If one were asked to describe the current state of the Bharatiya Janata Party (BJP) and its top leadership in one sentence, it would be the opening lines of Charles Dickens. A Tale of Two Cities“It was the best of times, it was the worst of times”.
After consecutive successes in 2014 and 2019 when the BJP failed to secure a majority for itself, it has buried the hatchet in the 2024 Lok Sabha. It has won decisive victories against both its enemies (West Bengal) and friends (Maharashtra and Bihar) in key state elections held since 2024. The opposition has lost. What’s even better is that it’s chaotic.
And yet, there’s not much to celebrate and not much to worry about. The reason for this is outside politics. Multi-generational technological disruption in AI threatens the longevity and strength of IT, one of India’s most important post-reform economic stories. Without it, the country will struggle to earn foreign exchange and create large-scale white-collar employment. Foreign capital, both speculative and productive, has cooled to India in recent times. The reasons are partly endogenous to the domestic economy (such as lack of AI play) and partly exogenous (such as high interest rates in advanced countries). The weakness in the capital account comes at a time when the current account is under pressure due to the biggest energy shock in the history of capitalism due to the ongoing war in West Asia.
It may be too early to declare May Day for the economy, but things are certainly worrying. Inflation, rupee devaluation, and supply side shortages are creating headwinds on the economic path, even though we are not yet facing a full-blown external account crisis. After spending 12 years in power, it is difficult for the BJP to blame anyone else for this problem.
Economists see the problem as a reflection of India’s structural weakness: a long-running current account deficit that could turn into a crisis in the event of trade shocks and weak capital flows. For the average person on the street, survival is a bigger challenge than economic arguments. Every effort of the government is increasing their pain. And things will get worse before they get better.
There are spin masters masquerading as subject matter experts on both sides of the political divide who attribute India’s structural economic weakness either to the current political leadership or to someone other than the political leadership. This column has argued on several occasions that the reasons for India’s economic weaknesses are structurally embedded in the democratic dialectical political economy. A domestic capitalist base is more interested in pursuing what staunch Marxists term semi-contractual behavior, meaning a focus on making profits through trade rather than adding to the economy’s production base. This tendency of capital is insured in providing political finance to the political class. Elections are fought on the promise of modest relief to the poor, but election expenditure dwarfs even the richest countries in the world. On the other hand, there is a large group of economically distressed people who are ready to be affected by economic palliative measures. When deployed intelligently with a powerful social strategy – both should be used as complements rather than substitutes – it is enough to maintain power in normal times.
But these are not normal times. The economic crisis also threatens to erode the goodwill of economic palliative measures. The poor, many of whom were gifted clean cooking fuel under a subsidized LPG scheme, have suffered the most since the war in West Asia. Even the non-poor are being asked to exercise restraint and are facing intermittent supply shortages.
Where does this leave a government that has been proclaiming India’s economic resilience for the last decade? Not feeling good is the short answer. The irony is that the steps that might actually help control the situation would attack the comfort zone of the BJP’s core base: economically well-off people who think it is their birthright to be residents of a trade-deficit country, but want to completely eliminate foreign exchange shortages. That the Prime Minister himself refuted a speculative report about forex restrictions is testament to this fact.
All this does not mean that the government is not doing anything or that it has any ray of hope that can make the problem disappear immediately. But determination alone cannot become a strategy in politics. Certainly not in a country where major state elections are held every year. What politics needs more than anything else is a narrative inconsistent with reality. A narrative that can generate pride and accomplishment when needed, a narrative that can generate anxiety, even hatred, when needed, and, when nothing else is working, a narrative that can generate schadenfreude by attacking expendable targets.
Now, imagine for a second that you are a typical white-collar worker in the country, who pays his taxes and is more concerned about mutual fund investments and job security against AI rather than paying ten bucks more at the petrol pump.
Who do you blame for the major structural problems? The powers that be are abstract answers. But who is the real target here? Why have big corporations refused to invest in R&D and investment that could have boosted India’s manufacturing power? Political class (across the spectrum)? Such an ideology would disrupt the dialectics of existing political economy. As the dominant political force, BJP is going to suffer the most.
How about a political narrative that suggests an attack inside the lair of a corrosive elite class enjoying feudal decadence? What happens when this privileged group is thrown into recession by the sudden withdrawal of this privilege at a time when the economy faces a huge challenge? This is what has been dominating the news cycle this week: The central government announced that it is snatching the heavily subsidized land from the national capital’s most exclusive club next to the Prime Minister’s residence. Everyone is now debating whether this act is fundamentally egalitarian or motivated by pure vengeance.
The focus has become on finding the parasites of privilege rather than the structural holes in India’s economic story. Sometimes deception is more effective than fighting a one-on-one battle. The politically astute BJP probably knows the value of such seduction-based schadenfreude. (Depending on the results) The opposition is asking its two best lawyer-politicians to defend this exclusive privilege in the courts. This writer would like to put his neck on the line and argue that this is exactly what the BJP expected. You will soon see their top leadership exploiting this in the controversy, where it is easy to make tenuous connections between the current economic difficulties and the poison tree of the allegedly privileged Indian elite, who is still linked to the political opposition.
A little history is useful to conclude the column.
Almost 60 years ago, the Congress party was meeting in a special session after its shocking performance in the 1967 elections. For Indira Gandhi, the fight within her party was as big as outside. He found the so-called “Young Turks” advocating a radical economic program useful for provoking the party’s older supporters, who wanted to get rid of Gandhi. Historian Srinath Raghavan describes this economic program in his book as “little more than milk-and-water socialism with a strong dose of the old guard (of the Congress)”. Indira Gandhi and the years that changed India. One of the points of the program was the abolition of privy purses for the then kings. This, along with bank nationalization (a decision far more consequential for economic policy than the abolition of the Privy Purse) became the basis of Indira Gandhi’s economic populism, which she used to destroy not only her opponents within the Congress but also the political opposition in 1971.
Certainly, India’s structural economic problems remained as they were, despite Gandhi’s revolutionary decisions. The judiciary initially found both decisions unconstitutional, but Gandhi eventually got his way on both issues.
Congress and other opposition parties keep saying that India’s political institutions are becoming subordinate to the executive. There is some truth in the claim. But the biggest problem of the opposition is the weakening of its political tendencies rather than India’s institutions. They can learn some of this from Indira Gandhi, one of the best when it comes to fighting political battles where she started out as an underdog. Politics, as Niccolo Machiavelli told us King This requires the cunning of a fox and the courage of a lion. Time and again, India’s opposition is found lacking in both these qualities.
(Roshan Kishore, HT’s data and political economy editor, writes a weekly column on the state of the country’s economy and its political fallout, and vice versa)
