Budget 2017: Modi Bets Big On The Small. Will It Work?

Modi now puts the aam aadmi at the centre of his economic narrative

- Raj Chengappa

IN LIFE OF PI, the Oscar-winning movie about a shipwrecked Indian’s fantastic tale of survival with a ferocious tiger in a boat adrift on the Pacific, the insurance agents have a hard time believing him. So Pi spins an alternative narrative that eliminates the tiger and brings in humans. And then asks: which story do you believe?

After unleashing the demonetisation tsunami, Modi had donned the mantle of the great reformer and moderniser who was unafraid of taking risks and offending his core supporters if he believed an action would result in the greater good of the nation. He had positioned himself as the new messiah of the poor and had also appropriated the role of a crusader against corruption.

Now past the half-way mark of his tenure, Modi was acutely aware that the budget could make or mar his chances of being re-elected as prime minister in 2019. He was also conscious that while there was broad-based support for his drastic moves to root out black money, he had to now provide some balm for all the pain the demonetisation had inflicted. On the immediate horizon were the assembly elections, particularly in Uttar Pradesh, where a defeat for the BJP could mar the remaining years of his tenure.

There were other equally critical considerations. Demonetisation had considerably slowed India’s economic momentum and his government was forced to admit that GDP growth would be down from 7.5 per cent to 6.5 per cent. Private sector investment and expansion had almost ground to a halt, with key sectors reporting a drop in demand and profits. Banks, saddled with bad loans even before demonetisation, remained conservative and were cautious about lending to corporates despite now being flush with funds.