Govt needs to work as an organic entity, says PM Narendra Modi

Written by fe Bureau | New Delhi | Updated: Aug 16 2014, 06:23am hrs
Narendra ModiPrime Minister Narendra Modi addresses the nation from Red Fort, in New Delhi on Friday
In his debut Independence Day address on Friday to a nation impatient for development, Prime Minister Narendra Modi shunned the customary bulletproof shield and persisted with his characteristic rhetorical flourish, but forcefully conveyed his vision of Come, make in India, inviting firms across the world to sell in any country but manufacture here.

In a speech that lasted for more than an hour and attended by a larger-than-usual array of foreign diplomats, Modi pledged a philosophy of consensual governance where everyone felt empowered and announced that the 64-year-old Planning Commission, increasingly out of sync with current times, would soon make way for a new body with a soul.

Analysts read into his every word for pointers to the governments economic plans and the prominent takeaways included, apart from the precedence given to the woefully underperforming manufacturing sector, a wholehearted embracing of public-private partnerships (PPPs) for economic growth. Even the new institution superseding the Planning Commission would be spearheading PPPs for development with the greater involvement of not only the state governments but also the youth of the country.

The internal situation of the country has changed, global environment has changed... Government is no longer at the centre of economic development, he said.

However, critics, especially those from the financial world, rued his being non-committal about structural (market) reforms they believe the stuttering economy is in crying need of.

On their part, Modis political adversaries were critical of what they called his continued penchant for the rhetoric that helped him in the hustings while the need of the hour was to act on promises and come out with specific policies.

In fact, he did unveil some. He launched a new scheme of financial inclusion Pradhanmantri Jan-Dhan Yojana with the aim to get every poor family a bank account, a debit card and an insurance cover of R1 lakh. The PM also unveiled a scheme called Saansad Adarsh Gram Yojana for each member of Parliament or state legislatures to convert one village in his or her constituency to a model one, to be named after him or her, by 2016.

A reiteration of Skill India movement aimed at making the youth employable (some 12 million enter the Indian workforce each year), an emphasis on digital infrastructure as a means to improve governance and a cleanliness mission with a five-year horizon were among the other highlights of his speech. Calling himself an outsider to Delhi till the other day, he bemoaned the callous bureaucratic infighting he had to come to witness in the capital and vowed to resolve this issue so that the government of India worked not as an assembled entity, but as an organic entity.

Modi's speech from the ramparts of Red Fort on the country's 68th Independence Day left none in doubt about his desire to involve states in development plans. Chief ministers, he said, would be direct stakeholders in the proposed body to replace the Planning Commission.

In fact, a process to increase states' stakes in designing and implementing Five-Year Plans had begun in the previous UPA regime. The number of centrally sponsored schemes (CSS) was reduced to 66 in the interim budget presented by then finance minister P Chidambaram in February this year from 138 at the start of the UPA-II government. The new umbrella schemes practically enhanced the states' discretion on what exactly the CSS funds last pegged at R2.5 lakh crore are to be used. The interim budget also routed substantial chunks of CSS funds through state treasuries, effectively increasing state Plan sizes by 20-30%. The Plan/non-Plan distinction for expenditure is also being reduced with expert committees vouching for the principle of revenue/capital spending instead.

Perhaps because their expectations from him were higher, industry bodies Ficci and CII appeared less than sanguine in their reaction to Modi's pronouncements. Ficci welcomed the priority accorded to bolstering the manufacturing sector but stressed that the concept needs to be supported by requisite policy and implementation measures.

CII said issues related with taxation including introduction of goods and services tax land acquisition, faster approvals and trade policy need to be addressed to boost manufacturing. The share of manufacturing in India's GDP is languishing at 15% (in fact, this share has only seen a decline in recent years), while a national policy unveiled in 2011 aims to raise it to 25% and thereby create 100 million new jobs by 2025. In contrast, more than a third of China's GDP is formed by manufacturing and that country's share in global manufacturing is an impressive 14% compared with India's 1.8%.