Team Modi played its cards reasonably well, especially as the election year drew closer.
The curtains will soon fall on the 16th Lok Sabha, and political parties will hit the campaign trail with gusto as they beg the electorate for five years in power. But as they go to the voters cap in hand, the Congress party – or any party that aspires to challenge the incumbent government – may well have to pull a rabbit out of its hat if it is to have any hope of denying Prime Minister Narendra Modi and his merry band of men and women the keys to the country.
Team Modi played its cards reasonably well, especially as the election year drew closer. True, it hit a few stumbling blocks in the course of its run, giving opposition parties some headroom to woo votes away; but some clever maneuvering will be needed to really answer the opportunity that's knocking.
The biggest challenge, by far, will be countering the populist measures squeezed into Budget 2019 – from the income support scheme for the farmer with under 2 hectares of land to his name, to measures ostensibly targeting the middle-income taxpayer like the hike in the threshold for tax rebate to a taxable income of Rs 5 lakh per annum, and the raising of the standard deduction by Rs 10,000.
Of them all, though, the farmer income support scheme may be the toughest nut to crack. On the announcement, the plan drew criticism because the promised Rs 6,000 per year per family (which roughly works out to Rs 17/family/day) is paltry compared to the significantly higher largess lavished on their farmers by states such as Telangana through its Rythu Bandhu scheme and by Odisha via KALIA.
The fact remains, however, that the introduction of the scheme renders the Congress' promise of income support guarantee to the poorest of India’s poor just that -- a promise. It is, after all, impractical to promise something when it already exists.
It would be political suicide to try and criticise the scheme too much, let alone threaten a dilution or a rollback. More so, when farmer distress has been one of the biggest sledgehammers the opposition has been using to try and wear down this government.
Outmaneuvering Team Modi
This leaves any opposition party yearning to rise to power with two broad options to counter the BJP’s farmer-targeted handout. The first, would be the promise of more money. Here, the Congress -- pretty much every opposition party, actually -- will find itself speaking to a voter community that has, because of having been a slave to the vagaries of the Weather Gods, long-inculcated a practice of considering a bird in hand to be worth two in the bush.
The farm loan waiver schemes signed into effect by a couple of state governments where the Congress managed to wrest control may offer some proof of intention and willingness to follow-through, but given the relatively small section of the target population living under a debt burden emanating from the organised sector, waiver promises may not translate into a very powerful vote magnet.
The second option would be to promise to expand the scope of the scheme beyond just small land-owning farmers, and covering landless farmers, or take it a step further and apply it to the poor across the country – an intention the Congress has already voiced. But this could well prove to be an expensive proposition.
According to the Vienna-based NGO, World Data Lab's World Poverty Clock, which provides real-time poverty data across countries, India has over 48.9 million people living in extreme poverty (as this report was being written). Even if one considers that this is just 3.6 percent of India's population, significantly lower than the 5.3 percent in 2017, providing this section of the population with enough money to try and get them even near the poverty line -- $1.25/day, or around Rs 89/day, according to the World Bank based on purchasing power parity -- will be a herculean task.
A promise that combines the two options – more money, and to a wider net – will be tough to sell… because, where’s the money? Despite more tax returns being filed it is a struggle to make direct tax collections hit targets, indirect tax collections since the switchover to Goods and Services Tax (GST) leave a lot to be desired even if the government falls back on gross collections data to paint a rosy picture, and non-tax sources like the demand for a higher dividend payout from public sector enterprises and Reserve Bank of India have already rubbed many -- including the institutions being told to cough up -- the wrong way.
A Question Of Staying Fiscally Fit
Realistically, though, finding the money is a problem for a later date. The more pressing problem will be convincing the economically savvy voter that these promises will be implemented, given the pressure the next government will face on the fiscal front.
