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Minhaz Merchant

Minhaz Merchant is the biographer of Rajiv Gandhi and Aditya Birla and author of The New Clash of Civilizations (Rupa, 2014). He is founder of Sterling Newspapers Pvt. Ltd. which was acquired by the Indian Express group

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Modi At Four

Overall, India’s Pakistan policy under Modi has been inconsistent and incoherent

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Drawing up a report card on Prime Minister Narendra Modi’s first four years in office presents a daunting task. Modi inherited a broken economy in May 2014: high inflation, low GDP growth, a distressed banking sector, and an unsustainable fiscal deficit.

Last year in a rare candid moment during an interview, Modi confessed that after he took office on May 26, 2014, the extent of the crisis-hit Indian economy shocked him. He said he did not make public the deep malaise in the economy and debt-laden banks in order to avoid panic among both domestic and global investors.

A year later, in May 2015, the Mumbai Press Club invited senior journalist Rajdeep Sardesai and myself to debate the first year of Modi’s prime ministership in front of an audience of over 150 editors and reporters. At the debate I likened the economy Modi had inherited to a truck with a broken engine, its chassis lying upside down. Even Sardesai, sitting on the dais beside me, couldn’t help but agree.

It has taken Modi four years to turn the truck around, repair it and get it back up to speed. In the process the Prime Minister has made mistakes but also achieved significant milestones across the economy, industry, banking, foreign policy and social sector schemes. On the following pages in this issue, distinguished personalities analyse the successes and failures of Modi’s first four years as prime minister. Here we examine specific sectors, policy decisions and landmark schemes that have made Modi one of India’s most proactive yet controversial prime ministers. Several dozen schemes have done well. Several more remain bogged down in red tape. Modi has less than 12 months to transform that red tape into the red carpet he promised four years ago.

The Economy:

GDP growth, after being punched in the solar plexus in 2017 by demonetisation and the implementation of an overly complex Goods and Services Tax (GST), is expected to rise to 7.8 per cent in 2018-19. In the run-up to the 2019 general election, Modi needs to show that he has been a good custodian of the economy. Interim Finance Minister Piyush Goyal, a chartered accountant, is result oriented and a good pick for the job. Though he will function as Finance Minister only till Arun Jaitley returns to work following his kidney transplant, Goyal could be just the catalyst the ministry of finance (MoF) needs at this crucial juncture.

Monthly GST collections in 2018-19 are expected to average Rs 1.02 lakh crore compared to the average of Rs 89,000 crore up to March 2018. Compliance has been simplified and e-way bills are mitigating tax evasion by traders. The government is meanwhile doubling down on its achievements in the plethora of schemes it has introduced over the past four years. Outcomes are now vital; metrics will be carefully measured by the Opposition and media in a febrile election year.

The government has increased farm credit from Rs 90,000 crore in 2017-18 to Rs 1,10,000 crore in 2018-19. The other big focus areas are highway construction, rural electrification and sanitation. The Insolvency and Bankruptcy Code (IBC) has been acknowledged as a landmark reform. Aadhaar has reduced pilferage of subsidies to beneficiaries among the rural poor though its use in non-essential services is being adjudicated by the Supreme Court. Digital connectivity has helped move India gradually to a less cash-dependent economy. Health and education remain under-budgeted though the National Health Protection Scheme (NHPS), dubbed Modicare, to be implemented from October 2, 2018, is an important step forward in providing healthcare to those who need it the most.

Foreign policy:
In recent weeks, the Prime Minister has recalibrated three crucial strands of Indian diplomacy. First, following his informal summit with Chinese President Xi Jinping in Wuhan, India-China relations are now on a more secure footing. Second, Modi’s visit to Russia on May 21 has smoothened emerging wrinkles in the close military and diplomatic relations between New Delhi and Moscow. Russia’s increasing closeness to Pakistan is a new factor in the complex geopolitics of South Asia. Russia, isolated by the US-led West, has concerns over India’s deepening strategic partnership with the United States. The Modi-Putin meeting is a key step towards allaying those concerns.

The third strand in the Modi government’s foreign policy faces severe challenges in the neighbourhood. Modi’s recent meeting with Nepal’s Prime Minister Khadga Prasad Oli has to an extent countered the Himalayan country’s broadening relationship with China. But Pakistan remains the sharpest thorn in India’s side. Islamabad continues to use terrorism as an instrument of state policy and will do so till that policy exacts an unaffordable price. Indian security forces have eliminated over 250 Pakistan-sponsored terrorists in Jammu & Kashmir over the past year. The PDP-BJP government though has made a strategic error in allowing a “conditional” cessation of counter-terror operations during the current month-long Ramzan period. This misstep will allow terrorists, till now under intense pressure from the Indian Army and the CRPF, to regroup.

