BETTING THE FARM
WITH A FARMER-FIRST BUDGET, THE PRIME MINISTER HAS TAKEN A CALCULATED RISK GOING INTO THE GENERAL ELECTIONS. WILL IT WORK FOR HIM?
The Union budget’s big farm push is designed to please a large irate constituency of voters. But will it also manage to spur economic growth?
BBUDGET 2018 WAS A Modi moment. Without doubt. And as with everything he does, he made sure everyone knew it. Soon after the Union budget was tabled in Parliament, the prime minister, pen in one hand and notepad in the other, went on national television and for a good 25 minutes spoke on its highlights with admirable fluency. He was acutely aware that this is his government’s last full-fledged budget before the general elections. So every word he spoke had an underlying message for the electorate: I am your prime sevak. I care for you, I care for our country, I am a problem-solver and I am thinking not of the next election but the next generation.
Narendra Modi has already demonstrated his capacity for big ideas. His newest catch phrases are a ‘New India’ by 2022, ensuring ‘social and economic democracy’ and enhancing ‘Ease of Living’. He also has an
appetite for big risks. Whether it was the surgical strikes against Pakistan, the demonetisation drive against black money or ramming through the Goods and Service Tax, Modi showed he wanted action, whatever the price. Demonetisation proved to be a political success but was an economic mess. GST was an economic necessity but a political quagmire. As the country’s growth slid under the weight of these two back-to-back economic shocks, Modi began to lose his aura of invincibility. But the prime minister showed that he is ever willing to fight back, learn from his errors and make amends speedily. Budget 2018 reflected his ability to take big risks even while managing the inherent conflicts and contradictions between politics and the economy.
The economic imperatives before the budget were clear. There was a need to find jobs for a young and burgeoning workforce. The widespread agrarian distress had to be addressed even while raising farm productivity and resilience. Key social sectors like health and education needed urgent reform to develop a skilled and healthy labour force. Economic growth had to be speeded up by stimulating private investment and boosting exports if Modi was to keep the promise of Achhe Din that he had ridden to power with. All this without indulging in what an advisor has termed the mindsets of ‘crony socialism’ or the ‘stigmatised capitalism’.
The political compulsions were even more forceful and urgent. Opinion polls, including one done by india today recently, had shown that while Modi’s personal popularity remained high, that of his government had steadily eroded mainly because of the economic slide. If the BJP has to retain its majority in the next election, he would have to win over vast sections of the population. Particularly disgruntled farmers and agricultural labour, who constitute a bulk of the work force and the electorate. He would also need to firmly establish a sympathetic image with every other section of the population that would make a difference at the ballot— youth, women, tribals, Dalits and small businessmen. All this while maintaining the Sangh Parivar’s faith in his ability to usher in a Hindutva India.
For Modi, there are no half measures. In everything that he does, he strives to be daring, dauntless and dazzling, but this can be disturbing too. So Budget 2018 is daring because Modi went all-out to woo farmers by promising to pay them 1.5 times the Minimum Support Price (MSP). His team also set aside vast sums to bring in much-needed agrarian reform in terms of boosting infrastructure, especially for food processing and horticulture. It was dauntless because although it could result in a rise in prices for consumers, it was a risk the prime minister was willing to take. Also because he was willing to earn the displeasure of big business by not lowering corporate tax and introducing capital gains tax for long-term investments. Nor did he provide any new sops to the influential middle class. The budget was dazzling because it ushered in the world’s largest health insurance plan called “Ayushman Bharat”. Under this scheme, the government will offer to pay for annual medical costs of up to Rs 5 lakh for nearly 10 crore needy Indian families.
YET, IT IS DISTURBING because there is an inherent risk for Modi in assuming the mantle of a Populist Reformer. Among the known unknowns is the rising price of oil. In the first three years of his rule, the windfall of low crude oil prices allowed him to fund a host of infrastructure and welfare schemes while maintaining fiscal discipline. But if oil prices continue to shoot up, it could result not only in loss of revenue that could impact his largesse towards the poor and farmers but also see interest rates harden and inflation spiral out of control.
Modi is also banking on the huge investments in infrastructure his government has made, especially in the transport and housing sectors, to provide employment and stimulate private investment, thereby ensuring economic growth. Yet, there are major dampeners, such as the twin balance sheet challenge, with many corporates heavily in debt and banks overburdened with non-performing assets or bad loans. These are being addressed, but it may take a while before the situation eases. There is the added risk that implementation of the big schemes announced in this budget may prove to be tardy. That could cause widespread resentment and dent his re-election prospects. So the risks are high. But fortune, as they say, favours the brave. And in Budget 2018, Modi has showed plenty of that quality.
The prime minister’s newest catch phrases are a ‘New India’ by 2022, ensuring ‘economic and social democracy’ and ‘Ease of Living’. Budget 2018 incorporates all these