Last week I had written that ‘the BJP may still ride to victory’ in Gujarat. As it turned out, the BJP did not ‘ride to victory’. The BJP limped across the finish line with a young and energised sprinter close on its heels. Both the BJP and the Congress were winners: the BJP scored an electoral victory, the Congress scored a political victory. The BJP’s leadership has reason to be despondent that it lost 16 seats (from the 115 seats it had held) and was nowhere near its declared goal of 150 seats. The Congress’s leadership has reason to be disappointed because it came so near (80 seats) but couldn’t cross the finish line (92 seats).
Incumbent and Challenger
The takeaways from the election in Gujarat are many. I shall list a few:
1. The BJP under the leadership of Mr Narendra Modi is not unbeatable. Delhi and Bihar were not flashes in the pan or flukes. A strong narrative and a carefully-crafted strategy can defeat the BJP.
2. Vote swings can be very large between one election and another even if the interval is only two or three years.
3. In Gujarat, the critical factor was not caste but mobilisation. Such mobilisation can take place around other factors as well — joblessness or farmers’ distress or growing inequality or religion. The outreach of social movements can be larger than the reach of political parties and may determine the outcome of an election.
4. Mr Rahul Gandhi has his task cut out. He has galvanised the Congress cadres but their numbers must increase and they must be welded into organisational units. The ‘missing’ organisational units may explain the difference between 80 seats and 92 seats.
5. Mr Narendra Modi has to deliver on his promises — growth, jobs, doubling farm income, and sabka saath, sabka vikas. The first three years of his government have returned an average growth rate of 7.5 per cent (under the new methodology). That is a long distance away from the double-digit growth that was promised. Jobs are not in sight. Doubling farm income — I suppose real income — seems to be a pipe dream. Sabka saath is belied by the divisiveness and hate spread by the BJP/RSS foot soldiers and even some leaders.
Economy and jobs
Ultimately, it is the state of the economy in 2018-19 that will be the decisive factor in the elections over the next 16 months, including the Lok Sabha election. In ‘economy’, the critical factor will be ‘jobs’. Hence, it makes sense to talk about the outlook for the economy and for employment.
The last exposition on the economy by an official source was by the RBI at the last Monetary Policy Review on December 6, 2017. After noting that manufacturing, mining and electricity, gas, water supply etc (constituting ‘Industry’) accelerated in Q2 of 2017-18, the RBI pointed out that, “In contrast, growth in agriculture and allied activities slackened, reflecting the lower than expected kharif harvest.
Activity in the services sector decelerated, mainly on account of slowdown in financial, insurance, real estate and professional services, and in public administration, defence and other services (PADO) following the large front-loading of government expenditure in Q1. Despite some improvement, construction sector growth remained tepid due to transitory effects of the RERA and GST implementation. Growth in the trade, hotels, transport and communication sub-group remained resilient, in spite of some slowdown in growth in Q2 as compared with the previous quarter. On the expenditure side, the growth of gross fixed capital formation improved for the second successive quarter. However, growth in private final consumption expenditure — the mainstay of aggregate demand — slowed to an eight-quarter low in Q2.”
If growth in agriculture slackened, services sector decelerated, construction sector was tepid, growth in trade, hotels etc slowed down, and growth in private final consumption expenditure slowed to an eight quarter low, will anyone in his right senses say that the economy is healthy?
MUDRA and Myth
Let us look at just one boast of the government — that millions of jobs were created in the last three years. On March 28, 2016, the Prime Minister referred to the MUDRA scheme and said “over 31 million loans have been sanctioned to entrepreneurs… Even if we assume conservatively that, on average, each enterprise creates just one sustainable job, this initiative itself amounts to 31 million in new employment.” MUDRA loans are simply an aggregate of loans given by public sector banks and regional rural banks — what they have been doing for many years. As on July 28, 2017, 8.56 crore loans were sanctioned. The total amount was Rs 3.69 lakh crore. The average loan size was Rs 43,000!
We are asked to believe that a loan of Rs 43,000 will create an additional job! If the ‘new’ worker is paid less-than-minimum wage of Rs 5,000 a month, the loan will evaporate in eight months! Can an investment of Rs 43,000 generate additional income of Rs 5,000 per month?
The claim that every loan created “one sustainable job” is false. It is just like the boast that Rs 15 lakh will be deposited in the bank account of every person after retrieving the black money that was stashed abroad. If you are an unemployed youth, enjoy your Rs 15 lakh deposit, take the MUDRA job, eat statistics and live happily ever after!