Rupa Subramanya is an economist and researcher based in Mumbai.
In May 2014, Narendra Modi and the Bharatiya Janata Party (BJP) swept to power in a landslide election victory. Modi’s campaign was built around the slogan of “Minimum Government, Maximum Governance” and the promise of “achhe din,” or good times. The expectation was that his decisive mandate would enable Modi to sweep away the remnants of India’s socialist past, eliminate corruption, strengthen weak institutions and place India on a high-growth trajectory.
After a victory lap playing statesman in major foreign capitals, Modi got down to business in 2015 by trying to reform a draconian land acquisition law that had stymied economic development. But the attempt was halfhearted and soon abandoned when Rahul Gandhi, leader of the country’s main opposition party, the Indian National Congress, managed to deliver a knockout blow by successfully painting the policy as pro-business and anti-poor. A chastened Modi quickly retreated from other politically contentious structural reforms such as burdensome labor laws that hamstring industry and hamper job creation.
Modi did manage to accomplish some important technocratic reforms, such as a new bankruptcy law, a monetary policy framework, and a goods and services tax (GST). With the notable exception of the monetary policy framework, the GST, with its welter of different rates and cumbersome administration, has seen little if any of the benefits of a unified national market, with revenue falling short of expectation. Similarly, the bankruptcy law bogged down by poor implementation and insufficient regulatory capacity is also yet to bear much fruit.
Far from jettisoning the remnants of central planning, Modi imposed price controls on medical devices to benefit a handful of manufacturers in his home state of Gujarat and hiked import tariffs across a range of products, reversing a quarter century of trade liberalization — thus marking a return to India’s failed import substitution and command-and-control era.
In 2014, Modi spoke to the aspirations of young Indians with the promise of plentiful good jobs. Four years later, when challenged on his poor job creation record, his cavalier response was that even selling Indian street food — a highly precarious, low-productivity and low-wage occupation — was also employment.
Despite the promise of minimum government, Modi all but abandoned the privatization of state-owned enterprises, and, if anything, the government is more bloated and intrusive than ever, making for a virtual alphabet soup of government schemes, and with no diminution in routine corruption that average Indians face everyday.
Not surprisingly, Modi has not managed to lift the Indian economy above its 7 percent growth rate, the minimum it would grow given the economy’s fundamentals, no matter who was in power.
Modi staked his considerable personal political capital when he dramatically announced the immediate voiding of 86 percent of the nation’s currency stock by value on national television on Nov. 8, 2016. The surprise move, known as “demonetization” — which caught even ministers and senior officials off guard — was billed as an attempt to curb “black money," but its main effects were to cripple cash-based supply chains and credit relationships, damaging small- and medium-size enterprises, which are yet to fully recover. It did nothing to extinguish black money, nor did it lead to a less cash-based economy or increased tax compliance and collection due to greater formalization.
The largest monetary policy experiment in modern history was based on reckless voodoo economics, inspired by the BJP’s Hindu right-wing cultural base, and ultimately failed to achieve any of its objectives.
Modi also introduced policies that had no rationale other than to placate this Hindu base. His government’s draconian cattle trade rules — done without any stakeholder consultation — not only crippled the industry and destroyed livelihoods but also emboldened Hindu right-wing extremists, who were given a free pass to engage in violent vigilantism and hooliganism in the name of cow protection. So severe has been the impact of his government’s obsession with cattle protection that there is now a problem of stray cattle roaming around destroying crops and further harming farmers.
The promise of good governance increasingly seemed like a cruel joke in the face of Modi’s reckless adventurism.
But reality is now catching up. With a tough reelection battle looming and recent state election losses, Modi is using the time-tested method of an old-fashioned populist spending binge. With the recent ouster of central bank chief Urjit Patel, who refused to bend to Modi’s wishes, and his replacement by a loyal bureaucrat, the spigots of loose money have all but been opened.
Almost five years later, was the Indian public sold a bill of goods? Modi’s record suggests that his lofty slogans in 2014 were part of a slick and sophisticated exercise in public relations, but no genuine conviction or plan of action lay behind it. Modi’s major tangible accomplishment is avoiding a big corruption scam of the type that hobbled his predecessor.
That apart, Modi squandered a decisive mandate, and voters will soon decide whether he and his government deserve a second term in office.