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In 2018 and 2019, with More Socialism, Modi Will Become More Like Manmohan

Dec 19, 2017


As expected the Bhartiya Janata Party (BJP), won the state assembly elections in Gujarat. The margin of victory though left much to be desired.

Before the elections, the party president Amit Shah had talked about the party winning 150 out of the 182 seats in the state assembly. The party finally ended up with 99. So, there was a clear gap between expectation and reality. I say this because Amit Shah is a brilliant electoral strategist and his words should never be taken lightly.

Finally, it is the massive support that the BJP enjoys in the cities of Gujarat that pushed it through. In the four biggest cities of Gujarat, Ahmedabad, Surat, Vadodara and Rajkot, the party won 46 out of the 55 seats (Ahmedabad 16 out of 21 seats, Surat 15 out of 16 seats, Vadodara nine out of 10 seats and Rajkot six out of eight seats).

What this clearly tells us is that the Goods and Services Tax (GST) wasn't as big an issue in the cities of Gujarat, as was made out to be in the days leading up to the elections, in the media. It clearly impacted a section of the population, but that wasn't large enough to make an electoral difference. The only other explanation for this lies in the fact that even those impacted negatively by the GST, couldn't get themselves to vote for the Congress.

The other interesting point here was that more than 5.5 lakh voters chose the NOTA (none of the above) option while voting. This amounted to 1.8 per cent of the total eligible votes. The NOTA votes were more than or close to the winning margins in nearly 24 constituencies. One explanation for this that has been offered is that a small section of the population which is unhappy with the BJP didn't want to vote for Congress either. The trouble with this explanation is that there is no way to verify it. It could even be the opposite.

Anyway, getting back to the point I was trying to make-the BJP won 46 out of the 55 seats in the four biggest cities of Gujarat. How did the electoral results look in the remaining 127 seats? The BJP won 53 of these seats. The Congress won 71. Hence, the Congress clearly did much better than the BJP beyond the four biggest cities.

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There will be economic and political implications of these electoral results in other states like Rajasthan and Madhya Pradesh, where the elections are scheduled in the months to come. Some points are as follows:

  • The basic problems in India's rural economy are not going to go away any time soon. The size of the average agricultural holdings in India has fallen as land has been divided across generations, making agriculture as a profession very non-remunerative.

    Over and above this, India has too many people in agriculture than is economically feasible. A recent discussion paper by Niti Aayog points out that as of 2011-2012, agriculture employed 64 per cent of the rural workforce but produced only 39 per cent of the total rural economic output. Hence, for agriculture to be economically feasible 8.4 crore agricultural workers need to be shifted out of agriculture. This is around 70 per cent of the non-farm workforce in the rural areas. This isn't going to happen overnight.
  • Of course, given this huge disguised unemployment in agriculture, people working in agriculture try to work in other areas as well. But the trouble is that there aren't enough jobs going around for them. Data from the Labour Bureau suggests that only 52.7 per cent of the people looking for jobs all through the year, in rural India, are able to find one. Given this, nearly one in two people in rural India do not have jobs all through the year.

    Hence, rural India has a problem at two levels: 1) Agriculture as a profession is no longer as remunerative as it used to be. 2) There are not enough other jobs, given their low skillsets, which people working in agriculture can take on, to add to their income over and above what they make in agriculture.

    This explains why land-owning castes have been protesting all across the country. This includes the Patidar Patels of Gujarat.
  • Given this, the BJP in every state that it goes to election after Gujarat, it is likely to promise a farm loan waiver, as it has done in other states over the last one year. This is going to cost state governments all across the country a lot of money. It will also create moral hazard with future borrowers waiting for farm loan waivers than paying off their loans.

    The question is why did the BJP not promise a farm loan waiver in Gujarat? The rural areas in Gujarat are not as badly placed as in other states. One reason for this lies in the fact that the livestock economy in the state, has continued to grow robustly. Also, over and above this, the non-farm economy in the rural areas, created job opportunities because of the overall faster growth in the state.

    In fact, farm loan waive offs will become even more important given that, the states of Madhya Pradesh and Rajasthan, are not as urbanised as Gujarat is.

    Also, in the run up to 2019 Lok Sabha elections, I see the minimum support price of agricultural crops going up. As per the Shanta Kumar Committee, the minimum support price system benefits under 6 per cent of the farming households in the country. While, increasing MSPs may not benefit many farmers, it does have a strong signalling effect.
  • The Modi government will also look to consolidate its position in the urban and semi-urban areas. And for that, chances are it will waive off Mudra loans of Rs 50,000 or lower. In total, over 7 crore of Mudra loans of less than Rs 50,000 have been given out.
  • As far as the Congress is concerned, it needs to start rebuilding itself, particularly in the rural areas because that is where its support is. This is a rather obvious insight.

To, conclude, the Modi government will give out doles and waive off loans, in order to improve its position. This strategy will not be much different from what the Congress led UPA government led by Manmohan Singh, did in the 2009 elections. This again goes with the broader point that I keep making-India has only one model of governance and that is the Congress model.

