It’s the politics, stupid

Understanding Narendra Modi’s economic pitch for 2014 elections.

It is now given that Gujarat chief minister Narendra Modi would be the prime ministerial candidate of the opposition Bharatiya Janata Party (BJP) in the 2014 general elections. As Mr Modi’s national profile has been elevated, his economic record and the so-called Gujarat miracle have been subjected to close scrutiny. This larger debate carries an interesting sub-text: Is Narendra Modi an economic reformer?

First things first: What does a reformer mean in the Indian context? Writing in the Business Standard, Vivek Dehejia argues that contrary to the clamour of some of Mr Modi’s more enthusiastic supporters, the Gujarat Chief Minister is unlikely to morph into a ‘idealistic crusader for the free markets’, making a Hayekian case for deregulation, liberalisation and limited governance. In short, despite the rhetoric of ‘minimal government’, Mr Modi is unlikely to deliver on that promise.


 This argument can be understood at two different levels. First, in an electoral contest, politicians broadly respond to their constituents. Outside of a tiny elite, too insignificant to even dominate the op-ed space, are the Indian people clamouring for a free-market crusader? Are there liberty marches in Indian cities demanding that the government step back and leave the people alone? Even in the ‘land of the free and the brave’ which always have had a strong independent streak, the libertarian party itself is a marginal player. Its policy triumphs are not the result of legislative victories but because the public opinion has shifted decisively—for instance, in the case of marijuana legalisation. Therefore, obsessing over Modi’s literary tastes misses the woods for the trees.

Second, all modern democracies are welfarist in nature; redistribution is an important function of government. What differentiates the French model from its American counterpart is the degree of welfare. It is here that the Congress party has missed the point. It has placed its faith primarily in redistribution, entirely ignoring the role of the growth. Enamoured with a Rights-based model, it has also ignored the limited capabilities of the Indian State, as well as the negative externalities of welfare. In short, it has confused intent with action; and expenditure with outcome. In its latest iteration, it has confused malnutrition among the vulnerable and its complex causes with generalised hunger among the population.

Even the reluctant reforms it has carried out are borne out of a realisation that derailing the Indian growth story would not only cost it middle class votes but also those of the poor. After all, fiscal profligacy has its natural limits. In a poor country like India, the debate cannot be between a libertarian conception of government versus Nehruvian socialism. There is a middle ground which focuses on growth primarily as a tool for poverty alleviation but is willing to help the most unfortunate and the needy. Any concept of ‘reform’ in India which ignores the immediate needs of the poor is not only politically unfeasible but will be morally indefensible. And for a politician it would be suicidal to embrace such a framework.

Professor Dehejia raises another important point which is more germane to the debate.  He argues that Modi’s slogan of ‘good governance’ is actually a ‘barnacle’ to every new scheme which has caught the fancy of the Gujarat strongman. There is some truth in this. Importantly, the rubric of ‘good governance’ offers Mr Modi an escape hatch in which virtually anything can be justified because it is pro-people. With an almost unquestioning support base whose absolute faith in the man is often disquieting, it is possible that Mr Modi’s conception of what constitutes good governance would go unchallenged within his party.

But consider this. In a vast and complex county like India, an obfuscatory message is often a political necessity. After all, someone wishing to capture power at Delhi has to appeal to the voter in South Mumbai as well as Gorakhpur. By couching his message in a broad framework of ‘good governance’, Mr. Modi can appeal to both these voters who otherwise share little in common. He can promise the middle class professional in South Mumbai that he would re-ignite the India growth story while promising better delivery of essential services to the voter in Gorakhpur. Admittedly, it may not be an ideal approach and there are genuine fears this attenuates accountability but in a country like India, there is no alternative to this model.

What about Mr Modi’s claims to be a micro-manager?  It often appears Gujarat is personally managed by its chief minister who is credited with transforming moribund government schemes into trail-blazing success stories. Isn’t that against the logic of a true reformer who would trust the invisible hand of the market rather than bureaucratic initiatives? Two points. First, there is an element of clever propaganda here in which Mr Modi—a marketing genius—has cleverly anointed himself as the face of the Gujarat development story.  It is impossible to manage a state like Gujarat, much less India, at a personal level. This is not to deny Mr Modi credit for Gujarat’s consistent economic growth but merely to point out that micro-management is a logistical impossibility. Second, politically, the claims of being a micro-manager have tremendous political salience. Though this may offend the ranks of classical liberals, the villager in Bihar who still awaits an electric connection is not looking for less government; he is interested in more effective governance. And this is exactly what is Mr Modi’s primary pitch.

A stronger criticism of Mr Modi and his party is that over the last decade they have completely given up on the platform of economic reforms. Contrary to the charges of obstructing the parliament needlessly, the BJP has been Congress’ partner-in-crime in passing each and every social legislation from the NREGA in UPA-1 to its ostensible support for the Food Security Bill. It has allowed the Congress party to dominate the intellectual debate while offering little more than occasional admonishments about corruption. Some of this stems from BJP’s misunderstanding of the 2004 defeat. Additionally, BJP’s ideological fountainhead, RSS, remains deeply atavistic with an open disdain for market economics.

However, it is equally true that long-term political wilderness is detrimental to political parties. It would be an interesting exercise to examine the headlines from the early 2000 when a ‘permanent majority’ was seemingly in NDA’s grasp. The readers were often informed that the Congress was ‘in drift’; there was ‘ideological confusion’ and much else. Congress’ unexpected victory in 2004 almost overnight changed the political discourse with the choicest epithets  now reserved for the BJP. Whether a stint in power would reinvigorate the BJP to the same extent remains an open question. Its rather poor track record in opposition is, however, not a definitive indicator of its imminent failure as a governing formation. In addition, in a parliamentary democracy, it is the government which sets the agenda and holds almost all the cards. The opposition’s role is largely reactive and BJP‘s myriad failures—though by no means excusable—are perhaps understandable in that light.

The Congress party is traditionally conditioned to the idea of ‘two Indias’ as Rahul Gandhi once memorably put it.  It is fundamentally uncomfortable with the language of empowerment because it believes that government and not markets are the primary arbiter of social good. As India urbanises rapidly, the Congress party may be forced to reevaluate its strategy but in the near term it is trapped in its rhetoric. Admittedly, the BJP often echoes the language of the Congress party but Mr Modi as the chief minister of India’s most urban state is more comfortable with the language of empowerment. Importantly, unlike the Congress party with its largely rural base, a Modi-led government would only be possible with the support of the middle class; it may be more receptive to their needs.

Ultimately, democracy is all about choices. Prime Minister Modi will not deliver a reformist government by Western standards. Indeed,  he would often disappoint the more reasonable pro-reform voices who acknowledge that no economic argument can be made in a political vacuum. However, perfection is mirage in an democracy where compromise is inherent to its very structure. Muslims vote predominantly for the Congress party not because they perceive it as perfectly ‘secular’ but because it is a less inimical to their interests compared to the BJP. So whether you  believe in Mr Modi’s reformist credentials or not, would you vote for a party which has almost explicitly rejected reforms and has ordained a pernicious Rights-based environment? The ‘minimum government’ promise may be a rhetorical flourish but the very fact that a politician is prepared to make such a statement is significant in India’s political climate.

The entire argument can be distilled thusly: Will a Right-of-centre voter who is morally outraged by FSB and is not bothered by some of Mr Modi’s other heavily negative  baggage—and the importance of this cannot be emphasised enough—vote for UPA because it feels BJP’s opposition is not strong enough?

The answer is self-evident.

Photo: jynxzero

Update: This is a revised version of the original piece.