http://economictimes.indiatimes.com...now-what-has-changed/articleshow/60792201.cms
2019 might not be a cakewalk for Narendra Modi: Know what has changed
NEW DELHI: In March this year, right after the landslide victory of Bharatiya Janata Party (BJP) in Uttar Pradesh Assembly elections, former Chief Minister Of Jammu and Kashmir Omar Abdullah tweeted: "At this rate we might as well forget 2019 & start planning/hoping for 2024." Abdullah's tweet summed up the lesson from the election results—If the magic of Prime Minister
Narendra Modi was intact even though the government had completed half its term, it will sustain till the next
Lok Sabha elections in 2019. Abdullah explained why
Modi magic was still working: "In a nutshell, there is no leader today with a pan-India acceptability who can take on Modi & the
BJP in 2019."
That's true even today. Congress vice-president Rahul Gandhi's efforts to project himself as a wise and articulate leader can hardly be interpreted as a challenge for Modi. With Nitish Kumar on his side, there is no leader who can be seen as Modi's challenger.
What has changed?
Abdullah also gave an advice at that time: "BJP isn't unbeatable but strategy needs to shift from criticism to positive alternative. Criticising the PM will only take us so far." It seems now Modi himself has offered the opposition what Abdullah called "positive alternative". The economy is slowing down—and this can be a positive and potent critique of Modi by the opposition which has been raking up issues such as 'intolerance'.
The Organisation for Economic Co-operation and Development (OECD) has trimmed India’s growth forecast for the current financial year, citing the temporary impact of the rollout of the goods and services tax and demonetisation. OECD says India’s economy would likely grow 6.7% in FY18, lower than its estimate of 7.3% in June.
India's GDP grew 5.7 per cent on a year-on-year basis during the April-June period (Q1). It was 7.9 per cent for the same quarter last year. The data proved demonetisation has hit the economy badly. In November, after demonetisation was announced, India's former economist-PM, Manmohan Singh, had said demonetisation could shave off 2 percentage points off GDP growth. He was proved right.
If you add to the post-demonetisation woes the confusion created by the new Goods and Services Tax that weighs down innumerable businesses and the jobs getting scarce, you will get the picture of the fastest growing economy falling freely now.
Yes, Modi too sees the threat
Recently, BJP president Amit Shah attributed the economic slowdown to “technical reasons”. Within a few days, SBI came out with a report that said the slwodown was not a technical glitch but a trend that might not peter out in the short term. “We certainly believe that we are in a slowdown mode since September 2016 and a slowdown that has been prolonged to Q1 of this fiscal year is technically not short-term in nature or even transient,” SBI Research said in a report. Irrespective of Shah's downplaying of the slowdown, Modi knows the threat to economy is real and it can give opposition a credible weapon against him. The fact that the government is considering to give a stimulus to the economic in the shape of increased spending itself validates that government has acknowledged that the situation is critical and requires urgent steps even if they are too radical.
Will the stimulus work?
The Rs 40,000 crore stimulus that the government is said to be planning aims at boosting exports, encouraging domestic investment, supporting small and medium enterprises and providing more money for rural infrastructure and affordable housing. But there are serious downsides to it. A fiscal stimulus at a time of rising inflation and higher current account deficit can be a risky measure. It can also have an adverse impact on near-term macroeconomic stability. According to a report by Singapore-based DBS, the strong fiscal and monetary policy stimulus undertaken in the wake of the 2008-09 global financial crisis initially shored up India’s growth through higher consumption and investment spending, only to result in double-digit inflation and wide domestic and external imbalances thereafter. The stimulus will also make it hard for the government to meet its fiscal deficit target of 3.2% for the current financial year.
2019 is no longer a battle already won
Six months after Abdullah tweeted about Modi's win in 2019 Lok Sabha elections being certain, the circumstances have changed drastically. The economic slowdown and jobs crisis are real issues that can hit the NDA hard. If the opposition junks ideological issues such as 'intolerance' for the real issue of economic slowdown, it stands to gain credibility. The critique of Modi will then sound more sincere and convincing. The economic plank can also unite opposition parties of all hues. With his performance as well as rhetoric, Modi had risen above issues of ideology and corruption. The opposition tried hard but could not pin him down on these issues. But any leader cannot escape the criticism on economic slowdown. Rahul Gandhi's rhetoric in his recent speeches in the US universities indicates the opposition will turn slowdown into its main plank. That's why the government is making frantic efforts to shore up the economy. If the economy remains more or less the same, 2019 won't be a cakewalk for Modi but messy, pitched battles across India.
