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Business News/ Politics / Policy/  India @70: This time it’s different

India @70: This time it’s different

Seventy years after independence, India is moving down a new road. Some think it is a road to a strong and prosperous India, others believe it will lead to disaster

We now have a charismatic and forceful mass leader as PM Narendra Modi, whose government has shown it is not afraid to take unpopular decisions. Photo: HT

On the 70th anniversary of India’s independence, the nation stands on the cusp of change. In case that smacks of hyperbole, let me make a list of some of these changes:

1. After a very long time, we now have a single party majority in the Lok Sabha.

2. We now have a charismatic and forceful mass leader as prime minister.

3. The Narendra Modi government has shown it is not afraid to take unpopular decisions.

4. The ruling Bharatiya Janata Party (BJP) is an offshoot of a cadre-based organization—the Rashtriya Swayamsevak Sangh (RSS). Only the Communists have a cadre-based organizational set-up, and it is far from matching the RSS in strength.

5. Here is a list of recent major economic decisions/reforms: a) lowering the fiscal deficit; b) increasing capital expenditure, especially for infrastructure; c) a thrust on solar and wind energy that has brought down the cost of renewable power; d) containing inflation that has lowered the cost of capital; e) attempting to target black money through demonetisation and the benami property law; f) attempting to clean up the real estate sector through the real estate Act; g) implementation of the goods and services tax (GST) Act; h) removing fuel subsidies; i)low increases in minimum support prices for agricultural products; j) trying to expand the formal sector and reduce the grey or informal sector; k) tried to increase the scope for foreign direct investment; l) relaxed rules, including on environment, to help set up businesses; m) implemented bio-metric identification, which has the potential to stop leakages in government spending, and n) the bankruptcy law.

6. The RSS, from which almost all of the BJP leaders have been drawn, has a distinctive ideology—Hindutva. It aims to restore the lost glories of Hindu India, but is, at the same time, a modernizing rather than merely a conservative movement. The ideology has proved to be an effective tool for mobilizing the masses under the party banner.

7. If the Uttar Pradesh elections are a guide, the ruling party has been able to stitch together an alliance of Hindu castes that can afford to ignore the minority vote.

8. The party has been able to place followers of its ideology or those sympathetic to it in many institutions of the state, creating the conditions for writing a new narrative of India, very different from the earlier one. The changes in history books in some states are an indication of this.

9. The government has adopted a more robust, more assertive foreign policy, its latest manifestation being the eyeball-to-eyeball stand-off with China at Dokalam.

10. Both domestic and international capital is solidly behind the present government to an unprecedented degree.

Why is this change a big deal?

It’s very significant for two reasons: One, the Indian state has so far been a soft one, unable to discipline large sections of society and with a sizable petty commodity sector largely left alone. The Modi government, through demonetisation and now GST, wants to bring these activities into the formal sector. It has shown, through the demonetisation exercise, that it is capable of hurting its own supporters. The government wants to transform India into a hard state.

Two, that fits in neatly with the East Asian model it seeks to emulate. The model is one of close co-operation between the state and business as well as getting plugged into global value chains. In the case of China, a large state sector has co-existed with the private sector, which seems to be the Modi government’s model, too. Like in China, the government views nationalism as a potent cementing force. The internal conditions for the development of an East Asian variant of capitalism in India have never been so propitious.

That said, there are plenty of hurdles the government’s policies may encounter. Here’s a list of some of them:

1. The impact of the government’s policies on the informal sector is far from certain. Will it affect jobs in the economy, will it affect demand? Will there be a political backlash?

2. Questions remain about the farm economy, with loan waivers being the latest indication of the pressures the government faces.

3. Will India be able to rewrite its labour and land laws to make them more business-friendly? What political effects will that have?

4. Is the East Asian model past its sell-by date, as the reaction against globalization deepens in advanced economies? More fundamentally, is there space for two Chinas in the world economy—as India aspires to be another China?

5. The ruling party’s ideology could lead to social tensions in a country of enormous diversity like India.

6. Will the government be able to provide good jobs for young people, whose aspirations are high? The ongoing agitations for reservations among relatively well-off groups such as the Marathas, the Jats and the Patels are symptoms of the jobless growth disease.

It is the playing out of these contradictions that will shape India’s path.

Seventy years after independence, India is moving down a new road. Some think it is a road to a strong and prosperous India, others believe it will lead to disaster, but policy will be determined by the forces that emerge successful from these struggles. What is undeniable is that it is a very different road from the one taken in the past 70 years.

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Updated: 18 Aug 2017, 06:52 AM IST
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