During the heated campaign for Gujarat in December of 2007, the enterprising folks at NDTV sent a hard-nosed report to a remote corner of Gujarat to verify a staggering claim being made by CM Modi - "24x7 uninterrupted power".
With Dr. Prannoy Roy in the studios the NDTV reporter was broadcasting live from outside a small, barely lit neighborhood shop. Approaching the shop keeper, the reporter - with barely concealed smugness - asked him why his shop showed no signs of the much tom-tom-ed 24x7 power.
The shop keeper reached behind and over his shoulder and flicked a switch. As the tube light flickered to life the reporter asked the shop keeper why he did not keep the lights on. His response "I have to pay the bill, this power doesnt come free". As the NDTV team collected their respective jaws from the floor, Dr. Roy could muster up a limp retort "expensive power" or something to that effect.
The ensuing election was fought on a mixture of development, Gujarati Asmita and Hindutva in that order of importance.
18 months of NDA tenure seems to suggest that PM Modi has settled on a similar strategy for 2019.
As explained in a previous post (http://inflextionpoint.blogspot.com/2015/10/india-shining-part-deux-and-why-we.html) this strategy comes with inherent risks.
1. India is not Gujarat
The Gujarati shop keeper may be grateful for 24x7 power supply and may be more than willing to pay the bill but Indians in other parts of the country, fed on a steady diet of state largesse may not be so enamored with assured power supply if it comes a a steep cost.
Team Modi seems to have anticipated such a scenario. Conversion of Indian power consumption to LED based light bulbs are but the start of an effort to bring down per capita consumption so that the inevitable high costs of generating and distributing power can be rationalized so as to ensure zero net impact to the consumer.
Even Jan Dhan accounts and direct deposit of subsidies may have a limited impact if prices remain high (more on this later)
BJP needs to understand the mindset of voters outside Gujarat before they reach a point of no return.
2. Time
As an International banker pointed out last week, PM Modi is taking a long term view and eschewing the temptation to take short cuts so as to install a strong foundation upon which to construct a truly vibrant, dynamic and friction-less economy.
Noble and appropriate as this path may be, it ignores the emerging political realities and perhaps the single biggest constraint faced by the Modi Administration i.e. Time.
As pointed out earlier, though completely necessary for India's long term economy well being, initiatives such as Make-In-India are unlikely to bring strong political dividends in 2019. Simply because most new ventures are unlikely to have a meaningful and visible impact on India's economy in time for the election season which should commence around Oct 2018.
PM Modi had 36 months to deliver on major initiatives so as to allow people enough time to imbibe the benefits of these goods and services and be willing to associate them to the NDA in run up to 2019. The PM and his team are doing great on some and not so great on others.
Controlling prices is one area where NDA has come up short. Way short in public perception.
Price Rise:
Mr. Nitin Gadkari (easily the top 3 performing Ministers in the Modi Cabinet) came up with a lame defense on price rise. "Prices of some items have fallen and others has risen". This simply wont cut it with the common man.
If the govt. carries on with this 'item(s) of the month' philosophy toward price rise, people will come to permanently associate high prices with the NDA govt. at the center.
Even local price fluctuations will be dumped at PM Modi's door step and that is when the 'Suit boot ki sarkar' will stick like a 3M adhesive.
Moreover, failure to control prices will make new highways and other infrastructure improvements look like gifts created by the Modi Government for enjoyment of the rich.
Congress and their media assets are likely to have a field day if even one daily necessity is out of reach of the poor in the run up to 2019.
As events of the past months have shown us, commodity markets can be manipulated with great ease. A formidable industry has come up which survives on creating artificial scarcity of basic necessity so as to make windfall profits out of the misery of the common man.
No amount of flag ship successes on the infra and industrial fronts will mitigate the anger and rage engendered by high prices.
In India there are two political certainties - Caste and Prices. NDA can tackle one but not both.
NDA's current strategy is pushing them into a cul-de-sac where they can get hit by a Price-Caste double whammy.
The Solution:
Given these constraints and the limited time at PM Modi's disposal what should be the Government's strategy going forward. Firstly, there should be no let up on the remarkable work being done by various ministries. This work will provide India with a strong foundation.
But to succeed in 2019, PM Modi must reverse engineer the pitch.
a) Identify the basic needs of the population i.e. Every day food items, Daily challenges (transportation, water, etc.)
b) Rapidly create infrastructure to bring prices of these items down to a level where they never become a political issue
Controlling prices:
Prices are driven by a basic interaction between supply and demand. The NDA Govt. should build temperature controlled warehouses to store basic items of daily consumption - Onions, potatoes, Dal, wheat, etc.
These warehouses can and should be constructed on Railway lands close to major Railway lines. Which in turn would make the shipping of these items both economical and time effective.
With most major rail hubs supplied with ample power through a national grid, power should be readily available to this 'cold chain'.
A national team could monitor local prices of these commodities on a daily weekly basis and inject the necessary supply as and when price spike so as to rapidly bring them down.
A big deal should be made of the this national cold chain so that people can directly associate this key infrastructure initiative directly to the PM.
Even 40 years later, people associate Indira Gandhi with India's progress. As flawed as this perception may be, one must applaud Congress' marketing savvy in creating and perpetuating it.
