Haryana Results Contra-Indicative Of A BJP Sweep In Upcoming Polls

A lot happened this week. Former Tata Group chairman Ratan Tata passed away. The Monetary Policy Committee of the Reserve Bank of India (RBI) met, with three new external members present, and decided to hold the repo rate unchanged, with one dissenting vote. It has shifted the monetary policy stance from ‘withdrawal of accommodation’ to ‘neutral’. The BJP won the assembly elections in Haryana, leading to political commentary predicting better prospects for the party in the forthcoming elections in Maharashtra and Jharkhand. The RBI clamped down on fintechs making loans against gold. And Israel continued to pound Lebanon with its bombs, even as Israeli troops began a tough occupation of southern Lebanon, across Israel’s northern border.

No More Tata-Birla Ki Sarkar

The impact of Ratan Tata’s demise does not need elaboration in this column. We could, however, note one facet of his style of working, which might escape the attention of normal business journalists. There was a time when the Opposition used to pejoratively describe the government of the day as Tata-Birla ki Sarkar (the government of Tata and Birla). Other industrialists now occupy the Bull’s Eye for accusations of crony capitalism. The Tata Group, at least, has not become less important in India’s world of business. What has changed is that Ratan Tata’s relatively low profile has allowed the Tata Group to move off the political radar, making space for others to move in.

Also Read:The Fork On The Road For Ola

Geopolitics Could Wreak Havoc

The September Purchasing Managers’ Index shows a loss of vigour for both services and industry, even as both sectors continue to grow. The threat of regional war in the Middle East pushes up risk aversion, oil prices, and freight costs, fading any hope that net exports would play a big role in pushing up the growth rate. The rupee, finds the RBI, is overvalued against major trade partners, making its nominal decline against the dollar deceptive. However, given that oil and gas are invoiced in dollars, except for what comes in from Russia, when the rupee slides against the dollar, that could import inflation by making rupee prices of oil and gas higher by a degree in excess of the rise in dollar prices. Other things remaining the same, lower interest rates would weaken the rupee.

Europe has no growth to boast of. US growth is still intact, but slowing, triggering a likely rate cut by the Fed. It makes sense for the RBI to keep its rate action on hold till the Fed makes its move and the resultant cross-border capital flows materialise. At the same time, given the slack in growth momentum, it makes sense for the central bank to change its monetary policy stance from restrictive to neutral.

But it is difficult to fathom the RBI’s tough stance on gold loans. There is no risk to those who lend against gold — they have fat margins on the loan, and there is little risk of gold prices suddenly taking a tumble. The risk is all for the borrower. The RBI would have a case against gold loans if there were evidence that gold loans fuel the frenzy on the stock markets, or are being used up in online betting. But this goes against the grain of Indian culture. Gold is an asset that people hold as a reserve cache for desperate times. Few people in real life imitate the virtuous Yudhishthira of the Mahabharata and risk their most precious assets for the pleasure of gambling. Restricting gold loans would more likely slow activity in the real economy than blow off some of the froth in stock prices.

Also Read:Kashmir’s Villages Now Have Access To E-Commerce But Not Without A Cost

What Do Haryana Poll Results Indicate?

How are the election results from Haryana and Jammu and Kashmir likely to influence the rest of the polity — in particular, the forthcoming assembly elections in Jharkhand and Maharashtra? The conventional wisdom is that a third victory for the BJP on the trot in Haryana marks a tremendous vote of confidence in Prime Minister Narendra Modi’s leadership, and that victory for the BJP would be replicated in the forthcoming assembly elections as well. This is overgenerous to both PM Modi and to the Opposition, the Congress.

The BJP’s failure to make its mark in Kashmir, even as it had a strong showing in Jammu, indicates that the prime minister’s appeal is neither universal nor all-conquering. Attributing the BJP’s Haryana victory to the party’s star campaigner does an injustice to the meticulous management of the election on the ground. Candidates were chosen based on their winning probability, rather than self-professed claims to fame, and designed to give due representation to all caste groups and political clans. Rebel candidates were put up, wherever required, to eat into the rival’s votes. Votes were canvassed door-to-door by an army of volunteers, pointing out the benefits doled out by the state government and promising to make amends if any potential beneficiary had been left out. And, on polling day, volunteers ensured that all supporters turned out to vote.

To assume that the BJP victory in Haryana was on account of the prime minister’s charisma is to sadly underestimate the Congress’s ability to shoot itself in the foot. Given the history of considerable animosity among non-Jat sections of Haryana towards the Jats, whose unruly mobs did what unruly mobs tend to do, during the agitation for Jat reservations, it would have made little sense for the Congress to put all their eggs in the Jat basket. By projecting former chief minister Bhupinder Singh Hooda as the party’s leader in the state, and giving him the upper hand in candidate selection, and seeming to slight veteran leader Kumari Selja, the Congress high command ensured a good electoral outcome from Jat-dominated areas and weakness elsewhere, especially among Dalits, who account for a fifth of the population. Add the absence of training in booth management for polling agents, and the failure to have polling agents in every booth, there are plenty of reasons for the Congress to lose, apart from the Prime Minister’s electoral appeal.

The Haryana result would increase the bargaining power of Congress allies in Maharashtra and Jharkhand, when it comes to seat distribution among the alliance partners, but would not have much of an impact otherwise. Local issues, local candidates, and local rivalries matter far more than macro level personalities. Voter mobilisation and booth management would matter, as it has in Haryana. The BJP is on the top of its game when it comes to this part of electioneering. The Haryana result should persuade the Congress and its allies of the need to counter the BJP on this front as well. To that extent, the Haryana result is contra-indicative of another BJP sweep in the next round of assembly elections.

Action that matters takes place at the micro level. Spin is what is spun at the macro level. To understand what is likely to happen in Maharashtra and Jharkhand, we need microscopes, not spin.