Originally Published 2017-02-02 09:46:40 Published on Feb 02, 2017
Budget shows Modi has found his narrative for 2019

There is only one way to evaluate policy in Narendra Modi's India: how many patriotic WhatsApp messages can it spawn? By that yardstick at least, his government's fourth budget is a tremendous success.

And it is indeed basically his government's budget, rather than Finance Minister Arun Jaitley's. After all, perhaps more important and revelatory than the FM's Budget speech was the PM's message broadcast shortly thereafter - a new tradition that Modi has started, and a useful indication of exactly how much mindspace he likes to cede to his cabinet ministers.

It seems clear that Jaitley was given one basic instruction: take the political gains of demonetisation and build on them. Modi needs those tricolour-draped WhatsApp messages to keep flowing - those, instead of cash, are the currency of power now, and their circulation has increased as cash's has dropped.

That's why the sections hurt by demonetisation were targeted for concessions, incentives and bailouts. Small and medium enterprises got a tax cut. "Honest" income tax payers were rewarded with a tax cut, too. Real estate, which is struggling, got a series of sops that essentially amount to a bailout of India's most corrupt industry - unsurprisingly, the index tracking realty stocks zoomed up shortly after the speech.

Demonetisation was popular largely because it was seen as the one time that a government introduced a policy that hurt the rich. Modi's a smart politician; he figured this out and has swiftly repositioned himself as a tax-and-transfer leader. The upper middle class will pay for the lower middle class' tax cuts; urban consumers will pay for farm schemes; larger companies will subsidise smaller ones. Vijay Mallya will have a law for rich thieves named after him. All this is going to play well on WhatsApp, isn't it? Narendra Modi is now officially a sanskari Robin Hood.

Perhaps the most WhatsApp-ready message from the budget, of course, is the attempted clean-up of political party financing. It's a complicated scheme that's being proposed, and it's not clear whether it will work in practice - won't people just show 10,000 donations under Rs. 2,000 instead of 1,000 under Rs. 20,000? But it's a worthy attempt anyway. Indeed, if I get a WhatsApp message praising that one, I might even forward it.

The truth is that this budget was probably written on November 8, when Modi announced demonetisation - or at most, a few days later when the BJP's troll-farms produced targeted WhatsApp messages praising Modi's "bold", "well-thought-out" move. Pretty much every aspect of this budget has had to build on the narrative being created then. Most initiatives and choices emerged from demonetisation: whether the ban on high-value cash transactions, focus on propping up the rural sector, or the push to digitalisation, or the tax cuts. It's a rare policy that essentially shapes a budget this completely. Perhaps Jaitley would have chosen to go off in other directions as well, but this was a very politically calculated budget, and demonetisation seems central to the BJP's calculations.

The impact of demonetisation on the poorest, something that's not exactly discussed by the government, is clear from the revised allocation for NREGA in the past year, the highest ever. If Modi believed that NREGA is a monument to failure, his demonetisation failure has just expanded the size of the monument considerably.

Yes, this is a political budget, but let's not make mistakes about its impact. It might be tempting to think that this is a budget written for the Uttar Pradesh assembly election, or that the UP election result will be a referendum on demonetisation - and, by extension, the budget. But I don't think that's true. The UP election will be dominated, as usual, by hyper-local issues. Instead, it's 2019 you should be thinking about. That's the election for which the PM is positioning himself, creating the narrative that silences the opposition, the message that he will hone over time in his radio broadcasts and rallies, and the talking points that his WhatsApp swayamsevaks will dutifully forward to everyone in the country close enough to a mobile phone tower.

It's clear Modi has found his narrative for 2019: that he is the man who is cleaning up the country, physically, morally and spiritually. By definition, those who oppose him are dirty. Note the deafening silence from other parties on changes to political funding - who would dare to discuss the issue when anything other than abject agreement is actually a confession of guilt? The WhatsApp Test has already been applied to this argument: witness the fact that Arvind Kejriwal was practically silent on demonetisation once messages claiming it revealed AAP corruption began to circulate.

All this happens at a time when the economy is growing only at 6.5 per cent, according to the Economic Survey; when investment has declined for three quarters, a situation reminiscent of - worse than - the darkest days of UPA-II; when jobs were created for only a fraction of the young people joining the workforce last year - and job creation actually appeared to be slowing even before Modi killed it with demonetisaton. You'd think a responsible government would seek to make policy at this time that was substantive. Instead, it's got a scattershot strategy that's structured for internet memes instead of the real economy. Real people will suffer - but Modi may not pay a political price for that suffering.

This commentary originally appeared in NDTV.

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Mihir Swarup Sharma

Mihir Swarup Sharma

Mihir Swarup Sharma is the Director Centre for Economy and Growth Programme at the Observer Research Foundation. He was trained as an economist and political scientist ...

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