NDA has much to learn from the Congress in this regard.
..... to be continued
With Dr. Prannoy Roy in the studios the NDTV reporter was broadcasting live from outside a small, barely lit neighborhood shop. Approaching the shop keeper, the reporter - with barely concealed smugness - asked him why his shop showed no signs of the much tom-tom-ed 24x7 power.
The shop keeper reached behind and over his shoulder and flicked a switch. As the tube light flickered to life the reporter asked the shop keeper why he did not keep the lights on. His response "I have to pay the bill, this power doesnt come free". As the NDTV team collected their respective jaws from the floor, Dr. Roy could muster up a limp retort "expensive power" or something to that effect.
The ensuing election was fought on a mixture of development, Gujarati Asmita and Hindutva in that order of importance.
18 months of NDA tenure seems to suggest that PM Modi has settled on a similar strategy for 2019.
As explained in a previous post (http://inflextionpoint.blogspot.com/2015/10/india-shining-part-deux-and-why-we.html) this strategy comes with inherent risks.
1. India is not Gujarat
The Gujarati shop keeper may be grateful for 24x7 power supply and may be more than willing to pay the bill but Indians in other parts of the country, fed on a steady diet of state largesse may not be so enamored with assured power supply if it comes a a steep cost.
Team Modi seems to have anticipated such a scenario. Conversion of Indian power consumption to LED based light bulbs are but the start of an effort to bring down per capita consumption so that the inevitable high costs of generating and distributing power can be rationalized so as to ensure zero net impact to the consumer.
Even Jan Dhan accounts and direct deposit of subsidies may have a limited impact if prices remain high (more on this later)
BJP needs to understand the mindset of voters outside Gujarat before they reach a point of no return.
2. Time
As an International banker pointed out last week, PM Modi is taking a long term view and eschewing the temptation to take short cuts so as to install a strong foundation upon which to construct a truly vibrant, dynamic and friction-less economy.
Noble and appropriate as this path may be, it ignores the emerging political realities and perhaps the single biggest constraint faced by the Modi Administration i.e. Time.
As pointed out earlier, though completely necessary for India's long term economy well being, initiatives such as Make-In-India are unlikely to bring strong political dividends in 2019. Simply because most new ventures are unlikely to have a meaningful and visible impact on India's economy in time for the election season which should commence around Oct 2018.
PM Modi had 36 months to deliver on major initiatives so as to allow people enough time to imbibe the benefits of these goods and services and be willing to associate them to the NDA in run up to 2019. The PM and his team are doing great on some and not so great on others.
Controlling prices is one area where NDA has come up short. Way short in public perception.
Price Rise:
Mr. Nitin Gadkari (easily the top 3 performing Ministers in the Modi Cabinet) came up with a lame defense on price rise. "Prices of some items have fallen and others has risen". This simply wont cut it with the common man.
If the govt. carries on with this 'item(s) of the month' philosophy toward price rise, people will come to permanently associate high prices with the NDA govt. at the center.
Even local price fluctuations will be dumped at PM Modi's door step and that is when the 'Suit boot ki sarkar' will stick like a 3M adhesive.
Moreover, failure to control prices will make new highways and other infrastructure improvements look like gifts created by the Modi Government for enjoyment of the rich.
Congress and their media assets are likely to have a field day if even one daily necessity is out of reach of the poor in the run up to 2019.
As events of the past months have shown us, commodity markets can be manipulated with great ease. A formidable industry has come up which survives on creating artificial scarcity of basic necessity so as to make windfall profits out of the misery of the common man.
No amount of flag ship successes on the infra and industrial fronts will mitigate the anger and rage engendered by high prices.
In India there are two political certainties - Caste and Prices. NDA can tackle one but not both.
NDA's current strategy is pushing them into a cul-de-sac where they can get hit by a Price-Caste double whammy.
The Solution:
Given these constraints and the limited time at PM Modi's disposal what should be the Government's strategy going forward. Firstly, there should be no let up on the remarkable work being done by various ministries. This work will provide India with a strong foundation.
But to succeed in 2019, PM Modi must reverse engineer the pitch.
a) Identify the basic needs of the population i.e. Every day food items, Daily challenges (transportation, water, etc.)
b) Rapidly create infrastructure to bring prices of these items down to a level where they never become a political issue
Controlling prices:
Prices are driven by a basic interaction between supply and demand. The NDA Govt. should build temperature controlled warehouses to store basic items of daily consumption - Onions, potatoes, Dal, wheat, etc.
These warehouses can and should be constructed on Railway lands close to major Railway lines. Which in turn would make the shipping of these items both economical and time effective.
With most major rail hubs supplied with ample power through a national grid, power should be readily available to this 'cold chain'.
A national team could monitor local prices of these commodities on a daily weekly basis and inject the necessary supply as and when price spike so as to rapidly bring them down.
A big deal should be made of the this national cold chain so that people can directly associate this key infrastructure initiative directly to the PM.
Even 40 years later, people associate Indira Gandhi with India's progress. As flawed as this perception may be, one must applaud Congress' marketing savvy in creating and perpetuating it.
NDA has much to learn from the Congress in this regard.
..... to be continued
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