Introduce technocrats in lateral positions. The MoD must have a senior armed forces officer on deputation to provide domain knowledge on modern weapons purchases that today are in the hands of IAS generalists newly seconded from, for example, the Ministry of Tourism.
Talented individuals from the private sector like Sanjeev Sanyal (the government’s principal economic adviser), Bibek Debroy (chairman of the PM’s Economic Advisory Board) and Rajiv Kumar (vice-chairman of NITI Aayog) have brought fresh ideas into governance. Their tribe must multiply in government. As in the United States, technocrats must occupy key positions in administration as well as the Union Cabinet. India’s defence preparedness has suffered significantly because of delayed and often rogue decision-making in the MoD on key weapon systems. This is an important area that the Prime Minister’s handpicked Defence Minister Nirmala Sitharaman must urgently address.
Third, focus on exports. Indian exports have sagged to 2014 levels. Few countries in the world have achieved high levels of GDP growth without double-digit export growth. China’s 10-11 per cent GDP growth in the 2001-14 period was buoyed by surging exports. India has a unique demographic advantage — the world’s youngest workforce. But that demographic window will shut within 20 years as it already has in ageing China. It is vital therefore to enhance the productivity of India’s young workers with a combination of vocational training and professional courses.
Modi was quick to recognise this, hence the focus on Skill India, a scheme that has made slow progress. Like several other schemes launched over the past three-and-a-half years, outcomes have not matched ambition. Yet, financial inclusion through Jan Dhan Yojana, the Mudra Bank’s small loan initiative and key reforms on the bankruptcy code and biometric delivery of subsidies to the poor through Aadhaar have all been standout achievements.
Economic reforms though have so far been incremental rather than radical, apart from demonetisation and GST. It is time to focus on taking the investment and savings rates, which have slipped to below 30 per cent, back to the level of 35-37 per cent. The economy escaped a deflationary environment, but to regain high growth, consumption through household savings is the key. That also underscores the principal concern of the Prime Minister: jobs. Unless jobs are created at a faster pace, consumption will remain patchy, endangering the economic revival in 2018 that is vital to Modi’s 2019 Lok Sabha campaign.
Manufacturing has recently shown an uptick, following a year-long depression. Services too are beginning to scale up after the IT software sector lost momentum in an increasingly protectionist world. Foreign direct investment (FDI) though is strong and the start-up ecosystem is maturing rapidly. In 2018, India will overtake Britain to possess the second largest start-up universe of entrepreneurs and investors after the United States.
The rise in India’s ranking in the World Bank’s Ease of Doing Business (EDB) by 30 places to 100 and Moody’s sovereign rating upgrade to BAA2 come with caveats. The World Bank’s methodology is confined to Mumbai and Delhi and thus understates the problems entrepreneurs still face in setting up a business — or indeed in closing it down. The old licence raj may have been consigned to history, but it has been replaced by canny bureaucrats with a slew of new clearances — environmental, land use, power connections and municipal laws. It is these irritants that have kept India at a lowly 100th position in the EDB ranking, behind countries like Kenya (80th) and Indonesia (72nd). Modi has managed macro reforms but is being let down at the micro level by gatekeepers intent on keeping their discretionary powers — and side income — intact. It is a systemic problem and Modi needs to attack it at its root and branch.
The year 2018 is going to be critical for Modi. On the one hand, the BJP faces strong anti-incumbency in three states that go to the polls in December 2018 — Rajasthan, Madhya Pradesh and Chhattisgarh. All three, and especially Rajasthan, are vulnerable. Modi’s campaigning skills will be needed to retain them. Four northeastern states — Mizoram, Meghalaya, Nagaland and Tripura – will also hold elections in 2018. Modi and Shah’s North East India strategy will be fully put to test.
The most immediate challenge is Karnataka, which goes to the polls in April 2018. With Andhra Pradesh the only southern state in the NDA fold, and Tamil Nadu in flux, the BJP needs to win Karnataka, even as it seeks to establish a beachhead in Kerala.
With eight state elections slated for 2018, Modi will have to ration his time between political campaigning and policy making. It is therefore vital that he breaks with his practice of not holding regular press conferences. A robust and free media interaction will help him erase the disinformation spread by the Opposition that today goes unchallenged except by the BJP’s social media team and TV spokespersons — neither of whom have the sophistication and finesse needed in modern political messaging.
A daily briefing by the Prime Minister’s Office or the Ministry of External Affairs too is vital. A minister and a department official can by rotation brief the Indian and international media on key economic and political issues in a structured format as every major country, including China and the United States, does. India’s current permanent representative at the United Nations, Syed Akbaruddin, who played a vital role in helping India’s judge defeat his British rival for a seat on the ICJ, held excellent daily afternoon briefings when he was MEA spokesperson.
In a 24x7 media environment, the government’s policies need to be conveyed with clarity and brevity. As Modi hunkers down for the final lap of his first term, that is an information protocol he must establish.
Rahul Gandhi’s media messaging has improved significantly. So must Modi’s in an era where the only thing worse than disinformation is no information.