The song of defeat
His confidence in his government's decision-making besides varied and well-documented failures are bound to make Prime Minister Modi's re-election in 2024 unlikely
There are a series of ten bloopers that will likely ensure Narendra Modi's electoral defeat in 2024. There seems to be no visible way for him to be able to make India free of his errors in the next five years because after winning the election the second time around, he is chock full of self-belief and has a tendency to believe that whatever he is doing, is the best alternative for the country. Modi thinks that all that he did in his first term was perfectly on-point and is keen to expedite his efforts to reform the nation, its society and the next generation.
Prime Minister Modi can never concede that he did many things wrong or he didn't do more things right. On the contrary, he is full of awesome confidence that what got him here will give him another win in 2024. He refuses to realise the fact that his economic underperformance did not matter in 2019 because the electorate somehow perceived that the alternatives were not up to the mark. But in 2024, this will not remain the same. Opposition by that time will get its act together. The state of the economy and especially the jobs will matter more than ever and the result would be a negative vote against Modi and his party.
Here are Modi's 10 mistakes for which he will pay a huge cost in the summers of 2024:
India's 'biggest tax reform' is floundering on the rocks of bad design and complex rate structure. Modi was solely culpable for bringing such half-cooked legislation. It will rebound on him in 2024. Today, the business community is totally enraged with him and sour-faced consumers are eagerly waiting to give a befitting reply to him. It is presently difficult to reduce the abnormalities in GST because Modi is convinced that the current policy is perfect. Angry state politicians, even from his own party, will lay the blame for shrinking government revenues on Modi at the time of the general election.
The ruthless emphasis on compliance is the whole problem as individuals and corporates feel that the tax rates are grossly unreasonable. The Modi government has not only raised tax rates but has added surcharges and cesses as well. With the current situation of the economy, Modi won't be able to give any concessions in taxes for years to come. By the time we reach 2024, the tax net will increase to a level which will have the potential to block the way of Modi's return in elections.
Real disinvestment and strategic sales
If Modi thinks that selling IDBI Bank to LIC or Hindustan Petroleum to ONGC or REC to Power Finance Corporation are strategic sales, what can one say? Aren't they mere transfers from one pocket of the government to another? If our prime minister wants us to believe that he is rescuing failing public sector IPOs such as New India Assurance, GIC, etc., with money pumped in by other public sector entities, I would say that he must understand that this is not disinvestment. How can a budget-announced decision that let government holdings fall below 51 per cent in case other public entities also hold shares in them be called a reformative step? If the government reduces its stake and LIC or State Bank of India holds the balance, what we will have is public sector financial institutions stuck with illiquid holdings, a deadweight in reality. This financial flirtation will go against Modi in the next parliamentary elections.
Banks and the public sector
India's public sector banking is in a pathetic situation. Sooner than later the country will realise that merging banks or asking the LIC to buy one staggering under huge losses was no solution. Foreign branches of PSU banks are closing their operations with each passing day. Coming years will find how much money they have lost in various countries. Similarly, the Modi government is underway for the privatisation of a few other white elephants with an eye on earning money for the exchequer rather than avoiding liabilities of a permanent nature. Non-banking financial companies are also teetering on the brink. They are afflicted not just by liquidity problem, but a solvency one. How 2024 election results could be spared from the dark shadow of all these clouds?
The emasculation of the public sector
Fiscal deficit window-dressing requirements are forcing the government to demand buybacks of shares and higher dividends from public sector companies. Modi has disallowed public sector companies to retain their profits for investment in expansion projects. As a result of this, investment is not picking up in the economy. Modi needs to internalise that money left with companies will always be better spent than money transferred to government coffers. But his current policy will lock-up any chances of the survival of the public sector in the long run and most of them could be shutting their shops in the next four to five years.
Most of the economists feel that these accounts are a real source of scandal. The Comptroller and Auditor General of India have openly said that for the fiscal deficit in 2017-18, the real figure was 5.85 per cent and not the official version of 3.46 per cent. This is because a lot of budget expenses were shifted to public sector undertakings. Another technique used to show a lower fiscal deficit is to shift current year expenditures to the following year. The manipulation of the figures could be justified in files but when it will show its effects on the ground, Modi is bound to face the heat. After all, accounting fiction cannot provide real bread to the people of India.
The Monetary Policy Committee and inflation targets
There was a time when central banks all over the world were finding it tough to raise inflation to a level that was complacent for them. MPC was given an inflation target at that time. The only thing worse than high inflation is very low inflation because prices don't move then and stagnation and misallocation of resources becomes puzzling. The current MPC mandate will end in 2021 and it will be too late by then to give it a dual mandate. It is not easy for Modi to give producer prices index and wholesale prices index weight in the MPC target setting. The shadow of this will loom large on next general elections.
India's statistical system is being questioned for its credibility. The international community is upset over the reports of data being fudged by the Modi government. Even if Modi has said that the criticism is politically motivated, what is the hitch in investing a bit more to find out a real figure on the jobs situation and not just rely on Employees Provident Fund data to show that the jobs market is fine?
Apart from these very strong eight roadblocks that Modi will face in 2024, an equally forceful barrier would be the social disharmony scene that has emerged because of Citizens Amendments Act and National Population Register. Kashmir will act as yet another barricade to Modi's electoral victory. I see no amnesty for him.
Pankaj Sharma is Editor & CEO of News Views India and a national office bearer of the Congress party. Views expressed are strictly personal