Overall, India’s Pakistan policy under Modi has been inconsistent and incoherent. After the surgical strike in September 2016, infiltration across the Line of Control (LoC) has spiked. Terror attacks have increased and fatalities among Indian soldiers and civilians risen. In the final year of his first term, Modi must get his Pakistan policy right: prevarication and olive branches will not do.

As I wrote in my Mail Today column, long-lasting peace can be achieved only by the projection of strength: “What should India’s Pakistan policy be? Peace through strength has worked on the border. It can work on proxy terrorism if a clear-eyed policy is applied consistently. Modi must recognise that Pakistan’s sweet-talking diplomats are a cover for what former Pakistan envoy Husain Haqqani rightly calls the country’s jihadi-minded army. India has many options it can pursue. First, if there is another proxy terror attack on Indian soil, send Pakistan’s High Commissioner packing. Downgrade diplomatic relations. That is a policy every nation – from the US and Britain to Russia and Bangladesh – uses to deal with hostile countries. Second, build up the Indian Army’s capacity to deploy covert operations. In short, make Pakistan pay. India has been a victim long enough. Prime Minister Modi, of all people, knows that.”

Social:
Modi came to power on the slogan sabka saath, sabka vikas. But the overwhelming accent on winning elections has led the BJP to use caste and religion in electioneering. That has polarised sections of society. In turn, this has allowed the Opposition to dub the Modi government communal though its own self-declared secularism does not stand up to scrutiny. Modi, however, has worsened matters by declining to hold a single press conference in the last four years. In the absence of information, disinformation prospers. One-way communications through Maan ki baat, tweets and occasional one-on-one interviews with carefully selected journalists are no substitutes in a democracy for regular unscripted press conferences.

With the Opposition likely to present a united front in the 2019 Lok Sabha election, it is important Modi establishes a more potent and proactive communications strategy. Perception often decides close elections. The perception that the BJP is an open-minded, inclusive party needs to filter through to especially millennials, many of whom will be first-time voters in 2019.

Jobs:
Perhaps the one issue that will define Modi’s four years in power is the government’s performance on creating employment. Reliable statistics are hard to come by. Contrasting claims by various institutions show that between 1.4 million and 7.5 million jobs were created in 2017.

Demonetisation hit the most vulnerable job seekers – the young, poor and unskilled – the hardest as my analysis earlier this month confirmed: This is what I wrote: “How many jobs were created in calendar 2017? Mahesh Vyas, CEO and managing director of the Centre for Monitoring Indian Economy (CMIE), says 1.43 million. I spoke to Vyas to make sense of the dichotomy. The analysis that follows is based on the data spreadsheet Vyas sent me which contains detailed age group break-ups of those who are employed in the formal workforce.

“In Vyas’ recent article in a daily (May 1, 2018), the numbers for only three age groups (15-24, 25-64 and over-65) were published. An analysis of a more detailed age break-up in CMIE’s spreadsheet throws new light on two key issues: One, how many jobs, and in which age groups, were created (and lost) in calendar 2017? Two, how did demonetisation affect job losses — and which age groups were most affected by it? As CMIE’s Vyas writes in his piece, 11.83 million new jobs were created between January 2017 and December 2017 in the 25-64 age group. This age group comprises over 85 per cent (346.84 million) of India’s total formal workforce (404.91 million) as per CMIE data. The key 25-64 age group saw a near four per cent increase in job creation in 2017 despite demonetisation (11.83 million new jobs created in 2017 on a 2016 base of 335.01 employed). This suggests resilience in the Indian economy.

“Demonetisation, however, struck hard at the 15-24 age group (a loss of 7.22 million jobs) and the over-65s (a loss of 3.18 million jobs). Together, the very young and the very old lost 10.40 million jobs in 2017, largely due to demonetisation. The loss nearly wiped out the gains in jobs (11.83 million) among the 25-64 age group which comprises the vast bulk of India’s formal workforce. The net gain in jobs in 2017 was thus pruned to 1.43 million. Without such large job losses among the under-24s and over-65s, job creation in calendar 2017 would have been significantly higher.”

The successful outcome of the dozens of schemes launched by the government – ranging form Make in India and Jan Dhan Yojana to Swachh Bharat Abhiyan and Skill India – will be tarnished if more jobs aren’t created quickly enough to absorb India’s young workforce. Providing employment to this surging demographic is a key task for the Modi government. It is a metric that could define his tenure.


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