In its August 29 issue, The Economist suggests that Prime Minister Narendra Modi’s tenure has so far been more talk than action. It misjudges the rhetoric of a fledgling Prime Minister unused to the labyrinthine politics of Indian national governance, the irrelevance of a large majority in the Lower House when it is a minority in the Upper House, and the ways in which a small Opposition can hold up work in Parliament. The PM did not expect the Congress to faithfully follow the BJP’s tactics of stalling Parliament.
Modi made many promises. Some of which have been eradicating corruption, speeding up development, bringing back black money from abroad and giving it to the citizens, and providing skills training for the new jobs to come in Smart Cities to be created.
Others have been reducing poverty by moving population dependent on agriculture elsewhere, building world-class infrastructure, attracting substantial foreign investment, focusing on less government and more governance, and improving the ease of doing business in the country.
Modi planned to have less ministers and ministries, while bringing in holistic decision-making by combining ministries. Subsidies would be reduced sharply by direct transfer of benefits to bank accounts of the identified needy.
Without saying so, Modi’s economic philosophy was against socialism and state control, towards private enterprises and free markets (but regulated so that they remained free). This would be a revolution. Media and public understood him to say that the promises would be delivered quickly. The Economist, like the Opposition, has taken the non-achievement of Modi’s exaggerated time-lines as signs of his inaction. But various actions are in hand.
Already there is a new and vigorous foreign policy. A strong presence in relation to countries in the Indian Ocean and the Pacific has been initiated. (Atal Bihari Vajpayee’s Indian Ocean initative was not pursued subsequently.) The Indian diaspora, and countries such as Japan, China, South Korea and the UAE have committed to large investments. A more muscular policy towards Pakistan is evolving, which looks for deeds and not just talks. India is getting into regional groupings such as the ASEAN and the Shanghai Cooperation Organisation (SCO).
Economic growth will be affected by the failure of the monsoon (50%), though ample foodgrain stocks and generally low inflation will cushion the effect. China’s current economic problems make India and the US the two strong large economies. The Chinese slowdown and crude oil collapse, which might last for some years, have lowered commodity prices, cheapened our major imports, moderated inflation and improved the balance of payments.
Most promises on the domestic economy front are on the way to being delivered. OROP (One Rank, One Pension) to the armed forces has been announced. The bringing back of unaccounted money salted overseas by Indian nationals is now legislated and international cooperation has begun. The huge black money in the domestic economy is not yet touched. Faster government clearances, simplifying land acquisition, introducing the goods and services tax are delayed by political Opposition. Modi’s government must be blamed for not anticipating this. More courtesy than contempt towards the Opposition might have got cooperation. Coordinated and holistic government decision-making has been brought partially to the energy sector by combining power and renewable energy with coal. Others such as transport and health are in the same old uncoordinated state.
Bureaucratic reforms to improve accountability and decision-making have not happened. Crores of bank accounts were opened in a few weeks. Aadhaar identification and individual bank accounts leave only beneficiary identification to low-level administrators. Direct transfer of subsidy benefits to the poor, and reducing theft and wastage are now closer. The auctioning of allotted coal mines was implemented speedily. Coal production has risen. The accepted 14th Finance Commission recommendation to give more autonomy to states is another fulfilled promise. Abolition of the Planning Commission and the creation of the NITI Aayog gives states greater freedom in economic decisions. The 2015 Budget transferred many social schemes to states along with over 10% increased share in central tax revenues.
Black money legislation is in hand, as are emerging commitments by tax havens to disclose holdings by Indians. The R1 lakh crore plan for interstate electricity transmission is attracting private investors. Domestic coal supplies have improved. A fuel supply policy has been evolved for large users. Actions are afoot to revive stranded power capacities. Electricity distribution is a state subject. They need disciplining to de-freeze over R2 lakh crore in ‘sticky’ loans. Power supplies have been hurt, as are nationalised banks and the economy. Massive private investment in ambitious road development is on course. Railways restructuring and massive investment is in progress. The national sanitation programme is making much headway with public and private participation. The female school toilets plan has been achieved. Land reform will now be left to competing state governments. The government is accepting Opposition demands for tweaking the GST to get Parliamentary support.
In addition, the management of state-owned enterprises remains unreformed and inefficient. RBI has moved to improve lending and collection practices in nationalised banks. Their CEO selection and remuneration are being improved.
Modi was the all-powerful chief minister of Gujarat, which is a cohesive state. India is a minefield of vested interests, power centres, unscrupulous political and commercial interests, multitudes of caste and communal groupings. Modi is taking time navigating these. His overbearing personality and contempt for the Congress dynasty have delayed implementation. The Congress has used a “scorched earth” policy to prevent legislation that would benefit the country.
Modi has not attracted much new talent. His Cabinet has few ministers of real competence in Parliament or as ministers. There is excessive dependence on the bureaucracy. The statutory regulatory framework demands reform in personnel and functioning.
The Modi government, in just over one year, has initiated but not completed many of the actions it promised.
The author is former director general, NCAER, and was the first chairman of the CERC