Entitlement Over Empowerment and Pro-Oligarchic Bias: The Politicisation of Economic Policy Under Modi

As the Union finance minister prepares to present the Modi government’s first full Union Budget since its third Lok Sabha election victory, one of the key questions that may come to any fiscal or public finance observer’s mind is whether a status quo can be expected in terms of economic ideology.

One may, perhaps, even question further, inquiring, whether in the last 10 years, the current government has had a core economic ideology to begin with which can be ascertained from the direction of its fiscal policy and budgetary outlays.

The short answer to this appears to be a clear No – given how politicised the government’s agenda has been which seems to be less connected with economic principles but has more to do with electoral strategies combined with a pro-oligarchic capital wealth creation for certain businesses.

Modi government’s macro-economic understanding of the nature of structural challenges afflicting the Indian economic landscape, from high food inflation, to rising debt, to high youth unemployment (rising underemployment), independent of how well the macro-fundamentals of the economy may be doing in relative performance to other recession-affected western economies, remains weak, and largely unacknowledged.

The government’s fiscal road mapping has also lacked a fuller understanding of India’s macro sectoral-growth options (services vs manufacturing) at the peril of ignoring the growth of farm incomes (a promise Modi first made back in 2014) and the purpose of creating a medium-to-long term cohesive fiscal agenda, when it comes to ensuring a higher upward mobility centered economic opportunity fiscal plan.

Also read: Inequality, Jobs, Hunger: Why You Should Care About the Union Budget

It must be acknowledged though that the Indian economy from a basic numbers standpoint appears to be growing and is macro-resilient to the nature of challenges many of the other countries, steeping towards recession – from Europe to North America – are currently experiencing.

But, this period was a shining spot and opportunity for India to take over the world and offer a deeper economic promise and compact for investors to base long-term faith in the country’s domestic factor markets (from capital to land to labour). That, unfortunately, hasn’t happened.

A few of us have argued since 2016 that the gross fixed capital formation levels anchored by private investment haven’t increased under the Modi government, despite all it has tried to do on the supply side. My concern is more with the nature of the disputed welfare strategy the government has repeatedly followed at the risk of eroding, almost dismantling the existing social/economic safety net for the vulnerable, without ensuring any substantive investments in human capital formation.

The reason for this latter issue (the inability to provide a higher-mobility fiscal plan) is directly related to an ‘entitlement-centered’ view of economic welfare that the government seems to practice, driven by a political (more narrowly, an electoral) rationale. From the 80 million people receiving ‘free ration’ to seasonal cash transfers provided to low-income women households, the government has prioritised entitlement over empowerment to its citizenry. This is where the average Indian citizen has become atmanirbhar by circumstance – or apathetic indifference by its government, not by choice or empowerment.

Tokenistic approach to welfare

One key indicator to explain this is the nature of the widening social, economic, and political inequality of ‘access’ that is plaguing states, rural areas, pan India. In almost all critical developmental measures, from measuring access to basic healthcare, education, social security, credit, and legal recourse, the macro-realities of widening access inequality have made the average citizen worse off (at least in states where the Bharatiya Janata Party has remained in power). The Opposition-ruled states too have faced their own set of challenges, triggered by a severe politicisation of fiscal devolution that has worsened the scales of asymmetric federalism (see a detailed report here).

Entitlement-centered welfarism has a symbolic, tokenism of ‘assigned resources’ (from housing to nutrition to jobs) attached to it. It makes a citizen feel that the government is ‘handling’ sops to them rather than investing in building an ecosystem – through a more enterprising, pro-market set of competitive interventions, that allows citizens to do/achieve/pursue what (s)he find reason to value.

This tokenistic approach to welfare through seasonal, temporal entitlements driven for electoral gains has further made a few (those like this author) to question the credibility and legitimacy of the Indian state under Modi, which seeks to envision a ‘developed’ India as part of its Viksit Bharat 2047 plan, or one may more critically see all the hype as simply another episodic cycle of a new rhetoric being peddled by those in power.

One can use the word ‘rhetoric’ simply to ascertain the nature of big-ticket, headline-managing announcements the government has vested itself in, to create a strong, pro-business perception, which domestic (and foreign) private investors haven’t bought into; case in point: see a persistent decline in private investment levels despite the millions poured into schemes like Make in India and Production Linked Incentive (PLI) where the results seen are dismal to the outlined expectations of the government. There is little correlation between the allocated spending on these schemes and their consequential returns in terms of ‘good jobs’ or in driving domestic consumption or targeted exports.

Pro-oligarchic bias

The other key issue with the government’s ideological core in its fiscal and governmentality under Modi so far has been its pro-oligarchic bias observed towards benefitting certain businesses against ensuring a competitive, pro-market environment for ‘reforms’ to enable better economic outcomes. Most sectors, from manufacturing to services to big infra are being anchored by a handful number of business houses, with contracts thinning out for new entry-players who may have enterprising ambitions and want the ‘market’ to choose their destiny – not the government.

Maximum government and Minimum Governance that would have allowed the market to assign and allocate capital-other factor resources, in a more competitive economy has somehow a B2G2C (Business to Government to Consumer) model, where the government seems to be an intermediary in all core decision-making beyond its predefined role in regulatory capacity.

Also read: Dear FM, Corporate Revenue Foregone in 5 Years is Nearly Rs 8.7 Lakh Crore, Where are the Jobs?

This has made smaller businesses, especially MSMEs to either shut shop, or continue to remain small, while some of the bigger business houses have consolidated their wealth in India, buying public assets, and investing overseas through big-capital investment. The classic case of the decimation of the MSME sector, one of the largest job-creating segments in India’s manufacturing landscape, is a classic illustration since the demonetisation and GST era and then a pandemic struck the heavy blow-killing millions of labour-intensive jobs.

Given these challenges, the responsibility for many can be attributed to an incoherent, confused and misplaced economic agenda that may find little solace in the upcoming budget too. Even in terms of hard data, which speaks ‘truth to those in power’ the government – even in this third elected term – has followed a policy in a continuum of apathetically dismissing any critical government data, citing political or methodological concerns, and for worse, invest more resources in coming with ‘alternative set of data points’ to suit the government’s rhetorical narrative.

This exercise in itself reflects a cultured, authoritarian attitude of indifference meted out by the Modi government in dealing with the structural economic challenges that afflict India, which will postpone an (economic) calamity waiting to happen – not prevent it.