The just-concluded Assembly elections in Haryana and Maharashtra should not be construed as a vote against incumbency. Both Devendra Fadnavis and M.L. Khattar did well, or at the least much better than their immediate predecessors. However, both became victims of the “5% syndrome” that has permeated the election results. After being used to close to double digit growth for decades, voters are plainly not satisfied with a rate of growth of 5%, which has come down from the much higher levels that were seen in previous years. Whether it be in empty malls or in multiplying anecdotes of joblessness, it is clear that tens of millions of families are less than happy at the overall economic situation. Recent events in Lebanon show what happens when economic hardship multiplies. People take to the streets against the authorities. Even in Hong Kong, it needs to be remembered that income inequality in that autonomous city within China is the highest in the world among economies that are developed. A handful of land monopolists have ensured that young people in Hong Kong have zero chance of buying an acceptable accommodation, so high have prices remained in that territory as a consequence of the greed of a few. Had dwellings been cheaper and incomes higher rather than stagnant, the rallies taking place across Hong Kong may have been far smaller in number. A double digit growth is needed for bringing the poor up to the level of tolerable living standards, as has been seen in China or even in India during periods of faster growth. Prime Minister Indira Gandhi sought to redistribute income in the 1970s to try and fulfil her promise of Garibi Hatao, but failed completely. A country with an economy much below the level it ought to be has no way of ensuring social justice. Indeed, going after wealth creators in the manner that has been seen since Sonia Gandhi took effective control of the government in 2004 has only worked in reverse. Investment has been scared off and job levels have fallen. When producers feel that they are at the mercy of the whim of a politician or a bureaucrat in the matter of avoiding prison, the incentive to invest and to expand falls drastically. This is what has happened in India since 2004. An atmosphere of fear has permeated the business world and affected sentiment in a negative direction. Prime Minister Modi did well in warning about this in an unmistakable way in his 15 August Independence Day address. What is needed is for the Prime Minister’s views to be converted into policy down the line, so that the flood of prosecution notices and the wave upon wave of official harassment reminiscent of the V.P. Singh period and revived by Sonia Gandhi needs to be stamped out. Once Prime Minister Modi restores business confidence, it will only be a matter of months before the effects on the economy start to become visible.
The disappointing results of the Haryana and Maharashtra elections, despite the presence of two hard-working Chief Ministers, is a warning administered by voters to the BJP. The party needs to concentrate on the fundamentals of the economy. Prime Minister Modi has done much in the field of promoting ease of doing business and in cleaning the system of graft. However, much more needs to be done. It would be wrong to assume that official corruption has been stamped out. In fact, the amount of bribes paid has gone up in some segments of the economy, because of the vastly increased powers since 2004 of the bureaucracy. India is a democracy ruled by, for and of the people. However, elements of the bureaucracy believe that it is a republic ruled by and for the bureaucracy and of course their political masters. PM Narendra Modi, who is far and away the most popular politician in the country, has the will and the ability to ensure a paradigm shift in empowerment from a bureaucracy still in thrall of colonial attitudes to civil society that is increasingly more versatile and capable than those who wield the power of life and death over them as a consequence of archaic rules and laws that should have landed in the dustbin after 15 August 1947 rather than retained and indeed added on to. Only greater freedom of enterprise and the reduction of harassment can promote the “animal spirits” needed for the economy to grow at the double digit pace that voters expect from Modi. The fact is that people expect more from Modi, which is why they are disappointed at the 5% rate of the growth of the economy, even though this is on the high side as compared to economies such as Brazil, South Africa and Russia, partners in BRICS. Such a move requires a substantial decentralisation of authority, as it is not possible to administer a complex economy from a single point. Ministries need to be told to take decisions on their own rather than constantly referring matters to an overworked PMO, and in turn they need to devolve authority lower down the line. Strict monitoring of performance and holding accountable those responsible for bad performance are other features that need to be mainstreamed. The need is for a fresh set of reforms that in scope and impact will be much greater than the 1992. This is the challenge facing PM Modi, and his well-wishers look forward to his success in such a gargantuan task.