Rahul strategy is to damage economy to weaken PM Modi (Sunday Guardian)
MADHAV NALAPAT New Delhi | 8th Aug 2015
The Congress party has deliberately embarked on a "scorched earth" strategy of blocking legislative avenues for faster growth in order to discredit Prime Minister Narendra Modi's reputation as a leader who can create jobs and raise incomes overall. This is the reason why that party's functionaries say, there is no room for compromise with the BJP even on issues such as the GST, which was initially backed by the former ruling party.
Scenting success after engineering the chaos in Parliament, where the monsoon session has thus far been wholly unproductive, strategists close to Rahul Gandhi say that the de facto leader of the Congress party "is refining a strategy of seeking to discredit in the voter's mind the Narendra Modi government on four fronts". These are: (a) the economy; (b) interests of the majority community; (c) corruption; and (d) inability to stop acts of terrorism emanating from Pakistan. Aware that passage of the GST and Land Bills may result in large volumes of external investment speedily moving into India, the focus of the Congress is to ensure that their passage gets stalled at least till elections in Bihar are over, so that the BJP's plank of effective governance can be damaged. On this account, BJP floor managers seem helpless in ensuring passage of key legislation, despite they and their allies having an overall majority in both Houses of Parliament. The two NDA budgets appear to have failed to enthuse the alliance's voting base, as they seem similar to UPA-era measures. The rise in service tax and the very small reduction in income-taxes are distancing the BJP from a constituency that had voted overwhelmingly for Narendra Modi in 2014, the middle classes. These segments have been further put off by the "Angrezi Hatao" and other regionalistic moves of a government expected to adopt 21st century values and systems, rather than continue with the harsh regulations and laws favoured by the Sibal-Chidambaram duo during the Manmohan decade.
Aware that the only ace in the BJP pack is the Prime Minister, Rahul Gandhi has instructed his party leaders to concentrate on Modi, seeking to portray him as "unwilling to take action against scam-tainted ministers and Chief Ministers". In reality, the Prime Minister has yet to indicate his mind on the matter, and may well be awaiting an opportune moment before acting against those judged to be less than straightforward in their dealings. The Congress is "hoping that such action will come only after the Bihar Assembly polls, if it comes at all", a key associate of the Congress leadership revealed.
Strategists close to Rahul Gandhi say that the BJP's continuing "defence of Pankaja Munde, Shivraj Singh Chouhan, Vasundhara Raje and Sushma Swaraj is assisting Rahul Gandhi to make the point that there is nothing to choose from between RJD and BJP in the matter of corruption". At present, Lalu Yadav (although certified as ethically fit by former CBI director Ranjit Sinha) is damaging the "good governance" record of Nitish Kumar, whose eagerness to consolidate the minority and Yadav vote banks led to the alliance with Lalu, despite the damage this has caused to his overall image. The strategy of the Congress is to "change the focus of attention away from Lalu to Sushma Swaraj and other BJP leaders accused of improper conduct" by the time the Bihar Assembly elections fall due in two months' time. The Congress has been assisted in its battle by the fact that the Modi government — in the face of promises made during the election campaign — has yet to file even a preliminary enquiry against the central UPA leaders accused of corruption by the present ruling party. Also, the many improvements in public administration made by the PMO have yet to be properly showcased, and several of the new measures are still unknown to the public, although apparent to those dealing with government agencies.
The Congress has been assisted — coincidentally — by RBI Governor Raghuram Rajan, an appointee of Manmohan Singh who has surprisingly been embraced by the new government, with Minister of State for Finance Jayant Sinha being his primary cheerleader within the National Democratic Alliance. The high interest rate regime implemented by Rajan has led to a slackening of industrial investment and consumer demand, including in such employment-generating sectors as construction. Capacity utilisation is at a meagre 60%, while the IMF predicts that the earnings of 4,800 Indian companies surveyed would see a fall of 20%, at a time when the costs of borrowing would go up by 30%. The IMF has also predicted a further sharp depreciation in the Indian rupee. Incidentally, the significant fall in the value of the rupee under Rajan's watch has not led to a rise in exports, which have instead fallen by 16% in the first quarter of FY 2015-16, compared to the same period in the previous year. Despite the sharp fall in oil and other commodities leading to a reduction in the import bill of $40 billion in FY 2014-15, the external debt coverage ratio has risen to 7.5% of GDP in FY 2014-15, as against 6% during the previous three years. This is despite the collapse in oil prices and a good monsoon. As yet, the new government has not been able to implement a comprehensive house-cleaning of key slots that would remove tainted officers and replace them with better substitutes, although each month, progress is being made in this direction because of pressure from the PMO. Congress strategists are using economic data to discredit the BJP claim that it can boost economic prospects. Low rural demand and absence of job creation are other points being taken up by Rahul Gandhi, who is in the happy position of impacting growth prospects by preventing key legislation from getting passed, and then using this fact to his party's advantage. "We will oppose GST, the Land Bill and easing of labour laws," a key strategist warned. It is not accidental that the three are essential if India is to attract the external and internal investment needed to raise growth to double digits.
Growth has been affected substantially by an RBI Governor who is following the philosophy of former Federal Reserve chairman Paul Volcker. Raghuram Rajan is aware that the US and India are in different trajectories, yet he may refuse to avoid such errors as substituting the Consumer Price Index for the Wholesale Price Index, a measure more suited to a developed economy than a country such as India with severe bottlenecks between wholesale and retail. The CPI has been used by the RBI Governor to keep interest rates high, to the delight of the Congress party, and this despite the fact that wholesale prices have been in negative territory throughout 2015.
Congress strategists say that a task force is at work seeking to discover corruption charges against members of Team Modi and that the weeks before the Bihar election will see a blizzard of allegations against senior BJP leaders to "showcase the party as being corrupt from top to bottom". At the same time, matters such as "neglect of Hindus from Pakistan who are asking for help but getting nowhere" are being brought up by the Congress to seek to chip away at the saffron support base of Prime Minister Modi.
Thus far, the BJP response to the evolving strategy of Rahul Gandhi and his new team of advisers has been to stonewall all accusations and wait the Congress campaign out. Should Rahul Gandhi succeed in ensuring that key bills do not get passed during the monsoon session of Parliament, as seems likely, it will be an uphill task even for a leader as capable as Prime Minister Modi to show the people of India (specifically the Bihar voter) that his government can actually deliver on the high growth and watertight security promised during the last Lok Sabha campaign. However, those tracking the career of Prime Minister Modi point out that adversity brings out the best in him, and are therefore expecting both personnel and policy changes designed to weed out non-performers and replace them with efficient implementers. Should such steps get taken by Modi before the Bihar elections, Rahul Gandhi's expectation of a sweep for the Congress-JDU-RJD alliance may prove to be a false prophesy.