Vivek Kaul is the Editor of the Diary. He is the author of the Easy Money trilogy. The books were bestsellers on Amazon. His latest book is India's Big Government - The Intrusive State and How It is Hurting Us.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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12 Responses to "In 2018 and 2019, with More Socialism, Modi Will Become More Like Manmohan"

m sivaramprasad

Dec 20, 2017

rural poverty ruralunemployment are still to be adressed and that is what the planners have to understand.
economics vs religion people r bothered about their daily needs.

Like (1)


Dec 20, 2017

With land holding shrinking to unviable size, Govt. should encourage cooperative farming model on the lines of AMUL. Farmers can pool their land holdings and employ technology and modern implements to increase productivity. Govt. can hand hold these farmer cooperative socities by providing professional management manpower. Farmers should radically change their mindset and think of new solutions. We can seek help from Israel in this area. Agriculture should be recognized as an industry.

Like (1)

Niranjan T S

Dec 20, 2017

"India has only one model of governance and that is the Congress model." I don't agree entirely. The congress model also involves massive corruption, infiltration of institutions by Yes men, crony capitalism - benefit of a few at the expense of others and compromise of national interests for the profit of a few (mostly foreign) players. So, giving out doles doesn't really classify as the 'congress model'. Lets stick to calling it socialism.

Like (1)

Thiruvalluvan V

Dec 20, 2017

In Gujarat, even a Gujarathi (or his forefathers) is not registered as FARMER, he cannot purchase an agricultural land. He can get is leased only from the farmers. Hence unless government is giving land to industrialists, they can only get leased agreements from the farmers. An individual, who is from other state can only buy approved plots not agricultural land. This is the Gujarath model nationalism.
This is one of the reasons why Gujarat country side is comparatively not poor (if they have a land). There are many other reasons also.

Why this Gujarath model is not implemented to the whole country?

Like (1)

Youg raj pandita

Dec 20, 2017

I agree with the thesis of Mr Kaul, every content is elaborated nicely,70% India lives in villages, and keeping the performance of congress into consideration, they did well in rural segment and remained poor in urban mostly, the figure Mr kaul quoted is 100% accurate and i add little bit of my own perception concerned to this election is that EC Mr Jyoti will always remain in good books of Mr Modi reason is that EC did hard-work bu bestowing his help to BJP in Urban sector, so i predict that either Mr Modi will perform like UPA-2 of will be shunted out, or someone else like Rajnath may take over, however chances for Rahul Gandhi are bright as he did well in majority of population called rural India.

Like (1)

Ravishekar Thallapally

Dec 20, 2017

Sir, today we are seeing so much of automation in every industry. So bring people out of rural economy is very dangerous. Rather this government should focus more employment generation within a village. Yes, This is possible every village should have minimum 1000 cows, they should able to produce at least to suffice 10 to 15 village. Every village should have bIo gas stations, every should have solar power generaters, every should have food processing units, cold storages, good connectivity, digital connection.spirtual places, medical and banking units and good entertainment and culture centers. Instead of loan waiver of government concentrates on creating this infrastructure with in a village. India can generate billions of jobs at village level and create self sufficient villages and reach development goals or GDP goals.

Like (1)


Dec 19, 2017

Now a days, agricultural labours are not available. For the last 5 years we are searching for labours who will live in our fields, looking after plantation and cows. We are willing to provide them pucca houses and electricity and good salaries. But they want live there. Every one wants money where they may not have to work. Manrega & loan-waiver have made they KAM-CHORS. If you find hard working agrl. labours, contact me on above E-mail.address.

Like (1)

Krishna Kumar

Dec 19, 2017

Forget Jhumlas of Amit shah and his claim of 150 seats. What happened to the Vivek Kaul's theory of destruction of supply chain, economy on account of demonitisaiton and the thousands who died in queues? That along with 22years of Anti-incumbancy and cast consolidation by Jignesh, Alpesh and Hardik, congress should have got tow third majority!!!! Still BJP managed to win. Now Mr. Kaul is predicting that BJP will do what Congress did. Doles and loan waiver. Let us wait and watch.

Like (1)


Dec 19, 2017

Modi is too shrewd to be compelled by politics to divert his goal. Socialistic approach can be easily replaced by doling out some direct benefits to the bottom 10%. More effective and is already used. Farm sector is made of various sub-sectors. Many policies are already in place to boost the different sectors. Boost to one sector can change the perspective about the Govt. All marketing tricks. I am not a Modi fan but see consistent logic in his policies. Why write without doing some data analytics? I am a professional and frankly do not find any fault in his policies with all the data crunching I did. I do not expect 100% success but even 50% is a great achievement.

Like (1)

K. R. Suryanarayanan

Dec 19, 2017

India has only one model of governance - the congress model! This is what Arun Shourie also said more beautifully - BJP is nothing but the Congress + a Cow!

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