Get Instant Loan up to ₹10 Lakh!
Opinion | The big opportunity that Modi missed to reform the economy
The 2014 win offered the PM a chance to carry out major reforms but his shift to centre-left style populism squandered it
It appears to be that season: When those of us in the commentary class, who opined on the just-elected government of Prime Minister Narendra Modi in the summer and autumn of 2014, dust off what we wrote and compare it with what actually transpired in the last five years.
As it happens, the very first instalment of this column (Narendra Modi Going The Stephen Harper Way, 9 November 2014) argued what I believed then to be a plausible analogy between Modi and then Canadian Prime Minister Stephen Harper. Noting the similarities in their ascent to power—firebrand conservative outsiders who stormed the bastion, scorning elite liberal opinion all the while, and winning improbable majorities in largely centre-left polities—I remarked that what might just be the most important commonality was the shunning of radical or “big bang” economic reforms in favour of what Harper termed “relentless gradualism”.
That analogy has proven mistaken. Harper did, indeed, push Canada rightward, step by step, with a few steps too far when he was ousted in an acrimonious general election in 2015. By contrast, after a flirtation with conventional (structural) economic reform in the spring of 2015, with the ultimately failed attempt to amend the Land Acquisition and Rehabilitation Act (LARA), Modi retreated into technocratic reforms, such as the Insolvency and Bankruptcy Code (IBC), and finally a full-blown embrace of old-fashioned, centre-left style populism with an “Indic” twist.
Looking back with hindsight, most observers have correctly identified the ultimately failed “demonetization” disruption of November 2016 as an inflection point, after which economic policy went sideways. My own belief is that the failed land reform a year-and-a-half earlier was an equally if not more important turning point. The reason Modi gave up on it, after thrice going through the Presidential ordinance route to bypass the Rajya Sabha, was the “suit boot ki sarkar” jibe of Congress leader Rahul Gandhi. As it happens, this was also just around the time of Modi’s monogrammed bespoke suit debacle during US President Barack Obama’s Republic Day visit in January 2016. Gandhi’s taunt, and his own flamboyant sartorial zeal, made the erstwhile common-man-turned-prime-minister appear aloof and arrogant, he and his government having occupied with alacrity the Lutyens bungalows of departed Congress apparatchiks. It was time for a course correction, not just in terms of dress, but of assiduously courting the rural and urban poor on whose hopes and aspirations Modi had won a once-in-a-generation election landslide.
While widely repeated, this remains a superficial, ex post facto rationalization. The deeper reason for the drift away from reforms (however fitfully attempted) toward an eventual U-turn to welfarism, is the lack of an ideological core—of an idea, a theory of where Modi wanted the nation to go in terms of economic policy. While I am willing to concede, even if some others may not, that Modi had a kernel of genuine reformist conviction when he came to power, that vanished quickly when political push came to electoral shove—notably, after the Bihar defeat of November 2015. Likewise, the apparent validation of demonetization via the landslide state assembly election victory in Uttar Pradesh in March 2017 reinforced a conviction in favour of unorthodox, Indic economics, and a final rubbishing of any claim to ownership over the reformist legacies of former PMs P. V. Narasimha Rao and Atal Bihari Vajpayee.
All of this leaves us where we are now, with Modi having long since given up on sensible economic policy, and with granular macroeconomic indicators (below the glossy official statistics) themselves increasingly dire. The recourse leading up to and during this most unedifying election season has been to dust off the old playbook, and deploy plan “B”, namely, sectarian polarization, something which I and others sympathetic to the prospect of a reformist Modi wrongly dismissed in 2014 as having been vanquished by the uplifting tone of a campaign centred squarely on the economy and governance.
The facile response of pathological Modi haters is to say, “Well, I told you so”. One can always make the worst assumption and rub one’s hands in glee if proven right, like some economic witch doctors who predicted a depression every year and became famous because they predicted it yet again before the global financial crisis of 2008. Perhaps Modi haters were too cynical and, some of the defenders, including your columnist, too naïve.
But just now, such debates amount to little more than pedantic onanism. Whether his intentions were benign or not, whether he was pushed toward leftist economics by political economy forces or through inner conviction, the undeniable reality is that Modi has squandered a unique opportunity to fundamentally transform India’s economy, polity and society for the good.
No matter who emerges the winner on 23 May, the nation that wakes up to a new government the next day will be one whose economy and political institutions are in significantly worse shape than the state of affairs Modi inherited five years earlier, and, what is even worse, where social harmony has frayed dangerously to an extent reminiscent of the tumultuous early 1990s.
Modi’s missed opportunity is costly in itself. It may be far costlier still if the Overton window has shifted, or narrowed, and economic reform vanishes from acceptable public discourse for years to come. Perhaps, then, this is my Cassandra moment.
Vivek Dehejia is a Mint columnist
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess
First Published:19 May 2019, 09:38 PM IST
- Top Gainers
- Top Losers
- 52 Week High