Corridors of Power: Is PM Narendra Modi failing on the policy front?

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Published: July 1, 2015 12:24:46 AM

A view is gaining ground that he is focusing too much on project implementation, but it is too early to start questioning his ability to bring in critical policy changes.

Ahead of the 2014 Lok Sabha polls, when the talk of the national capital was, not who will be the next Prime Minister, but what will change if Narendra Modi became the next Prime Minister, a senior finance ministry official handling infrastructure offered an interesting proposition. He explained: “The biggest difference between Manmohan Singh (the then Prime Minister) and Narendra Modi is that the latter has experience of implementing projects on the ground. So, if a port project is being planned, he already knows how it should be implemented, with his experience in Gujarat. The same would be the case in other areas as well.”

It was this capability of Modi which attracted people, many from even outside the political domain, to support the “Gujarat Model” of development led by different projects and schemes like Jyotigram for the power sector, which helped in transforming electricity supply and distribution in the state by separating the feeder lines for agricultural use and other consumers. They thought he would be able to replicate the same story at the central level quickly, and will be as successful as the Prime Minister of India as he had been as the chief minister of Gujarat.

It is not surprising that Modi is playing to his strength. The NDA government has announced a spree of mega-schemes such as Swachh Bharat, Jan-Dhan Yojana, Make-in-India, Smart City and AMRUT missions, and he is launching a comprehensive Digital India plan today, mainly focused on making the citizens’ life easier with the help of online applications such as Digital Locker, e-hospital, e-sign and Digitise India platform. This may be reason enough for Prime Minister Modi to feel happy on his performance as “Pradhan Sewak” of the country, as he calls himself. But there is an underlying impression developing in certain segments of the government and academia, which also he needs to decipher carefully.

Some of those who thought that he could be a great Prime Minister with his successful experience of handling Gujarat for more than a decade have started thinking they were probably wrong in the sense that it was more about implementation of projects and less of policy formulation at the state level, which has been Modi’s plus. The Centre is a different ballgame, demanding deft handling of policy issues also, and Modi appears to be seriously lacking here. Their point is, take any major policy area that required immediate attention from him after the NDA took over from the UPA in May last year—taxation, banking stress, labour relations, ease of doing business or land acquisition (though this is one area where he is trying his level best to find a solution after almost goofing up)—it has failed to clear the mess created during the UPA regime. In fact, in some areas including taxation, the uncertainty has only grown instead of subsiding.

While it can’t be anybody’s case that the projects which have been announced are less significant and they are bereft of policy intentions, what raises concern is the absence of forward movement in some critical policy domains. If the taxation policy has to improve, it has to be cleaned up first, and that can’t happen till the government is not emphatic about getting rid of the 2012 retrospective amendments—there is no clarity as yet on this and decisions like not allowing Cairn to go for arbitration under the Indo-UK investment promotion and protection treaty, saying tax cases are not covered by such agreements, is only accentuating the problem. Similarly, banking stress is also growing rather than abating, as not much has been done here. Labour law changes at the central level are still in the pipeline, though some states like Rajasthan have already opted for the Presidential Assent route to relax norms related to running of businesses.

So, does all this mean that Narendra Modi has been more focused on projects and schemes, has paid less attention to policy issues, and has been a failure in terms of bringing in the required policy changes? The number of sceptics may be growing, but it may be too early to start thinking on these lines. To be fair to the Prime Minister, first of all it has to be understood that projects are implemented at the state level, so as a successful chief minister, this was his forte. Those who thought this was good enough to get over the policy bottlenecks in New Delhi, clearly erred.

Change in policy does take time at the Centre because of diverse interests at play, and Modi has to be given adequate time for this. It is also true that in areas like foreign policy and coal auctions, the NDA government has been quite successful. While the Bangladesh Land Boundary Agreement has been a major breakthrough, there is no doubt that Modi has enhanced India’s image globally within a short span of time. Similarly, the coal mess has been cleared to a large extent and there is definite movement towards commercial mining now.

On his part, though, Prime Minister Modi must not take this incipient view about him being lacking in taking strong policy decisions lightly. He must quell this fast before it starts proliferating and the “policy paralysis” jibe at the UPA comes back at him. If the Land Acquisition Bill is taking time, there is nothing which stops the government from clearing uncertainties in oil and gas exploration, especially gas pricing. In taxation, the AP Shah panel is currently looking at the MAT on FPIs issue. It can be handed over all retrospective amendment cases and be asked to suggest the next course of action here. This will reduce uncertainties on the tax policy front. The goods and services tax (GST) amendment Bill is currently being studied by a select committee of the Rajya Sabha and the government must ensure that the 1% additional tax to support manufacturing states is not part of the final Bill and the overall GST framework is also exemption-free. There is no point in pushing a diluted GST. Similarly, a fresh approach on tackling NPAs has become a necessity with the Reserve Bank of India warning that the bad loan cycle had not peaked as yet—a big chunk of restructured loans earlier turning into NPAs is adding to the stress.

It is high time individual ministers are assigned responsibilities to come out with time-bound policy solutions in their areas and are made accountable for implementing them. The Prime Minister’s approach of handling everything himself and his signal “mujhko sab pata hai” (I know everything) may not work at the Centre beyond a point.

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