The last sigh of Modi government

Author Name: Dr. Usman W Chohan      03 Sep 2019    

Scholars of political economy have endlessly studied the “political budget cycle,” with the idea being that democratically-elected governments have a strong incentive to time their budget proposals, as well as their generosity with the public purse, in a manner that gains them the most votes.

As a result, whenever the government approaches election season, it is likelier to make far-fetched and unsustainable fiscal promises to sway voters its way. Although considered one of the weaknesses of fiscal policy in democratic systems, political budget cycles are thought to have a mixed record in practice.

In other words, in some countries there is strong evidence that this occurs, but it is debatable whether this is an actual, permanent feature of fiscal policy in electoral systems. But in Modi’s India, it seems to be playing out exactly as the political economists would have foretold, and this may have consequences for Pakistan.

As India approaches the March 2019 elections, the Modi government is making a last ditch effort to appease as many marginal voters as possible. In addition to loud campaigning on anti-Muslim and anti-Pakistan rhetoric, and never-ending Hindutva platitudes, the Modi government is banking on a wave of pre-election vote-buying budget measures, including large-scale proposals for tax concessions and direct transfers (giveaways) that are not fiscally sustainable.

This should signal the increased desperation of the far-right Indian party to hold on to office. Worse still, the recent macroeconomic numbers do not help Modi’s case. Employment data indicates that the country is experiencing frightening rates of unemployment, particularly among its younger cohort, not seen in nearly half a century.

The BJP is at the point where winning votes in any of the constituencies it has ignored during the past five years is now its primary objective. The tunnel vision of that strategy is evident, since Modi’s pre-election budget is making fiscal promises it will not be able to fulfill.

Political budget cycle theory suggests that the most desperate of incumbents will make the most incredible of fiscal promises as the election nears. BJP Finance Minister Goyal’s announcements are good examples of this, particularly his Basic Income Support scheme, which will offer a very modest 6,000 rupees per year to every landholding farmer.

By giving 500 rupees a month to a now desperate economic class of farmers, who form the bedrock of every South Asian society, the Modi government seems to think it can avoid the consequences of its neoliberal policies which have significantly worsened inequality in the country. In particular, the income support scheme is targeted at landholders, whose plight is nowhere near as bad as the landless peasants or the urban slum-dwellers of India.

An element of the political budget cycle is evident in the fact that the government is timing the basic income giveaway in three tranches, one of which is to happen immediately, before the farmers can cast a vote in the Lok Sabha elections.

The BJP’s strategy for this election, heightened in its desperation, appears to be missing what India’s biggest long-term crisis will be: employment. For all the so-called “Shining India” song-and-dance routine that Modi government has made, it has introduced botched and quick-fix policies that have led to an unemployment catastrophe. Chief among these were the demonetization gambit, ostensibly to curtail their black economy; and the hastily rolled out GST system; along with general corruption and mismanagement in various large-scale projects.

To see the scale of the crisis Modi now faces, whereas he vowed to create 20 million jobs per year (a 2014 promise), in reality the Indian economy shed anywhere between 3.5 million jobs in the last two years (according to All India Manufacturers’ Organization), or up to 11 million jobs last year (according to Centre for Monitoring Indian Economy).

For all of the positive spin that the Indian and foreign media have given to Modi and to the Indian economy, its looks more and more like a “submerging” market than an emerging one. The latest figures show that youth unemployment among urban males aged 15 to 29 is 18.7% and among females has shot up to 27.2%. The unemployment rate for rural males between 15 and 29 soared from 5% in 2011- 12 to 17.4% in 2017-18.

There is an important signal for Pakistan to read from Modi’s budget bravado: Modi’s BJP government is now desperate to cling on to office, and recent misadventures by the Modi government are representative of this dangerous line of thinking. The security implications of weak Indian economic data are increasingly evident both to Pakistan and the world, and Pakistan should therefore read the statistics of Indian economic failure under Modi’s BJP as a signal to remain alert as the election nears.

Modi may not be India’s best economic thinker, but his surgical strikes song-and-dance has shown that he is one of India’s best fiction authors. But as the desperation of the BJP mounts, the likelihood of real aggression against India’s neighbors increases substantially.

The writer is a director of Economics and National Affairs at the Centre for Aerospace and Security Studies. He can be reached at

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