Modinomics vs Manmohanomics

In a daring political gambit, the NDA is making the upcoming general election a referendum on economic reforms. EPISODE #163

Dear Reader,

A very happy Monday to you.

The last few weeks have been dramatic for India’s polity. Every action (and every day at that) especially from the incumbent Bhartiya Janata Party (BJP)-led National Democratic Alliance (NDA) had a political overtone to it. The opposition was no less. And, all this even before the general election cycle has kicked-off.

This process got a fresh fillip with NDA’a decision to publish a white paper on the last two decades of the Indian economy. This prompted its primary political rival, the Congress party which led the erstwhile United Progressive Alliance (UPA), to come up with its riposte: A black paper.

The clash of two economic ideologies—Modinomics and Manmohanomics—is emerging as the central point of NDA’s pitch for a record third term in office. Frankly, this is a play book never tried before.

Yes, some will argue how the previous NDA led by Atal Bihari Vajpayee sought to make a similar pitch with their ‘India Shining’s campaign. They don’t match up.

So this week I explore this daring political gambit and the implications.

The cover picture is some wall art I stumbled upon in a local shopping market.

A big shoutout to Surendra, Gautam, Premasundaran and Vandana for your informed responses, kind appreciation and amplification of last week’s column. Once again, grateful for the conversation initiated by all you readers. Gratitude also to all those who responded on Twitter and Linkedin. 

Unfortunately, Twitter has disabled amplification of Substack links—perils of social media monopolies operating in a walled garden framework. I would be grateful therefore if you could spread the word. Nothing to beat the word of mouth.

Reader participation and amplification is key to growing this newsletter community. And, many thanks to readers who hit the like button😊.

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A Referendum on Reforms

As I mentioned in the introduction, the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) is doing the unthinkable. They are approaching the Indian electorate with their impressive economic reforms record as a key appeal in the upcoming general election.

The white paper they tabled in Parliament on the tumultuous two last decades, together with the subsequent stump speeches delivered by Prime Minister Narendra Modi and members of his cabinet make clear that the party is looking to make the upcoming general election a referendum on economic reforms. And, this when it facing a two-term anti-incumbency.

Never in India’s electoral history has any political party dared to do so. If anything, the ability to push reforms is soft pedalled during elections and in office, and the lip service for the poor and downtrodden amplified. In fact, this approach had a moniker: reforms by stealth.

The NDA is seeking to rewrite this precedence. Indeed this is PM Modi’s most daring political gambit ever.

NDA vs UPA

The white paper, or for that matter the black paper, is nothing but respective listicles about performance and non-performance of the same government: NDA. It will be a mistake to be taken in by the rhetoric.

Especially, since economic history—like all history—is a continuity. Frankly, such apportioning is about taking credit. But this is complicated. Akin to a winning cricket team distributing credit among its batsman, bowlers and fielders. Eventually, it is a team sport and hence credit goes to the team.

Now, how do you accord credit say in the case of Aadhaar. The idea was initiated in the regime of Atal Bihari Vajpayee. Arvind Virmani, presently a member of Niti Aayog, then working in the Planning Commission had put this down as a thought paper. It was taken up, but never got the chance, because Vajpayee lost the general election in 2004.

UPA productionised the idea in its second stint in office in 2009. The best thing they did was to pick Nandan Nilekani, the co-founder of Infosys to head it. Who in turn assembled some of the country’s most talented and humble technocrats (many of whom are now part of iSpirt, the team who worked on UPI, ONDC and so on).

But the UPA did a shoddy job, especially in not providing such a fundamental concept the desired legal cover. Not surprisingly Aadhaar became vulnerable to self-appointed privacy warriors and nearly died a legal death.

NDA moved swiftly to secure Aadhaar through a legislation, which created guardrails on how and who could use this data of an individual. The rest as they say is history. In the last decade it has spawned India’s global calling card: Digital Public Infrastructure.

Now, how do we apportion credit in this instance. Instead, it is my conclusion that such a powerful piece of economic reform has bipartisan consensus. The two biggest national political parties have thrown their might behind the most powerful economic reform.

Its pairing with Jandhan (no-frills bank account) and mobile gave us JAM—an economic GPS that enabled targeting of welfare and generating cumulative saving of Rs2.75 lakh crore to the exchequer.

Which also brings me to the point that there is greater convergence between the Congress and the BJP on economic reforms, than either side will care to admit. They differ in the means and scale of change.

While the BJP, under PM Modi, opted for aggressive but calibrated reforms, Congress, on the other hand, opted for the more timid approach where it played down official lip service to reforms.

@Reforms Central

The white paper from the NDA makes a case for reforms by showcasing the welfare benefits that accrued. It then pairs it with the performance of the economy under the two regimes to argue that it is time for the nation to debate and choose its preference—between the UPA way or the NDA way.

Effectively, it is making the upcoming general election a referendum on economic reforms. The effort is to mainstream economic reforms as an essential means of achieving inclusive development.

The objectives in the white paper very clearly state this. “It (white paper) hopes to generate a wider, more informed debate on the paramountcy of national interest and fiscal responsibility in matters of governance over political expediency.”

Here the implicit reference is also about competitive populism which sees political parties offering all kinds of freebies to lure voters. Most often they entail a huge fiscal cost.

Take for example Karnataka, where the Congress swept to power on the promise of a range of freebies. The spend on it is estimated at Rs52,000 crore in an annual state budget of Rs2.50 lakh crore.

NDA on its part has in the past been equally culpable in succumbing to the temptations of populism—offering the Rs60,000 crore package of relief in stipends to farmers. To be fair to them, this time they seem to be attempting a fresh start, walking the talk against populism as it were.

The union budget in a pleasant surprise did not engage in pre-poll populism. Something I wrote about last week.

Also, please check out the latest episode of Capital Calculus, shared below. My guest, Haseeb Drabu, unpacks this in fair detail.

The white paper then goes on to argue that it is time for the electorate “to commit to national development, with new inspirations, new consciousness, new resolutions, as the country opens up immense possibilities and opportunities.”

Implicit in this claim is that the country, which has begun to realise the advantage of transitioning to a market-based economy with a heavy trapping of state intervention, should brace for more reforms if indeed PM Modi succeeds in winning a record third term.

Like I said in an earlier newsletter, the choice before you today is about the kind of leadership you believe will transition India from a middle-income country to a developed one by 2047.

Over to the Indian electorate.

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Recommended Viewing/Reading

Sharing the latest post of Capital Calculus on StratNews Global.

This year’s interim Budget presented by Finance Minister Nirmala Sitharaman broke with political convention. It passed on the opportunity to shower political freebies at the expense of the exchequer. And, this from a regime facing a two-term anti-incumbency.

To unpack this unorthodox yet bold move I spoke to Haseeb Drabu, economist and former finance minister of the erstwhile state of Jammu and Kashmir. In his typical forthright style, Haseeb argued that this was a benchmark moment for Indian polity: It delinked the Budget from the Ballot.

Sharing the link below. Do watch and share your thoughts.

Till we meet again next week, stay safe.