Will the Modi-led BJP government orient the country towards Reagenomics

Before I really expand on the main idea or concern of the title of this post, I would like to clarify that it is not my intention to offer any political analysis of Modi's impressive victory in the recently concluded 16th Lok Sabha polls. Nor would I like to get into any critique of the antecedents and possible implications of BJP's known or assumed political positions on Hindu nationalism, minority rights etc, and its impact on political governance by the new government.

My real concern and interest in this instance is to speculate on what economic philosophy and practices the new govt. will adopt in response to the challenges of growth, development and welfare that are in need of redress. Of particular interest is the future course of the uneasy alliance that has prevailed between waning and patchy socialism of the past and neoliberalism of the present that gained currency in the times of PV Narasimha Rao and Manmohan Singh. This neoliberal turn of economic governance which was inherited by the earlier BJP government of Vajpayee was  carried forward by them especially in the area of Disinvestment of Public enterprises for which even a Cabinet post was created! Then, How will the welfare state and anti-poverty programs of the country evolve under the new regime?. What will be approach of the new government and party to the issue of subsidies?.

I am not sure that I am really articulating the concerns of India's liberal leaning intellectuals or classes when I say that I remain apprehensive of the influence of World Bank and IMF with their advocacy of the contradictory demands of growth and fiscal restraint, when the Finance and Commerce ministry responds to international calls for economic reform and unfettered access of Indian markets to foreign private interests and use of the threat of sovereign ratings downgrades from ratings agencies with vested interests and conflicts of interest.

Also the concept of "Investor-friendliness" of a government or country is not something that contrary to common wisdom, can be easily defined and evaluated. The attitude of the governments and economists alike to look to financial markets for endorsement of  fiscal and economic policies and treat the fickle judgments of market participants as a vote or referendum on various aspects of economic policy, which is a feature of  neoliberal leaning systems, also seems to be catching up well as an intellectual fashion in Indian intelligentsia.

To speculate that a few years of possible BJP rule under an aggressive politician like Narendra Modi can take the country's economic orientation towards Reagenomics may seem like an overstatement at this juncture.  But if past is any guide, small, innocuous and unnoticed events do signal significant changes of trend.

Very little is known at this point of how Modi is going to set the course of economic programs for the country. Modi is being given credit for the 'Gujarat Model of Development', and going by media assessments, a leap of faith or assumption, whether naive or not will likely be made that it will be extended to and can be made to work for the rest of India. Other than World Bank, IMF and Wall Street type cohorts in the economic space, it is hard to find any positive review of the Modi style of economic governance from the non-partisan side of fence.

The purpose of this article is not to make predictions on where and how BJP and Modi may influence the direction and tilt of economic policy making, but to elicit from readers and critics of this blog, their understanding of the concept of support for neoliberalism among the elite, intelligentsia and emerging middle classes in India and what the BJP/Modi  ascendency portends for  the prospects of that ideology in India's future.

Reaganism and Thatcherism represent the prominent caricatures or stereotypes of neoliberalism whose main tenets of:

• Rule or Primacy of the Market/Capital (Goods, Services and Finance) with the subordination of labor and employment.
• Downsizing and/or privatizing of social security and welfare state
• Deregulation or allowing a free hand to big business and exempting them from the effects of law and social responsibility(pollution, profiteering, exploitation, speculation/gambling)
• Privatization of most sectors by demonizing public sector and government/social ownership of business and services.
• Replacing public/shared systems with individual  responsibility and shifting the burden of funding common services onto poorer and struggling classes.

now come camouflaged under the terms of liberalization and globalization.

There is no doubt that Indian middle classes have greatly benefited from the effects of these global neoliberal trends (off-shoring and outsourcing of jobs to low wage/income countries) and clamoring for more of such policies may seem to be the natural response of a beneficiary.  What is more interesting or disturbing depending on how one looks at it, is the evolving middle class attitude to the issues of subsidies, management of fiscal deficit, growth stimulus measures and governmental approach of counter-cyclical response to periodical economic crises.

That subsidies are considered populist and  a tool of vote gathering is an interesting example of how middle class attitudes to an important element of India welfare state are changing, evolving and swaying to the tunes of neoliberalism. Another indicator is the middle class cynicism with anti-poverty programs and their continuation by the outgoing Congress/UPA regime. I had in this earlier post touched briefly upon the ignorance and hypocrisy involved in opposing subsidies that are targeted at poverty alleviation while at the same time applauding tax breaks for business/corporate  entities and investment income (Dividends and Capital Gains). It is usually seen that most of the educated classes and intelligentsia fall for this dishonest framing of subsidies benefiting poor and lower middle classes as handouts, and a cause of moral hazard of encouraging dependence and parasitism from its beneficiaries.

It is really ingenious that handouts to business and oligarchic elites are termed as incentives, grants, breaks and deductions and thus sound positively worded and affirmative and all this is glibly accepted even by the economically literate talking heads. It is even more curious that the need to question the tendency of the prosperous and elite to keep clamoring for subsidies is not felt by the gentry of economics.

Another tendency of Reaganomics whose appeal seems to have caught on with the emerging middle class conversation on economics is concept of 'Labor Market Reform' (LMR). I am not sure what the typical Indian idea of labor market reform or flexibility is. The kind of reform that is music to the ears of corporate and big business is ability to fire workers and/or employers at will without taking their interests into consideration. India's formal sector has tried to implement some versions of labor reform like VRS. This was considered too meek and inadequate by Anglo-Saxon peers whose own version of LMR is no different from throwing workers/employers under the bus to appease their overlords in Wall Street. If one were to go by this wish list of Wiki on Economic Liberalization, trade unions and farmers are powerful lobbies that can come in the way of opening up of the economy. One of the tenets of  neoliberal faith is expecting developing countries to take on these so-called lobbies and work on minimizing agricultural subsidies, without caring that US or Europe are still no better at reducing their own subsidies or that Big Business and Corporates can be as powerful a lobby or worse than trade unions and farmers.  

While India has a sizable Welfare State, it does not possess some of the key elements of the Western/European model of Welfare state like:

• Universal or Employer or State sponsored Healthcare
• Unemployment allowances
• Social Security payments

 which are very important for protection of the interests of the middle classes.It will be interesting to know and watch for BJP/Modi's gestures and plans for these initiatives or complete silence on these issues.

Without intending to get into oversimplification, it would be worth noting that BJP has been called a Traders party or a party sympathetic to interests of Business. Some of its CM's like the ones in Karnataka have known to collude with Big Business and mining interests to the detriment of the state and country's fiscal objectives. Big corporates like Reliance group have been accused of influencing economic policies by using their ability to fund parties and their role in the Oil pricing scam is something that will be a test of the motives and impartiality of the new govt..

In the current economic scheme of things, companies have grown very huge and powerful and new regulatory initiative like TRAI etc have failed to check their rising power (not to be confused with their size or their share of total economic output).  How impervious will the BJP/Modi govt. be to their lobbying power will be an interesting pointer to the shape of economic trends in oligarchic control of national resources.