5 Reasons why PM Modi is struggling on the economy

It is remarkable that the best PM in India’s post-independence history continues to be an average performer when it comes to the economy. Here I put out 5 reasons why the PM is visibly struggling

1 .Lack of Electoral Competition: Think of a class in school where you scored 60 out of 100 in Maths and you were the highest. Would you try to score 90 in Maths or try to score 95 in history which is your strong subject? The absence of strong electoral competition pushes the PM to get stuck to topics he is quite comfortable with – National Security for example.

2. Proven Results: The PM is one of the smartest politicians of recent times (all over the world). He has been able to deliver excellent economic results for years since 2002 (Until 2016). If something has worked for him till now, there is no reason why he should NOT trust himself more than any expert. This is evident from his comments after Demonetisation

On the one hand are those [critics of note ban] who talk of what people at Harvard say, and on the other is a poor man’s son, who through his hard work, is trying to improve the economy

3. What do voters want?: While many of us in the ‘chattering classes’ may be upset with where the economy is going, our deep culture of freebies, discounts have created a different culture on the ground. Take the example of Bihar. It gets approximately 133000 crores (about 60% of its budget) from the Central Government. It further gets a significant allocation from every Yojana (Food Security, Kisan Yojana, Awas Yojana) operated by the Centre given its high poverty levels). With so much of money being pumped into the State, it barely matches to keep up with the top states in terms of the growth. There is absolutely no incentive for either the Government or the voters in the state to do anything differently to sustain a higher standard of living. It is like giving 30 marks free to a student score 30 marks. He will obviously be quite happy with the teacher and call him best teacher. There is no electoral pressure to fix things and if indeed there is any, the solution is more freebies (Case in point, Kisan program as a response to the losses in the 2018 December elections)

4. All solutions are tough: Like every politician, the PM measures solutions from an electoral perspective. If you agree that we have serious problems with many fundamental facets of the economy – Public Sector Enterprises, Labour Laws, Land Acquisition etc, each of them requires difficult solutions that will impact millions and probably for a long time. PM’s comfort with ‘bold’ decisions is often backed by astute risk assessment. If the assessment is that the pain is short and impacts limited number of people, the PM is willing to take a risk. The second aspect the PM looks at it is the narrative. Can he sell the narrative to the voters? Post Demonetisation and GST, the PM has probably realised that he is far more comfortable selling the National Security and Anti-Corruption narrative than some BIG reform idea that has potential for serious backlash and a damage to his image.

5. Things are bad but not terrible yet: While everyone argues about how bad the economy is, a casual visit to any restaurants in Metros will tell you a lot. The average alcohol company is managing a 10%+ growth . International Travel continues to grow even if at single digits. Mobile Phone companies have also managed some growth. To be fair, we haven’t reached a situation where people will go to the streets. You could say, we have gone down from 60 marks to 40 marks. So it is a poor performance but not a failure yet. The pressure is building but still some scope for recovery.

Author: Subhash Chandra