Modi losing support over jewellery tax

Mr Modi riding in an e-rickshaw after distributing 1,000 of the vehicles on Labour Day in the city of Varanasi in Uttar Pradesh. The state will hold its assembly elections next year.
Mr Modi riding in an e-rickshaw after distributing 1,000 of the vehicles on Labour Day in the city of Varanasi in Uttar Pradesh. The state will hold its assembly elections next year.PHOTO: HINDUSTAN TIMES VIA GETTY IMAGES

Small retailers that form BJP base feel deserted as he moves to build rural support

NEW DELHI • For three generations, Mr Kumar Jain's family of gold traders in India's financial capital have been among the staunchest supporters of Prime Minister Narendra Modi's party. Now they're thinking of looking elsewhere.

Mr Modi in March imposed a 1 per cent excise duty on jewellery, prompting protests from thousands of manufacturers and artisans across India.

Mr Jain says the extra burden is dealing a financial blow and will cost Mr Modi the support of most of the country's roughly 3.5 million jewellers, designers and artisans.

"Not just us, but the entire industry is upset with the government," said Mr Jain, the owner of U.T. Zaveri jewellery store in Mumbai's Zaveri Bazaar, the biggest bullion market in India. "If the government doesn't support us, how can we support them?"

Small retailers like Mr Jain who once formed the base of Mr Modi's Bharatiya Janata Party (BJP) are feeling abandoned as he moves to consolidate support among rural voters ahead of the next national election in 2019. Besides the levy on jewellers, he has also removed barriers for foreign companies like Wal-Mart Stores to get a bigger slice of India's US$600 billion (S$815 billion) retail market.

STRATEGIC SHIFT

It's a strategic shift even at the risk of estranging their traditional support base. The BJP is concentrating on 2019 - they don't want to take any chance.

DR A.K. VERMA, director at the Centre for the Study of Society and Politics.

At the same time, Mr Modi announced plans to double farmer income in five years with investments in irrigation, food processing and rural roads. The political calculation is simple: Villagers make up 70 per cent of India's 1.3 billion people, and Mr Modi needs their support to stay in power.

"It's a strategic shift even at the risk of estranging their traditional support base," said Dr A.K. Verma, director at the Centre for the Study of Society and Politics. "The BJP is concentrating on 2019 - they don't want to take any chance."

Prior to the 2014 national election, Mr Modi struck a different chord. He criticised the previous Congress party-led government for moving to open multi-brand retail to international investors, saying in 2012 that it was "giving a new definition of democracy - of the foreigners, by the foreigners and for the foreigners".

Yet the vote redrew India's political map. With inflation soaring and citizens seeking change after 10 years of Congress rule, the BJP won the biggest majority in India's Lower House in three decades. It attracted a range of new voters and expanded its reach into parts of India where it previously had little support.

The excise tax on jewellery will affect only businesses with revenue of more than 60 million rupees (S$1.2 million) in a financial year, meaning it won't impact small retailers, Finance Minister Arun Jaitley told lawmakers last month.

The BJP's strategy has not changed, and only a small group of traders is temporarily upset at some policies, according to party spokesman G.V.L. Narsimha Rao. He said the moves would not affect the party's electoral prospects.

Many in the party feel differently, however. Mr Praveen Khandelwal a former BJP treasurer in Delhi, said the party is now turning its back on those who helped it expand since its formation in the 1980s.

"The expansion of the BJP can be attributed to the trading community," said Mr Khandelwal, secretary- general of the Confederation of All India Traders, which says it represents about 60 million small businesses.

"You can't take the risk of putting your own core voter on the anvil and ask for the support of others."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on May 06, 2016, with the headline 'Modi losing support over jewellery tax'. Print Edition | Subscribe