Narendra Modi will have to create avenues for investment in large-scale manufacturing

Dec 12 2013, 13:47 IST
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SummaryArvind Panagariya has been one of the strongest votaries of the Gujarat model of development

Columbia University professor Arvind Panagariya has been one of the strongest votaries of the Gujarat model of development. In an interview with Santosh Tiwari, Panagariya explains the significance of the outcome of the assembly polls in four states—Delhi, Rajasthan, Madhya Pradesh and Chhattisgarh. He says the primary job of the new government at the Centre would be to formulate a roadmap for boosting investment.

Do you think populist programmes have failed to deliver electorally in view of the results in the recent assembly polls?

Going by the results, especially in Rajasthan where these programmes were tried with great intensity, yes.

But in Chhattisgarh, they seem to have worked for the BJP?

In Chhattisgarh, Raman Singh also provided good governance and his main populist programme, food security, had been in place for some time. So, Rajasthan and Chhattisgarh are not exactly comparable.

So, basically, you mean to say that it has to be populist policies-plus-governance to win an election?

The last-moment gimmicks are not going to help. People are looking for long-term solutions. This is where sustained rapid growth, which is one of the likely outcomes of good governance, becomes important also. The voters now want something concrete and not just promises and last minute goodies.

That way, number of chief ministers have been voted to power a third time in the recent past?

Yes, chief ministers such as Narendra Modi, Nitish Kumar and Naveen Patnaik who have provided good governance and sustained growth have been repeatedly returned to power.

But in Delhi, Sheila Dikshit has not been successful and has been drubbed, particularly by the AAP. What was behind this?

There are several pieces to this puzzle. Delhi is where the Anna Hazare movement flourished. So, there was a large contingent of young voters who were rallying against the Congress but also against the BJP. These voters were very organised and committed to the cause. They ran a highly effective campaign from door-to-door. Perhaps the performance of Sheila Dikshit administration in the last term did not help her either. The allegations emerging out of the CWG scandal hurt her image. Finally, the effective campaign run by Narendra Modi also meant that the Congress could retain very few seats. Here it is worth asking if the AAP effect will go much beyond Delhi, for example in Mumbai where the Anna Hazare movement got little traction. My guess is, it won’t.

This is where the concern also lies for the BJP. Delhi was the ideal platform for Narendra Modi with youth voters—urban middle-class people—and the use of social media. Do you think this is a setback for Modi in that sense?

This is where Delhi media has missed the big story. The real big story is the Modi wave which has translated in a big victory for the BJP in Rajasthan and third successive win in Madhya Pradesh and Chhattisgarh.

So, what is the message coming out of these assembly polls for the 2014 Lok Sabha elections?

Clearly, after these election results, the prospects of a BJP government appear a lot better. Earlier even the high-end estimates were giving the BJP no more than 180 seats in 2014. But these results place the BJP within striking distance of about 220 seats.

This would put them in a comfortable position…

Yes, with 220 seats plus other allies getting another 20-25 seats, Modi may be in a position to form a stable government. Once the BJP and allies have 240 or more seats, the chances of others joining them improve dramatically. You just need to look at the reactions of the Congress allies like Sharad Pawar to the recent drubbing of the Congress.

But across the board, even within the BJP, people have been reluctant to call it a Modi wave?

Whatever you call it, wave or effect, there is a large shift of the electorate towards Modi. He seems to fascinate people in a way we have not seen politicians fascinate the electorate in a long time. People show up in vast numbers to listen to him at the rallies. Whereas a wit recently remarked that attending Rahul Gandhi rallies should qualify as MGNREGA employment, it is people who are paying to attend Modi rallies. Even in Tamil Nadu, where the BJP has zero presence, he had a huge rally. Of course, attendance at the rallies need not always translate into votes. But the overwhelming victories in Rajasthan and Madhya Pradesh testify to a substantial Modi contribution even after we take into account the anti-Congress sentiment in Rajasthan and the good work of Shivraj Singh Chauhan in Madhya Pradesh.

For the Congress, whatever it has done—be it the MGNREGA or the Food Security Act or the Land Acquisition Act to catch voters’ attention—has not helped. Isn’t it?

Yes, that seems to be the message. Rajasthan had been seen as one of the most successful states in the implementation of the MGNREGA. So, if there was a favourable effect of it, we should have seen it in that state. The implementation of the Food Security Act also began early in Rajasthan, when it still had the status of an Ordinance. Again, it did not translate into seats for the Congress.

Coming back to the Centre, how do you see the GDP growth from here as this would be one of the important benchmarks to judge this government and also the next government thereafter?

I really didn’t expect the growth to decline as far down as 4.4% as it did in the first quarter of FY14. The second quarter has been slightly better with 4.8% growth. I think we should see continued upward movement going forward. The fundamentals of the economy are sound with the investment holding up at 30% of the GDP. The depreciation of the rupee should also help exports. So, for the entire year, the growth might come close to 5%.

And from there, the prospects look good…

From there, it would be the function of what the next government does. My sense is that if the new government comes and assures the bureaucracy in no uncertain terms that the government is going to take responsibility for all the decisions and not pass the buck to it and also puts in place an environment minister who works in the national interest, we could rapidly return to 7-8% growth. I surely don’t rule out the possibility of returning to 7% in FY15.

What do you expect from Modi if he becomes the Prime Minister?

Governance-wise, he certainly is a decisive leader. This observation is based on what we have seen in Gujarat. What he does at the Centre remains to be seen.

But in terms of economic policies, it is not very clear what the BJP wants to do and even Modi has not yet outlined what his views are?

Here, I draw a distinction between the national leadership of the BJP and Modi. The national leadership seems to have been behind the curve. For Modi, it is still early in the campaign. But as the campaign progresses, I would expect him to clarify where he would take the country if elected to the highest office.

What would you expect Modi and his government to do?

The very first thing obviously would be to reassure the bureaucracy and end the paralysis. He would also need to streamline the environmental clearances as they have been the major stumbling block. And then he will need to return to building the infrastructure. It seems that some progress has been made in areas like electricity generation capacity on which the new government can capitalise. If coal and gas become available, electricity generation can rise rapidly in a short time. Contracts have also been issued on highway construction so that a further push can yield early results. And then Modi will also need to look for avenues to succeed in expanding large-scale labour-intensive manufacturing. The government needs to find out why is it that our industrialists have not made investments in these industries and then address the bottlenecks.

Skilling is also one of the areas where not much has happened…

I have already mentioned some areas where progress is needed. Additionally, higher education is a completely untouched area. We need lot of expansion of higher education in both private and the government sector. We need the entry of foreign universities. Skill development also needs attention.

You have been supporting Modi, what if he and the BJP government doesn’t deliver?

What I am pitching for is economic reforms and I speak favourably of Gujarat and Narendra Modi because both have delivered the kinds of policies and outcomes we need at the Centre.

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