The Budget will tell if aspirational Modi is now a populist Modi

The question on our minds is: has the Prime Minister changed? Is Narendra Modi turning populist? We shall have the answer on Wednesday when the finance minister presents the Budget. The nation elected Mr Modi on an aspirational platform of creating jobs, containing inflation, and stopping corruption. Indeed, in the first half of his term, he has pursued responsible policies to meet these goals. As a result, the economy has turned around; inflation has been licked; fiscal indicators are healthy. The big weakness is the lack of jobs, an objective that has suffered a setback in the past three months by a badly executed demonetisation. Modi has recognised this, and is this why his rhetoric has changed?

Instead of the aspirational talk of opportunities and jobs — of startups, ease of doing business, make in India — we have begun to hear the tired, pro-poor rhetoric of the Congress party. Nowhere was this more obvious than on New Year's Eve when Modi peppered his defensive speech with populist giveaways to farmers, pregnant women, senior citizens, etc. Gone was the refreshing talk of personal responsibility that we heard during his election campaign: 'India doesn't owe you cheap diesel, free electricity and loan waivers; the only thing it owes you is good governance; after that, it's up to you to work hard, pull yourself up, pay your taxes, and make India a great nation.'

So, what should we expect from this coming Budget? Let us hope the government will stay the course with the sound strategies pursued so far. Let's not take high growth for granted. Every rupee given away in populist doles is a rupee not available for job creation. Remember, recent state elections have also been won through purposive, long-term development, not giveaways. The window of opportunity for a grand demographic dividend is limited to the next decade, and it would be tragic to lose it to populism.

Job growth has been weak because the economy has been firing on a single cylinder: consumption. The other cylinders — private investment and exports — have failed. It is easy to get discouraged when jobs are disappearing around the world through technological change. The best course is to stay focused on bettering infrastructure, logistics, ease of doing business, implementing sectoral plans — such as the fine package for the labour-intensive textile industry — and resolving NPAs (non-performing assets) of public sector banks. The long-term solution is to bite the bullet and privatise these banks; eliminate the power of politicians to tamper with state electricity boards, and reform labour laws. So, no new schemes, please! Tell people that achhe din will take time; if you are honest, they will believe you.

Since non-farm jobs will take time, keep improving the productivity of farm jobs by allowing traders and farmers to buy and sell freely via e-NAMs (National Agriculture Market), thus ending the APMC (Agricultural Produce Marketing Committee) raj. Have a predictable export-import regime for farm products rather than the present switch-on, switch-off policy. Get over the unscientific bias against genetically modified crops, which is holding back productivity. On taxes, keep lowering corporate tax rate by 1% a year as committed (while eliminating exemptions) until we get to the effective rate of competitors. Move indirect tax rates closer to where they will be in the Goods and Services Tax. On personal income, stretch out the slabs rather than raising the limit for tax-free income to protect the tax base. Only implement the universal basic income scheme when all subsidies have been scrapped and supporting infrastructure is in place.

Whatever the cost-benefit of demonetisation, the Budget must snatch its long-term gains of a wider tax base, higher savings rate, and more resources for investment. Technology has offered a chance to bring banking to the masses. If we seize the opportunity, the aam aadmi can leapfrog over the bank branch into a digital banking future, just as he hopped over the landline with the cellphone. The Budget can fuel this revolution and keep alive the moral crusade against black money.

It was a fresh voice that reminded us in early 2014 that the state did not owe us anything except good governance, and it won Modi the election. People want opportunities and jobs, not loan waivers and sops. In fact, Arun Jaitley would do well on Wednesday to quantify the jobs that each lakh of rupees in the Budget will bring. It would be a pity to lose the Narendra Modi who wanted to make vikas a 'jan andolan', a mass movement.

As stagnant West gets meaner, rising India spells hope but there’s a big if

2016 was a dreadful year and it is a relief that it's over. The values I cherish most took a profound battering. As a classic liberal, I want equal rights for all; I reject racial and caste discrimination; I revere religious freedom; I seek a free economy based on competition; and I uphold dissent. These beliefs have been undermined by Donald Trump's election in America, Britain's exit from Europe, and rising racism, intolerance and nationalism in the world, including in India where Narendra Modi has made his first big mistake with ill-considered notebandi. The fault partly lies with privileged liberals who have ignored growing discontent in their backyard.

A quarter century ago, at the fall of communism, the political scientist, Francis Fukuyama proclaimed the triumph of liberal democracy based on free markets. He called it the 'end of history' and predicted that the liberal order would spread globally as it best served the human desire for peace, liberty and prosperity. But the willingness to risk one's life for abstract goals and daring acts of imagination and idealism would be replaced by the satisfaction of ever more sophisticated consumer needs. Hence, he warned that the 'end of history' might become a boring place.

Today, it appears that Fukuyama was wrong. Liberal democracy and globalisation are under attack. China's 'Marxist capitalism' has delivered enormous wealth without freedom. The Middle East has seen the rise of violent Islamic fundamentalism instead of democracy. The 2008 global downturn has challenged the deregulation of banking and finance. Thomas Piketty, the French economist, has persuaded us that free markets have enlarged the gap between rich and poor. And white working class men in the West have let out a wail against outsiders because their political system has ignored them and religion's loss has left them with monotony without meaning.

Yet the post-war globalised liberal order has been one of the best periods in world history. It has been relatively peaceful. It has seen the spread of prosperity and decline in poverty, especially after the rise of China and India. The number of democracies have risen from 35 in 1974 to 120 in 2013. But there have also been job losses in the West due to technological change and the failure to compete with Chinese, Indian, and Third World workers, amidst economic growth that has mainly favoured the top one percent.

Despite electoral setbacks in 2016, the present world order is not in danger of dying. Yes, it will undergo change but Fukuyama's basic thesis remains sound. For one thing, there is no competitor. Radicals in the Middle East may dream of restoring an Islamist caliphate but the average Muslim does not want it. Neither is the rest of the world attracted to a 'China model' that mixes dictatorship, market economy and technocratic competence.

The model might, in fact, collapse in China as growth slows and people clamour for freedom. Ironically, many Indians admire China because it has delivered what the aam aadmi wants from the government: personal security, growing prosperity, and functioning public services. Although India's democracy is impressive, it has not delivered good governance.

In these dark times, India's prospects look bright. Unlike economic stagnation in the West, India has a rapidly growing economy with an upwardly mobile middle class, which is traditionally a bulwark of democracy. Stagnation has made the West meaner, less generous, and suspicious of people who look different. India's historical strength is its diversity. With over 50 tribal groups and 3,000 sub-castes, we are used to 'people who look different'. This is why the majoritarian project of the RSS is doomed to failure, although we must be wary of the intolerance of saffron groups in the short term. India's soft underbelly is governance. A confident new middle class, which pays taxes and feels entitled to hold public officials accountable, may well provide a cure in the long run.

Although a badly executed demonetisation has been a profound economic setback, it has not turned political sentiment against Modi. Ours is an age of rising expectations in India unlike the mood of diminished expectations in the West. India's ascent after 1991 has been based on the classical liberal values of democracy and free markets with multiplying connections to the global economy, Thus, India offers the best endorsement of Fukuyama's thesis. If only Modi could control cultural intolerance, India could become an inspiration to the world, helping restore faith in a liberal future. But it is a big 'if'.