Towards the end of January 2019, a section of the media ran reports that unemployment had hit a 45-year high. The government went into denial only to accept the data as real days after the Lok Sabha election. Data now shows that consumer spending is collapsing. The government is in denial again and no prizes for guessing what happens next and how it is going to impact the political mood in the country.
The writing on the wall is clear. Consumer spending is down for the first time since I was born and that was in 1972 when it took a massive international crisis to push consumer spending into the negative zone. 1972 was the year of the global oil crisis and the only time this happened before that is in the 1960s when India faced a massive food crisis. Data now indicates that the Modi government is presiding over a crisis almost as big.
The biggest pointer here is that the rural spending is back to the 2009-10 levels and urban families too have been hit hard as urban expenditure on food is up by just 0.2%, on the verge of hitting a recession. The BJP’s economic and political calculus is beginning to go horribly wrong.
The government can be in denial about the elephant in the room but it is not going to help anyone, not even the ruling BJP which will have to put the economy back on track before the all-important Uttar Pradesh Vidhan Sabha election, which is clearly the next big event on the BJP calendar.
Before we start to look into how this is going to impact our politics, the decline in consumer spending needs to be looked into with much greater attention to detail. We have been hearing about a rural slowdown for many years now but the NSSO data confirms our greatest fears, rural families are spending less and many are being forced back into poverty.
This is a worrying sign because we are no longer talking about a slowdown in consumption growth, we are talking about a decline in consumption. What makes the data alarming is the fact that the findings come from primary data collected by the NSSO from the ground and is not an extrapolation of secondary data collected by the government from other sources.
With the economy on a downward spiral and little hope on the horizon, the political mood of the country seems to be changing too and this was evident in the recently concluded Maharashtra and Haryana Vidhan Sabha election. The BJP was expecting big wins in both the states but ended up way short with a 20%-plus dip in vote share. While some decline was anticipated, the decline in support surprised everyone on the ground.
The shift in the economic mood is bound to be the biggest worry for the ruling BJP. The Modi government is less than six months into its second term and it is finding it difficult to comprehend that the economic and political mood in the country could have shifted so significantly in such a short period of time. But then, six months is a long time in politics and the chickens are now coming home to roost.
Six months ago, the mood in the nation was firmly behind the BJP and though the economy was just as bad, they were able to win the Lok Sabha elections primarily due to the Pulwama effect. It was also believed that the Pradhan Mantri Krishi Samman Yojna or PM KISAN, the scheme that promised cash support of Rs 6,000 per annum to every farming household in the country, would steer the rural economy out of the mess. Clearly, it has had little impact, considering the scale of the problem.
The total GDP of India is now estimated to be around Rs 130 lakh crore and considering that the share of agriculture is around 15%, we can safely assume that agriculture contributes about 20 lakh crore. The government had planned to spend roughly Rs 80,000 crore on the scheme but is now expected to cut it down to Rs 50,000 crore.
At this level, PM Kisan’s contribution to Agri sector growth would only be around 2.5%, which would not do much to boost rural income, considering the sector was growing at 2.75% in Q1 of the current fiscal. In short, BJP’s claims of doubling farm incomes by 2023 is not coming through.
The Narendra Modi led BJP government came to power about 66 months ago on the promise of smart ideas and rapid economic growth. Five and a half years later, none of their ideas seem to be working and while the BJP was able to ensure that the economy was not the central issue in the 2019 Lok Sabha polls, the economic distress is too strong for anyone to overlook.
Lies are running out of steam, truth is finally catching up.