It’s always the economy

Nothing sells quite like it

No matter what conclusions we continue to draw from Modi’s ascent across the border, the fact of the matter is that the world’s largest electorate ignored his history of extremism and decided to judge him on his promise to provide what they need desperately – an improved economy. We have similar needs too, and Nawaz Sharif made similar promises on the campaign trail, and our new government enjoys a heavy mandate as well, so there are interesting points of convergence which will make this government cycle important.

But Modi won’t want a first year like Nawaz’s as far as the economy is concerned. At least his voters won’t. For, the finance minister’s delusions notwithstanding, there is not much to write home about on the economic front. Yes, they strengthened the rupee a little, but the uptick came from an exogenous injection, as mysterious as suspect considering political connotations that always accompany Saudi gifts. But they never mention how this artificial appreciation of the local currency quickly ate into exports, and all but eroded the benefits of the GSP Plus market access into the EU, undoing years of diplomacy in reaching the deal. Remember Europe is still caught in the hangover of the recent great recession, and their textile imports have fallen significantly, so competition is intense, and the timing of our strange monetary gift has not helped matters. Surely Dar sb has understood this by now, but why he hasn’t asked the prime minister to stop praising the rupee accomplishment is pretty obvious too.

Another area were the present government must answer some serious questions is the tax collection debate. The N league won precious praise at the last budget, when it floated a number of impressive measures to expand the tax bracket. But as the year went on, not only were those measures not implemented, but it seems the industrial lobby came into play immediately, and all sorts of exemptions and incentives that followed meant little had changed from the decade of democracy, except perhaps the rhetoric.

However, the ruling party’s biggest economic failure has been its inability to control inflation. Even those opposed to the N league understood why some of its measures might have raised it in its early days. The previous government had kept an artificial lid on prices, considering elections, etc, and delayed some bold decisions. But over the course of the year it has risen to more than nine per cent, with food inflation hovering around ten per cent. And some one should also explain why flour (atta) prices continue to rise despite fixing the wheat support price? That the lower income groups, especially the poorest segments, are now unable to even afford staple subsistence is criminal, and should be taken up immediately at the highest level. There’s more, like bungling the circular debt, and transferring more official negligence and corruption to the common consumer in the form of increased tariffs, etc, which the people will not tolerate for very long.

So, as the budget nears, the prime minister is advised to incorporate policies that bring intrinsic benefits as opposed to tough talk at big forums, just as much for the sake of the people as the continuation of the democratic cycle.