The Wall Street Journal has praised the rhetoric and slogans of the Narendra Modi-led government, but not the action. What has this government done, and why has it not done what it has not?
A combined Opposition, wedded to the ideologies of ‘secularism’, state-ownership and control, massive give-aways as social welfare, massive government borrowings and large deficits, a passive response to Pakistani border violations, and uninhibited exploitation for personal gains using government’s powers (viz. selling Railway Board appointments, taking commissions on sale of telecom spectrum and coal mines, etc) has been a factor. Controlling the Rajya Sabha as it does, this Opposition is able to hold up the NDA’s agenda. The BJP’s tough approach towards NDA allies and the Opposition has also held up critical legislation.
Many NDA ministers are inexperienced in government, while some are ideological plants from the RSS. The RSS and its associates have been a distracting factor for a government intent on development. The Hindutva programme must wait if the economy is to reform.
‘Secular’ ideology has generated the public opinion that the Congress governments were anti-Hindu and pro-Muslim. Giving special privileges (but sparsely delivered) to the Muslims, antagonised th e Hindus, who then mostly embraced the BJP.
But in the past eight months, this government has unobtrusively, and without any chest-thumping, achieved a fair amount. It has shown remarkable foresight and deftness in foreign policy. This will pay dividends through FDI and support for India at international fora. It has done this while retaining the traditional support from Russia. The NDA has fostered greater economic relations with, and greater inward investment from, Japan and China. At the same time, in building relations with Japan and Vietnam, despite China’s hostility to them, it has shown diplomatic deftness. Similarly, agreeing to the joint exercises with the US in Asian seas may not please China. It may be a question of time before this government develops more formal relations with Taiwan. The de-recognition of Tibet as a part of China, however, may be another chip on the table. This government’s policy to China differentiates between security and economics. With the global economy (Europe, Russia, Middle East, Japan, etc) in varying stages of decline, the NDA’s increased focus on Asia and the US is timely and appropriate.
The approach to Pakistan is distinctly different, friendly but very muscular and intolerant of any provocation. In this, it appears to have also got international support. The Saarc meeting in Nepal showed that long-pending differences with other neighbours are being resolved. For example, the hydel projects in Nepal (held up for years) are now under negotiation and may start soon. The pending agreements with Bangladesh (held up by a hitherto intransigent West Bengal CM, Mamata Banerjee) may now progress. Not indebted to any Tamil party like the UPA was, the NDA has been able to improve its relations with Sri Lanka. With emerging American self-sufficiency in oil and gas, the Middle East needs India as a market. Also, the NDA has moved further in cementing India’s relations with Israel.
Like many, I also felt that the new government had done little on economic reforms. Certainly, it has not been able to pass many key reform legislations. Whether it can manage to wrest the big-ticket ones, like the Constitutional amendment to enable goods and services tax (GST), remains to be seen. But, a number of decisions that make a difference have been taken quietly.
From the time of the NDA’s anticipated election victory, the stock market has been booming. Foreign investment (more FII than FDI, but both at much higher levels than before) is rising rapidly. Thanks to the decline in crude oil prices, inflation has dropped, the deficit in the balance of payments has improved, and RBI has worked to stabilise the rupee. Industrialists and chambers of commerce, too, sound genuine in their praise and optimism. The purchasing managers index (PMI) suggests an upswing in manufacturing.
The lack of ease of doing business in India has been a bottleneck for the expansion of manufacturing and attracting foreign investment. The land acquisition Ordinance makes a start on this front, making land transactions for manufacturing easier. Similarly, this government tacitly accepts that development does require some sacrifice of environment. Environment clearances are now faster and less restrictive. Other clearances are expected on line and will come within certain deadlines. The raising of limits on foreign investment in defence manufacturing and insurance signals a good first step. State-owned banks have a heavy non-performing assets burden, mostly because of government pressures. However, banks are now to be more commercial in sanctioning of loans than they have been (for example, government has in past years pressed banks to sanction or restructure loans without much scrutiny for power and roads). Banks are to be substantially recapitalised over the coming three years. While the privatisation of state-owned enterprises doesn’t seem to be very high on the present agenda, loss-making PSUs are to be privatised, and considerable disinvestment of government shares have been announced. The management of state enterprises and banks is to be freed from excessive government interference. The government is moving speedily on coal mine auctions but not on denationalisation. The announcement that more spectrum is to be made available for telecom use was long awaited. There is movement on decision-making on improving the railways and roads with massive new investments. The Planning Commisison, a symbol of top-down planning has been replaced by another body but its functioning is yet unclear.
The long-awaited but never-implemented cash benefits transfer of subsidies and social welfare benefits is becoming a reality. The prime minister broke the lethargy of banks and made them open crores of new bank accounts within a few weeks. This missing step has enabled the first cash benefits transfer possible for LPG. Surely others will follow. This step has the potential to reach the correct beneficiaries and substantially reduce theft and waste and government expenditures.
There is no clarity on how black and unaccounted money held by Indians abroad and in India will be brought back, and more importantly, how will the situation not be allowed to recur.
On security issues, it appears that this government is going to use more muscle than persuasion to stop Maoist violence. Intelligence gathering seems to have improved if the stopping of a Pakistani suspected terror boat from entering India is an indication.
The Kashmir issue is another major pending issue and the communal polarisation in election results between Jammu and the Kashmir valley has to be carefully manipulated. A tilt to Hindutva policies is inevitable. The government will have to draw a careful line between restoring Hindu pride and scaring the minority groups. Fortunately, the Opposition parties are superficial and themselves floundering on how to restore their followings.
There is movement on many issues. It has to be faster and cover more areas.
By S L Rao
The author is a former director general, NCAER, and is the first chairman of the CERC