Rewiring India

A happy convergence of digital, social and physical infrastructure is spawning a new generation of stakeholders, rewriting India's polity. EPISODE #158

Dear Reader,

A very Happy New Year to you.

As 2023 drew to a close our attention was drawn to what seemed like a political photo-op of Prime Minister Narendra Modi engaging with a labarthi or beneficiary of the government’s welfare programme. It is much more.

Mera Manjhi, a resident of Ayodhya, was the 10th crore beneficiary of the Ujjwala or the cooking gas scheme. In his conversation with Mera and her family, PM Modi covered all the touch points: welfare programmes delivering cooking gas, electricity, housing for all and the upcoming inauguration of the Ram Temple in Ayodhya. Indeed this was a masterclass in grassroots politics.

To me though there is a larger message in this encounter. Thanks to an unprecedented convergence of digital, social and physical infrastructure, the union government has been able to empower millions of Indians. One such metric is the dramatic reduction in the number of those living below the official poverty line in the 15 years ended 2020.

There is another way of looking at this development: there are more people inside, looking out, rather than the other way around. In other words stakeholders in India’s growth process have scaled dramatically.

This is the new political economy of India and the focus of my first newsletter for 2024. Do read and share your feedback.

The cover picture is sourced from Press Information Bureau.

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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Photo Credit: Press Information Bureau

The New Political Economy

As mentioned in the introduction, Prime Minister Narendra Modi’s meeting with Mera Manjhi, the 10th crore beneficiary or labarthi of the subsidised cooking gas scheme put the spotlight on the union government’s ongoing social welfare programmes and its impact.

Pradeep Gupta, CMD of AxisMyIndia and the man with the golden touch in forecasting elections, has often flagged that 60-80% of the lives of the voters intersect with government schemes. In other words their presence or absence of welfare services impacts people, especially their aspirations, and is likely to figure in their electoral calculations.

All the more, as this kind of empowerment gradually shifts the debate from being given fish to be taught how to fish—the power of this pivot is incredible.

For instance, under the Ujjwala scheme 10 crore households at the bottom of the pyramid now have cooking gas. Assuming four members to a family, this would mean that the government’s welfare programme has impacted 40 crore Indians, especially the homemaker, who are inevitably women.

Not only are they now part of the formal economy, they have also become key stakeholders in the Indian economy and experience ease of living like the rest of us. Personally, I recall how my mother’s life transformed when our household managed to procure a cooking gas connection in the 1970s.

The resulting socio-economic empowerment, especially of women, is rewriting their terms of engagement with the rest of India. In turn this new political economy is hitting the reset on India’s polity and have begun to influence electoral choices and in some instances even outcomes—women voters tilted the balance in the favour of the BJP in MP and the Congress in Karnataka.

To be sure, an electoral choice is very complex and the sum of various factors. All I am saying is that this is altering the terms of engagement and hence the existing political behaviour and discourse.

Inside, Looking Out

As a regular reader of this newsletter the extent of reach achieved by the union government’s Ujjwala or cooking gas scheme would not have surprised you. This newsletter has consistently focused on their quick spread.

To its credit, over the last decade, the incumbent Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) has pursued its outcome oriented welfare programmes to a plan and on mission mode. And this is exactly where the NDA has differed from past regimes: the gap between promise and delivery has been minimised or even eliminated.

First, it ensured targeting of welfare spending by creating an economic GPS based on the trinity of Jandhan-Aadhaar-Mobile (JAM) of an individual—this saved nearly Rs3 lakh crore in leakages to the exchequer and worked as a lifeline during the covid-19 pandemic. Second, it drew up a blueprint to universalise these benefits.

To make this possible this the NDA weaponised Aadhaar—the 12-digit unique identity it inherited from the Congress-led United Progressive Alliance (UPA).

First, the NDA provided Aadhaar legal cover—a glaring error of omission on the part of the UPA, which led to the identity project face a serious legal challenge—by enacting a law. Second, it passed a privacy law to protect the data of users. Third, it worked with technology evangelists to spawn India’s unique digital public infrastructure (DPI) by making Aadhaar its foundation.

This DPI architecture has enabled the NDA to undertake public good at staggering scale. Something that has caught global attention. In fact, the G20 summit meet in Delhi last September adopted this as the global standard.

