Like Bapu Nadkarni, Modi govt is doing what the situation demands

Those who watched cricket in the first half of the 1960s will remember Bapu Nadkarni. He was a devastatingly accurate bowler who once bowled 29 overs, 26 maidens for no wickets — and three runs. 

He was roundly criticised by the British press. How unsportsmanlike, they said, to bowl so accurately. 

This Modi government reminds me of that. Given its constraints — virus, China and FRBM — it is doing all the right things, that too in the right sequence. 

Yet many people are being highly critical because they have not taken all factors into account. They should calm down, at least till the border situation quietens down by December. 

After all, we may still end up in a firefight with China. If that happens, how will we pay for it if all the money has been spent beforehand? 

The FRBM ceiling, which pretty much ties the government’s hands, will be breached by a wide margin anyway because of this Chinese virus. Why add to the fiscal problem by spending on consumption when defence may need massive expenditure and when you don’t know whether people will spend or save?

Not a penny more, nor less

Thus, I think that like Mr Nadkarni, the government is only doing what the situation demands — nothing more, nothing less. And there is a reason for that: like Mr Nadkarni, it can neither do less nor do more.

In any case, it’s foolish to think that a man who is as astute — politically at least — as the prime minister will bowl loose balls. 

Politically, he thinks ten steps ahead because, while in other proper democracies the head of the government has to think only of winning general elections, in India all prime ministers have to think of state assembly elections also. 

One is coming up now in Bihar. Another in Bengal. And then somewhere else. Assembly elections are a non-stop activity.

These elections matter because in order to push legislation through parliament, the ruling party needs a majority in the Rajya Sabha also. As we saw with the early reform bills, if you don’t win in the states you don’t have that much needed majority.

Prime Minister, Narendra Modi addressing at the inauguration of the Patrika Gate in Jaipur, through video conferencing in New Delhi on Tuesday.

In other words, while all prime ministers of India are now constrained twice over — fiscally since 2003 by the FRBM and politically by the need for a majority in the Rajya Sabha, Modi has a third constraint: the virus relief expenditure which runs into several lakh of unbudgeted crore. It’s as if a flash flood swept away things in your house.

Wages of profligacy

This is not all. There is, in fact, another debilitating constraint that we seldom talk about. This is the constraint that profligate prime ministers — or their bosses — impose on their successors. Between 1985 and 1990 Rajiv Gandhi and V P Singh hobbled four successors: Narasimha Rao, Deve Gowda, Inder Gujral and Atal Behari Vajpayee. 

And then Manmohan Singh hobbled Modi. Central government debt at the end of March 2014 was 52.2 per cent of GDP, much higher than what is considered sustainable for the Indian economy. This profligate spending by the previous government had also led to an external debt to GDP ratio of 23.9 per cent in March 2014, far too high. 

Not just that: the UPA also left behind all those NPAs and the need to recapitalise the public sector banks. So it was a quadruple whammy.

To quote a chief economic adviser from the 1990s about UPA 1: “Finance Minister P Chidambaram’s deficit target of 2.5 per cent of GDP was hugely overshot to yield an actual outcome of 8.2 per cent of GDP (including including off-Budget petroleum/fertiliser bonds), resulting in the highest combined deficit in the last 35 years, amounting to 10.6 per cent of GDP."

That’s what hobbling means — making it impossible for your successor to undertake adequately large amounts of public investment. And this is what has happened to Modi.

Simply put, the massive consumption expenditure of UPA 2 during 2009-13 is what has led to the crisis of public investment in the decade from 2010 to 2020. Declining growth has been the result.

The rest is just economists brawling over regressions.

(Twitter: @tca_tca)