This Article is From Jan 11, 2016

It Would Be Cruel To Wish Modi 'Happy New Year'

Modi has not seen acche din in 2015. First, he lost the assembly elections in Delhi at the start of the year and then the Bihar elections at the end of the year. Clearly, his much-vaunted charisma has taken a deadly blow, for these two major election losses took place notwithstanding his personal involvement in both of them.

The reverses in panchayat elections have been even more striking, particularly in his home-state of Gujarat. There, the BJP lost to the Congress in 23 out of 31 district panchayats (Zila Parishads), besides two more where the Congress was in coalition with the JD(U). The Congress also won 136 taluka panchayats, leaving the BJP far behind with only 73. As for seats, in the taluka panchayats, the Congress outperformed the BJP in 2,542 seats with 53.5 per cent of the vote, whereas the BJP score was down to 1,180. In district panchayat wards, the Congress beat the BJP in 595 seats with a vote share of 60.02 per cent. Village panchayat elections are held on a non-party basis, but it can clearly be inferred from the results of the upper two tiers that between a half and two-thirds of those elected to the village panchayats are Congress supporters or sympathisers.

Overall, taking panchayats and municipal results together, the Congress vote has soared to more than a half, and stands at 52.33 per cent while the BJP share has slumped to 41.66 per cent. The Congress now enjoys a majority, while the BJP has been all but wiped out in Saurashtra and North Gujarat, including Mehsana, home to both Narendra Modi and his successor, Anandiben Patel. In the Rajasthan panchayat elections, similarly encouraging results have been obtained for the Congress. This is politics at the grassroots. It is clear that Modi's rural base has eroded and his urban base too is slipping. Why? Agrarian distress is the obvious answer for rural India. And joblessness for urban areas. Hollow promises are seen as hollow, and slogan-mongering as no substitute for action on the ground.  

More bad news for Modi has emerged as the year drew to a close through the Ministry of Finance's own Mid-Year Economic Analysis 2015-16 submitted to Parliament in the last few days of the Winter session. The analysis confesses to virtually every index being down. GDP projections have had to be scaled down. Nominal GDP growth is nearly three full percentage points below the Budget estimate. Savings and investment ratios have both dropped by about 30 per cent. Private investment is sluggish. Public investment is also likely to be slashed by the need for fiscal consolidation, the mantra of the Jaitley regime.

Agriculture is down and so farm distress is up. The growth in agricultural output, which was a miserable 1.1 per cent in 2014-15, is expected to return a negative figure this year. This has severely hit demand in the economy. As the analysis confesses, "Rural wage growth and minimum support price increases... have remained muted". A major component of rural demand, the Mahatma Gandhi National Rural Employment (MNREGA) programme, has plummeted owing to a vicious slash in outlays. Minimum Support Prices have stagnated notwithstanding the rise in input costs. Numerous other social sector programmes have also been cruelly curtailed. This has hit nearly two-thirds of the electorate in the solar plexus, as evidenced in the Gujarat and Rajasthan panchayat results.

Manufacturing growth at around 4 per cent is lower than in the last several years. Corporate balance sheets, quarter after quarter, are revealing great corporate stress, which is why private investment is lagging however many cheers there may be for "Make in India". Credit off-take has sharply fallen, reflecting the mess in the banking sector, with unpaid debts bounding upwards while current lending remains low.

Exports have declined for the 12th straight month running, down 24 per cent compared to last year alone, and this year is going to see India's worst export performance in 15 years! Service exports and tourism earnings are both down. Imports have also declined, partly because oil prices have slumped but more because there is a lack of demand in the economy. The rupee has achieved a measure of stability but at the lowest point ever with the rupee trading at about Rs. 67 to the dollar.

Of the four components of demand, only private consumption and public expenditure are powering what growth there is. The other two components of demand, namely, private investment and exports, are languishing. "It is," says former Finance Minister P. Chidambaram, "like a car running on two wheels."

Low domestic demand has reinforced low global demand in driving down overall economic performance. In consequence, lower-than-anticipated revenues have been secured from direct taxes, which are progressive, increasing Government's reliance on augmented indirect taxes, which are regressive. Thus, both growth and social justice have taken a knock.

This jargon may be gobbledygook to the average voter. But because the reality of poor growth is hitting every family budget and every individual's pocket, the poor election results the BJP has secured in 2015 represent the felt reality that all is not well. Where Modi in 2014 had campaigned on a platform of poor governance by the UPA and the promise of development and prosperity if he were returned, the ugly fact is that there are no jobs. This is dramatically illustrated by the figures for job creation in the first quarter of this fiscal year (April-June 2015) when net job creation in the manufacturing and export-oriented sectors actually fell by 43,000 compared to the previous quarter while in the same quarter of 2014, 182,000 jobs had been created. No wonder voters have been punishing Modi for so letting them down.

A huge opportunity to bring on the good days has been missed with international oil prices collapsing from over $100 a barrel to just $35. Modi's government has totally failed to cash in on this wholly unanticipated bonanza. If oil prices had not fallen, the precipitate decline in exports would have resulted in a gaping trade deficit and a drop in the value of the rupee to well below Rs. 80. It is ironic that the sheikhs have saved Modi's bacon.

The expectations aroused by Modi's soaring rhetoric were so unrealistic that a nose-busting reaction was from the start on the cards. The most vivid manifestation of his rhetoric overtaking reality was his promise to bring back every paisa of black money to render Rs. 15 lakh into the account of every Indian citizen. Almost nothing has been repatriated and so all accounts are quite innocent of any gifts from Santa Modi.

And what of 2016? The Mid-Year Analysis leaves us with this sobering thought: "If the Government sticks to the path of fiscal consolidation, that would further detract from demand. On these assumptions, and unless supply-side reforms provide an impetus to growth, real GDP growth next year, based on an analysis of likely demand, is not likely to be significantly higher than growth this year". That in a nutshell is Jaitley's dilemma: damned if he does; damned if he doesn't. Either he pursues his favourite goal of containing the deficit - or he gives up on macro-economic stability to kick-start an economy that like a stubborn horse is refusing to move on its own.

And along with the downward slide of the economy, the BJP's political prospects are also set to further slide over the next year, especially as they have already lost the assembly elections due in Kerala, Tamil Nadu and West Bengal even before the elections are called, and do not seem capable of measuring up to the challenge in Assam. Panchayat elections in a number of states will only add to Modi's woes.

Would it, therefore, not be cruel to wish Modi a "Happy New Year" when the all the signs point to the New Year as likely to be for him worse even than the dying year!

(Mani Shankar Aiyar is a Congress MP in the Rajya Sabha.)

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.