By the current government's own calculations, adding Rs 20,000 crores to its outlay in FY19 and Rs 75,000 crores in FY20 to finance its income support for small farmers are already pushing extant fiscal deficit targets out the window. Fiscal deficit for FY19 and FY20 is now pegged at 3.4 percent, making the earlier targets of 3.3 percent and 3.2 percent respectively defunct.
So though brokerages and economists feel they can live with this marginal slippage, the ongoing trend of governments treating fiscal consolidation targets as more of a suggestion than a line in the sand, and thereby drawing the ire of international rating agencies and global institutions like the IMF and the World Bank, does cause some disquiet.
Who Moved My Campaign War Chest?
Interestingly, one big objection opposition parties had raised to the populist measures ushered in through the Budget was that such new schemes in an election year trample on convention. An election year budget is traditionally a vote-on-account, and even calling it an Interim Budget was frowned upon.
By effectively backdating the blatantly vote-bait measures to FY19, the BJP government has robbed opposition parties of grounds to cry foul. The spending and revenue loss projections for FY20 on account of these schemes now become part of on-going programmes, not new ones.
The real trouble for the Congress party – and a stroke of genius on the part of the incumbent government – is that these measures make existing campaign war chests a lot smaller in comparison to the BJP's. That's primarily because this government is effectively preparing to fight the general elections not just with its campaign funds, but with taxpayer money – a luxury no other party has.
Lies, Damned Lies and Statistics?
Opposition parties will then necessarily have to fall back on the age-old tactic of attacking the government’s track record, any flaws in policy implementation, instances where it has failed to live up to past promises, or perceived gaffes that can be sold to the voting public as a gross violation of its trust and a visceral threat to its future. In these, it has a fair bit to work with.
For a government that came to power on the promise of not just economic stability, but economic growth, anecdotal evidence offers little support. While India has jumped higher on the World Bank’s ease of doing business rankings, the improvement has neither been across the board, nor uniform. On a couple of parameters, it may well be that India’s rise in the rankings is not because it did anything substantial, but because countries that had a higher ranking failed to keep their reforms momentum going.
This leaves the opposition with a relatively narrow window to make its voice not just heard, but acknowledged in the form of votes – by driving home the point that the economy is not on as sure a footing as the government would like, or have us believe. The restating of the GDP numbers as 2019 general election started taking up national mind space is one such weak link that is begging to be exploited.
Objections have already been raised to the fact that the back series data shows a much higher growth number under the Modi regime than under the previous UPA-2 government. The authenticity of the numbers have been questioned, since it was the NITI Aayog, and not India’s statistical authority, CSO, which released the data. This has only helped underscore the perception that the numbers may not be shipshape and Bristol fashion.
The fiasco with the unemployment data, especially when taken with the virtual excommunication of the NSSO, is one other rickety leg this government is standing on. The Modi government may well have blundered by being seen as attempting to block the release of the NSSO report saying over half of India’s working-age population does not contribute to any economic activity.
Poor optics for a government that has been heralding its achievements at working steadily on fulfilling the promises of employment generation and job creation. The potential trust deficit when it comes to government-released economic data could possibly crimp the BJP’s style and blunt its narrative.
A Scalpel, Not A Sledgehammer
If approached properly, pounding the table with allegations that India is really on a shaky economic wicket could even dwarf the possible gains from raking the government over the coals for an arguably questionable Rafale deal, or picking at the scabs of wounds inflicted by the shock treatment that was demonetisation, or even the growing pains Indians were subject to with the switch to GST.
One advantage the Congress could be looking to exploit is that even though corruption allegations have once again been insinuated against its ruling family, the UPA-2 has been largely exonerated in the 2G scam – allegations that are widely regarded to have worked remarkably in the BJP’s favour in 2014. (Of course, reminding the public that this dismissal of charges was mainly due to lack of evidence may not be prudent).
The question though, is whether the Congress can make hay while this particular sun shines, without letting its own decrepitude muddy the waters.
First Published: IST