Narendra Modi intervenes to win perception battle on state of Indian economy

In the past one week, the government as well as Prime Minister Narendra Modi have sought to reclaim the narrative on the state of economy


New Delhi: In an attempt to change the narrative and win the perception battle against his critics, Prime Minister Narendra Modi has intervened in the debate surrounding the economy and has tossed the ball in the court of his critics and opposition. The move signals how, in the past one week, the government has sought to reclaim the narrative to maintain its credibility.

A series of steps by the National Democratic Alliance (NDA) government in recent weeks, including last-mile village lighting, excise duty cut on autofuel and Modi’s amnesty for small entrepreneurs who were previously out of the tax net, have effectively helped build positive sentiments at a time when the economy is going through temporary shocks of structural reforms.

The intervention by the prime minister comes at a time when the ruling Bharatiya Janata Party (BJP), particularly the top leadership, has come under severe criticism on the economy front. The problem for the BJP is that it is not only the opposition parties that are criticizing the government, but a section of its own senior leaders, including former ministers Yashwant Sinha and Arun Shourie, have spearheaded the attack.

The government’s management of the economy came under scrutiny when growth rate slowed down to 5.7% in the June quarter from 6.1% in the preceding three months, which gave rise to loud calls for a stimulus package. However, the finance ministry decided that since public spending has already been “front-loaded” in the current year by advancing the 2017-18 budget by a month to 1 February, a decision on higher spending that would warrant more than estimated borrowings, could wait till the next budget.

Interestingly, even the top leaders of the Rashtriya Swayamsevak Sangh (RSS), the ideological parent of BJP, cautioned the government that there was a need to protect the needs of farmers, along with small and micro businesses.

Amid renewed debate on the economy, Modi directly addressed ongoing criticism against the NDA that it has mismanaged the economy. Modi’s comments come in the backdrop of the first quarter showing that economic growth slowed sharply to 5.7%.

The steps include a Rs16,320 crore scheme announced last Monday to realize the government’s goal of “electricity for all”, reconstituting the Economic Advisory Council to the Prime Minister, advising state-owned enterprises to step up capital expenditure including through market borrowings, Tuesday’s excise duty reduction on petrol and diesel, easing procedures for small exporters and instructing tax officials to process refunds to exporters faster. The prime minister on Wednesday also assured that entrepreneurs becoming part of the formal economy will not be harassed.

Addressing the golden jubilee celebrations of the Institute of Companies Secretaries of India, Modi spoke on a range of issues, including restoring premium on honesty, not mortgaging the future of the country for his present, no retrospective investigations of companies joining the formal economy, that India should become the most tax compliant nation by 2022 and the government was committed to reverse the trend of GDP (gross domestic product) deceleration.

Modi’s intervention is also significant because assembly elections are due in Gujarat and Himachal Pradesh in the next few months and a significant portion of the voters in Gujarat are small, medium and micro traders.

Experts said the prime minister’s intervention giving facts about economic trends was much needed and was well timed. Rajiv Kumar, vice-chairman of federal policy think tank Niti Aayog, said a host of high frequency data suggested that economic slowdown has already bottomed out. Kumar said it was not fair to spread pessimism based on one quarter’s figures when further data, including the Nikkei India Manufacturing Purchasing Manager’s Index (PMI), suggested recovery. “The Prime Minister’s intervention dispels negativity. Economic reform is a work in progress,” said Kumar.

Manufacturing activity in India showed sustained improvement in September as per the PMI, which was recorded at 51.2 in September, the same as August. A reading above 50 on the index suggests expansion.

Political analysts feel that the prime minister is addressing a “mindset issue” and is therefore making use of a narrative that requires mindset changes in order to adopt policies with long-term benefits or impact.

“The things that Modi is talking about includes structural changes like the goods and services tax (GST). If you start looking at the temporary outcome, you will not be able to make sense of it. Impact of these are long term and so they have to be explained in that way. This goes beyond a campaign mode of speech,” said N. Bhaskara Rao, a New Delhi-based political analyst.

Soon after Modi’s Wednesday speech, opposition parties came out in criticism and accused the NDA of mismanaging the economy. Randeep Surjewala, chief spokesperson of the Congress party, took to Twitter and said: “All drivers of our economy are sputtering and stumbling. Future of the young generation is at stake. Can sugar coated dramatics help, Modiji?”

Sitaram Yechury, general secretary of Communist Party of India (Marxist), also wrote on Twitter and attacked Modi over demonetisation, “mismanagement of GST” and higher indirect taxes.


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