For instance, using DPI India banked 51 crore people—more than the population of the United States—in the last decade. According to the Bank for International Settlements (BIS), the bank for Central Banks across the world, this is an enviable record. In the normal course, BIS said, this would have taken a country 47 years to achieve.

Simultaneously, there has been a massive rollout of physical infrastructure, especially rural roads and national highways. The growth has been astounding in the last decade.

For example, development of national highways more than doubled to 9,304 km in 2023. Similarly, the rural roads project, since its launch in 2000 till 2014 completed 3.81 lakh km; over the next decade this grew by 7.23 lakh km.

It is this convergence of digital, physical and social infrastructure that is creating the basis for gradually bridging the gap in the ease of living. Where earlier access to basics like toilets, cooking gas, banking, electricity, telephones and so on was a privilege, today this is getting universalised.

In other words even a decade ago, about 500 million Indians—more than the population of the United States—were outside looking in. Today, it is the other way around. This kind of a makeover has the potential to be a force multiplier.

Her India

This year’s Republic Day Parade, the 75th anniversary of India becoming a Republic with the adoption of the Constitution in 1951, will have only women participants in contingents—marching, playing the band and on the tableau during the parade on Kartavya Path.

It may be symbolic, but I see this as an unambiguous signal about the central role for women in the future of India. Especially since it comes in the backdrop of the unprecedented makeover in social welfare with women in the front and center of these programmes.

Pradeep Gupta of AxisMyIndia summed it up best in his contribution to the edited volume on Modi@20.

“While previous governments promised empowerment of women, Modi made it a reality by opening Jandhan accounts that enabled them to receive direct cash transfers. Women could have cash in hand that the could call their own and spend according to their wishes.

Women became the proud owners of their homes under the Pradhan Mantri Awas Yojana. They were no longer at the mercy of the men in their house. Their position was elevated significantly in their homes and, by extension, in society.

Everything that was in the files and works, became a reality in the very lifetime of these women.”

Check out the graphic below. It vindicates Pradeep Gupta’s claims.

Battle for the Hearts and Minds

This backdrop is what makes the upcoming electoral battle so important. It is a battle for the new idea of India.

The context, as I have detailed above, has changed dramatically. Not just from 2014, but even from 2019—when the country returned the NDA for a second consecutive term.

It is probably the first time that so many stakeholders will vote in a general election. Previously, their outlook was different as they were outside looking in.

In broad terms, the country’s per capita income has grown from around $1,200 to about $2,600. This is however not true for all Indians—the country continues to be stratified between the rich (10%), aspirers (10%) and the rest (80%).

The subtext of this is that indeed the bulk of India is still to fully partake in the growth process. Indeed, they are deriving the benefits of growth—a richer exchequer is able to bankroll social welfare spending and targeting is minimising leakages—in realising basics like housing, cooking gas, banking, electricity, drinking water and so on. But starting handicaps are limiting further progress, though their aspirations continue to be on fire.

Not only has the nature of the Indian economy fundamentally changed, the complexity of India too has grown—it is no longer the binary of haves and have nots; instead, it is far more nuanced as those inside the economy looking out have grown dramatically.

This means trade-offs between the three demographic cohorts—rich, aspirers and the rest—is going to be that much more contentious. For example protecting farmer interest through higher prices puts the consumer’s household budget under pressure. Political leadership in such circumstances will be the key.

Clearly, future challenges are no longer going to be about fending for basics. Instead, it will be about creating a blueprint for sustainable growth over the next 25 years. Consequently, the desired leadership is one which has an eye on the future and not look in the rear view mirror to strive for status quo.

This is the leadership choice India’s voters have to make this summer.

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Recommended Viewing/Reading

Sharing the latest post of Capital Calculus on StratNews Global.

India’s stock markets are on a tear. It has been rising steadily for the last year, but the last few weeks have been something else—the bellwether index Sensex was scaling new peaks almost every other day.

The obvious question is whether this is the usual dose of animal spirits associated with a bubble? Or is it telling us something more?

To unpack all of this I spoke to Somnath Mukherjee, Managing Partner at ASK Wealth Advisors. (This interview was conducted in the last week of December.)

In his very candid style Somnath went beyond the excitement and headlines about daily peaks for the Sensex and Nifty.

Instead, he put the spotlight on the ongoing structural transformation, especially the rise of the domestic investor and the growing democratisation of stock markets through the use of SIPs issued by mutual funds. An unmissable conversation.

Do watch and share your thoughts.

Till we meet again next week, stay safe.